Canadian M&A expected to rise in 2017

Fuelled by low interest rates, strong corporate balance sheets and stable finances, 2016 was a strong year for Canadian M&A. Looking forward, Citi Canada, in association with Mergermarket, surveyed a range of Canadian dealmakers to gauge their expectations for Canadian M&A in 2017. The results of this survey are set out in a recent report entitled Navigating Change: Canadian M&A in a period of global upheaval. Highlights of the report are set out below:

Deal volume. Two-thirds of respondents expect to see a rise in Canadian M&A volume in 2017 compared to 2016.
Free cash. The majority of respondents believe that the large cash positions on corporate balance sheets will drive Canadian M&A. At the end of 2015, TSX-listed issuers collectively held $40 billion in cash on their balance sheets, illustrating a significant reserve for deal-making. Respondents believe these large cash positions, as well as asset sales, will be the preferred method of financing acquisitions in 2017.
Quest for growth. The second largest expected driver of Canadian M&A is companies’ desire for inorganic growth, due in part to slow global economic growth.
Asia-Pacific. Just under three-quarters of respondents believe that Asia-Pacific will be one of the top sources of inbound Canadian M&A in 2017. This view is further bolstered by Prime Minister Trudeau’s goal of developing a trade deal with China.
Energy. As in the past, the energy sector is expected to lead Canadian M&A through 2017. This is due in large part to the buyers’ market resulting from lower energy prices. M&A involving industrials, chemicals and outbound healthcare is also expected to see high deal volume in 2017.
Political uncertainty. The largest concern for Canadian M&A voiced by respondents was political uncertainty resulting from the Trump administration – we covered these risks and uncertainties in a previous post.