According to a recent report entitled “Brighter horizons: A bolder future for Canadian M&A”, Canadian M&A activity is expected to be strong in 2016. The report presents the results of a survey of 50 leading Canadian M&A professionals commissioned by Citi and conducted by Mergermarket. The study reveals that none of the respondents expect Canadian M&A to decrease in 2016, with 70% of respondents anticipating an increase in Canadian M&A for 2016 compared to 46% of respondents for the previous year. The key drivers to dealmaking in 2016 identified by respondents include low commodity prices, private equity demand, easy access to financing, companies seeking inorganic growth, and the falling value of the Canadian dollar.
Valuation gap and volatility in global commodity prices were cited by a majority of respondents as the major challenges to Canadian M&A in 2016. As noted in the report, these two challenges are interrelated in some respects. For example, fluctuations in commodity prices create uncertainty for buyers trying to value the assets and revenues of a target and for sellers trying to avoid selling at the bottom of the market.
In terms of the sectors expected to see the most dealmaking, according to the report a large portion of the domestic as well as inbound M&A activity for 2016 will be in the oil and gas and mining sectors while outbound M&A is expected to focus on the financial services sector.
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