Despite some cut backs in M&A activity expected over the next 12 months, the results reported in Ernst & Young’s (E&Y) 19th edition of the Global Capital Confidence Barometer (the “Report”) make clear that Canadian executives remain optimistic about Canadian and global M&A markets. Canadian executives are traditionally thought to be very bullish on the Canadian and global economy, and it is suspected that the decline in deals since the last Report is a temporary and strategic step back for companies to “digest recent acquisitions and assess the changing global geopolitical landscape.” The current state of geopolitical uncertainty in Canada stems primarily from the consequences of the newly negotiated USMCA and the next phase of Brexit, and it is expected that local M&A activity may pick back up once key players have a better idea of how these developments unfold.
The Report highlights a number of encouraging findings related to the Canadian and global M&A markets. These include that:
- The number of Canadian respondents who see the local economy improving has risen from 60% to 81% in the past 12 months;
- The number of Canadian respondents who see the global economy improving has risen from 78% to 96% in the past 12 months;
- The number of Canadian respondents who see the global M&A market improving has drastically risen from 44% to 95% in the past 12 months;
- The number of Canadian respondents who see the domestic M&A market improving has risen from 51% to 81% in the past 12 months.
Despite these statistics, 34% fewer Canadian executives (from 80% on E&Y’s last survey to 46% this year) reported having the intention to actively pursue M&A deals in the coming year. Instead, Canadian respondents will aim to prioritize improving their working capital and further investing in existing operations. There is also a current push in Canada to invest in workforces, and specifically to motivate, retain, and reskill workers.
All in all, Canada is regarded as one of the world’s top investment destinations (ranking third in the world, the highest in its history). As such, despite the projected regression in M&A activity over the next twelve months, there are reasons for Canadians and Canadian executives to remain positive.
The author would like to thank Brandon Burke, articling student, for his assistance in preparing this legal update.
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