Tech M&A will continue in Canada, says Canaccord Genuity

A weak Canadian dollar has made attractive Canadian techs irresistible to foreign buyers.

And though in the wake of PayPal’s purchase of Tio Networks and Vector Capital’s pickup of Halogen Software it may seem the pile has been picked over, Canaccord Genuity analyst Robert Young thinks the trend is likely to continue.

In a research update to clients this morning called “#TECH – Sell in May? Buyers still active!” Young addressed the reasons behind the flurry of M&A and floated a couple more possible targets in Canaacord’s tech coverage universe.

“Perhaps a hotbed of activity is an exaggeration but Canada has certainly seen a notable uptick in acquisitions of technology companies in 2017 as names like Halogen, TIO Networks, DH Corporation, RDM Corp and others highlighted in past #TECH publications have been picked off,” says the analyst. “In our view, Canada is an attractive market for foreign buyers to shop for good technology with a global customer base at attractive valuations amid a weak Canadian dollar versus a basket of global currencies. As such we expect that M&A could continue in Canada as foreign and domestic buyers look for accretive deals.”

So which companies might be the next targets?

“There are only a couple of companies left in our coverage universe that we have flagged as M&A targets that have not yet been bought,” Young notes. “Nonetheless, we would be unsurprised to see more deals materialize in Canadian technology as valuations lag international peers amid a weakening CAD without the need for premium valuations for so-called “secondtier” names. In our view, potential targets in Canadian tech could include Nanotech Security Corp and perhaps NYX Gaming though large shareholders may be reticent to sell given the steep discount to global gaming peers.”

Canaccord Genuity analyst Kevin Wright currently has a “Speculative Buy” rating and a $2.00 one-year price target of Nanotech Security Corp, which closed Friday even at $1.28.

And Wright has a “Buy” rating and a one-year price target of $3.00 on NYX Gaming, which Friday closed down 2.6 per cent to $1.11.

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