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.
  • 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.

As the year progresses, Deal Law Wire will continue to provide you with updates regarding Canadian M&A.

The author would like to thank Mark Bissegger, Articling Student, for his assistance in preparing this legal update.

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