Canada's outbound M&A volume hit a record $128 billion last year. Bankers expect the trend to continue as sluggish economic growth at home, and a highly-concentrated market, make domestic M&A less appealing.

Enbridge's (>> Enbridge Inc) $28-billion acquisition of U.S.-based Spectra, announced last year, was the biggest outbound deal ever by a Canadian company.

In two of the last three years, international banks grabbed four of the top five spots in the M&A advisory rankings, according to Thomson Reuters data. Their share of M&A advisory fees climbed to 47 percent of total fees in 2016 from 35 percent five years ago, estimates from Freeman & Co show.

Morgan Stanley (>> Morgan Stanley), Bank of America Corp (>> Bank of America Corp), Barclays (>> Barclays PLC), RBC (>> Royal Bank of Canada) and JPMorgan (>> JPMorgan Chase & Co.) rounded up the top five spots in M&A advisory in 2016, a shift from a decade ago when domestic banks dominated the top rankings.

"There was a time when it was unusual for global banks to be in the top three for Canadian M&A advisory because M&A activity was dominated by domestic deals," said Dougal Macdonald, head of Morgan Stanley Canada. "It's now unusual if they aren't because of the volume of cross-border deals."

Global investment banks have topped the M&A league tables rankings in each of the last three years, ending a nine-year winning streak for Canadian investment banks RBC, BMO (>> Bank of Montreal) and CIBC (>> Canadian Imperial Bank of Commerce). RBC took the No. 1 spot six times in the last 20 years.

Macdonald added that international banks benefit from better knowledge of the target; having staff on the ground; understanding of local laws; and the expertise to finance acquisitions in local currency.

JPMorgan and Goldman Sachs (>> Goldman Sachs Group Inc) were the No. 1 M&A advisers in 2015 and 2014, respectively.

Robust share prices have made Canadian companies willing to strike overseas deals.

"When you take the fact that many Canadian companies have strong currencies, have ready access to low-cost debt, and are feeling more confident about their sectors and prospects, M&A is clearly on the radar screen again in 2017," said Trond Lossius, head of Canadian M&A at Barclays.

HOME ADVANTAGE

Meanwhile, Canadian banks, which look to take advantage of deep relationships with Canadian clients, are expanding into global markets and strengthening some coverage areas.

"We're doing a number of things to capitalize on this trend," said Mike Boyd, head of M&A at CIBC. In the past year, CIBC has added investment bankers to serve its pension fund and private equity clients, he said.

Both RBC and BMO have more investment bankers in the United States than in Canada as a result of their recent expansion. TD (>> Toronto-Dominion Bank) is also boosting its U.S. capital markets unit.

Moves such as BMO's acquisition of U.S. M&A advisory firm Greene Holcomb Fisher last year can help Canadian banks establish niches, said Jeffrey Nassof, director at Freeman & Co.

"The cross-border acquisitions space is an under-served market," Nassof said. "There's not a lot of firms that have global capabilities and local coverage of the middle market."

Canadian pension funds are among the world's biggest dealmakers as they look at ways to put their capital to work. CPPIB bought 40 percent of Glencore Plc's (>> Glencore PLC) agricultural unit in 2016 and GE Capital's private equity lending portfolio for $12 billion in 2015.

"The universe of opportunities for them to deploy capital of scale is really outside of the borders," said John Armstrong, head of Canadian M&A, BMO Capital Markets. "I don't see that dynamic changing in the near future."

Canadian banks are betting on a rebound in energy and mining deals to work in their favor, as they have been historically strong in those areas.

"For the most part, the (energy) industry has got itself back on level footing and now people are looking to grow again," said Peter Buzzi, co-head of Canadian M&A at RBC. "We're quite optimistic in terms of the outlook for energy M&A."

(Click here for a graphic on 'Canada outbound M&A' http://tmsnrt.rs/2mR7KVc)

(Reporting by John Tilak; Editing by Denny Thomas and Nick Zieminski)

By John Tilak