Record number of Canadian businesses looking at deals
EY survey reveals there's opportunities for strategic and innovative deals despite iffy economic sentiment.
Oil & Gas
Canadian Capital Confidence Barometer
Ernst & Young
mergers and acquisitions
TORONTO — A record number of Canadian companies are looking at deals despite significantly dampened confidence in the economy, according to to EY’s latest Canadian Capital Confidence Barometer.
The report reveals that 72% of respondents plan on completing at least one deal in the next 12 months, up from 24% in October, and the highest since the survey launched in 2009.
“Many Canadian companies are to looking to mergers and acquisitions to address challenges in their existing business,” says Doug Jenkinson, a partner in EY’s Transaction Advisory Services practice. “Even in Alberta’s distressed oilpatch, we’re still seeing deals get done, and there are surely opportunities for those companies that are strategic.”
The survey of more than 1,600 senior executives says 100% of Canadian respondents saw the global economy as either stable or improving. But when looking at the Canadian economy, 57% see it as stable, only 13% thought it was improving.
“The low price of oil and currency fluctuations are viewed as a challenge, further elevating the need for cost reduction in the short term for many businesses. But this volatility is also driving M&A momentum through increased consolidation and executives searching for growth outside their domestic market,” says Pip McCrostie, EY’s global vice chair of Transaction Advisory Services.
Canadian companies are looking south for investment opportunities – to the US (as always) and South America. Columbia, Chile and Argentina are all in the top five investment destinations, and consistent with Canada’s focus on the natural resources sector.
“Canadian companies are also looking right at home for investment opportunities,” says Jenkinson. “For the first time, Canada appears on the top five investment destinations.”
Highlights from the survey include:
- 91% expect to complete more deals than in the prior year
- 88% say their largest deal in the next 12 months will be $250m or less
- 91% are focused on cross border M&A in the next 12 months
“After years of adopting a ‘wait-and-see’ attitude, Canadians now seem ready to take a rational approach to re-entering the transactions arena,” says Jenkinson. “For those that are strategic, pursuing the right opportunities can help them emerge from these tougher economic times stronger, and in a position to thrive.”