Canada and Private Company M&A

Canada’s private M&A space – for the most part – is one of resilience and consistency. Canada has long been a comparatively stable and amenable place to do deals, even during the COVID-19 pandemic. Low interest rates and convenient access to capital have helped the country maintain a steady and reliable business-as-usual course since the 2008 financial crisis.

Private M&A transactions in Canada have witnessed a significant uptick in recent years – both in terms of deal volume and deal size. This can be attributed to several factors, including a robust economy, a favourable regulatory environment, and the aforementioned convenient access to capital. Moreover, strategic buyers and private equity firms have been key drivers behind the increased activity, seeking to capitalise on the high availability of investment opportunities in the Canadian market.

The flow of private M&A deals in Canada has continued unabated for many years now, and has largely stood on an even footing with public M&A during that time.

However, recent recessionary fears and increasing interest rates have contributed to a more challenging business environment, including in the private M&A sphere. These challenges have increasingly demanded more creative, patient, nuanced and pragmatic approaches from dealmakers and professional advisors, as deal timelines become prolonged, and financing requirements more complex.

Nevertheless, there remains a high proportion of opportunities available in the Canadian private M&A space, especially when compared to other developed markets. The country’s private equity sector continues to evolve, and lending continues to be available (though somewhat more difficult to obtain than in the past). Combining these factors with Canada’s relatively stable and resilient business environment (compared to the frequent peaks and troughs of the USA, for instance), presents a less risky set of circumstances in which market players can see safe and predictable returns. Canada may not be enjoying the dizzying highs witnessed in other G7 countries, but neither will Canada suffer the catastrophic lows.

Industry-wise, future-facing sectors such as the technology, media, and telecoms arena have emerged as key drivers of private M&A deals in Canada. The country's strong technology sector, particularly in areas such as AI, clean tech, and software development, has attracted significant interest for both domestic and foreign investment. As an additional catalyst, the Canadian government has been keen to keep these sectors attractive for investors. For example, Canada has one of the lowest statutory corporate income tax rates for zero-emission technology manufacturing and processing in the G7, and Canadian tax policies offers robust tax incentives for businesses manufacturing clean energy equipment.

Another notable trend has also been the strong consolidation within certain sectors of the Canadian economy. The healthcare, renewable energy, and cannabis spaces have witnessed a wave of mergers and acquisitions in recent years, as companies seek scale, market dominance and operational efficiencies in these growing areas.

The natural resources space – always a cornerstone of the Canadian economy – has witnessed a significant boom of late, as the move towards greener economies requires more and more mineral extraction. One has only to read recent news relating to mineral discoveries in the Province of Ontario to get a sense of the myriad opportunities and investments in this area. The Canadian federal government even went so far as recently announcing a CAD3.8 billion “Critical Minerals Strategy”, as a pillar to support steps towards its net-zero goals.

More recently, there have also been further changes in the funding of healthcare in the Province of Ontario, which has expanded the ability for private clinics to provide more services to patients. This change in funding presents significant opportunities for expanded services and for non-medical practitioners to create healthcare centres to enhance patient care and benefit from these new commercial opportunities. A large, aging population and increase in life expectancy also means that such private providers will be needed more than ever over the coming years, at the very least as a supplement to public healthcare services.

The Canadian private M&A market can be characterised by increased activity, with a huge amount of opportunities and upside still available when compared to other developed markets. Canada’s robust business environment, strong regulatory framework, mature banking system, and access to global markets and resources has meant that the country remains an attractive and reliable place to undertake private M&A transactions.