Execs look to U.S., South America for M&A deals

Confidence in the Canadian economy has plummeted over the last six months, says EY.

But, despite increased pessimism, most Canadian businesses (72%) are planning on making at least one deal this year—that compares to 24% in October.

Read: Canadian M&A activity will remain strong

“Many companies are to looking to [complete] mergers and acquisitions to address existing challenges,” says Doug Jenkinson, a partner in EY’s Transaction Advisory Services practice.

“While executives aren’t overly optimistic about our country’s economy, that sentiment isn’t holding them back. Even in Alberta’s distressed oil patch, we’re still seeing deals and opportunities for companies that are strategic.”

Read: Why the Heinz-Kraft deal is good for investors

EY says all survey respondents say the global economy is improving, but that only 57% see the Canada as stable (and only 13% say our economy is growing).

That pessimism is due to the low price of oil and to currency fluctuations, says Pip McCrostie, EY’s global vice-chair of Transaction Advisory Services. “But volatility is also driving M&A momentum through increased consolidation, and executives [are] searching for growth outside their domestic market.”

Read: How to prep a business for sale

In fact, the survey finds companies are looking south for investment opportunities. They’re focusing on the U.S., as well as on South America, Columbia, Chile and Argentina.

Other highlights from the survey include:

• 91% of executives expect to complete more deals in 2015 than in 2014;
• 88% say their largest deal in the next 12 months will be worth $250 million or less; and
• 91% are focused on cross border M&A.

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