Expect more M&A in Canadian market, says EY

Next year’s M&A plans are on the minds of 73% of Canadian executives, says a report by EY.

That’s up from 24% in October 2014. This year’s level is the highest in the survey’s history. It’s also just one percentage point behind the U.S.’s rate, which is the highest in the world

“Canada is bullish in its pursuit of acquisitions,” says Doug Jenkinson, EY’s Transaction Advisory Services Partner.

The survey also indicates more optimism about the domestic economy. In fact, 38% of respondents foresee Canada’s economy improving, compared to just 13% in April 2015. This optimism is reflected in the steady growth of deal opportunities, with almost 90% of Canadian respondents looking at more than one M&A opportunity at once. This is almost double April 2015’s rate.

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“Despite the high appetite to acquire, we have confidence this isn’t an overheating market,” says Jenkinson. “Executives told us they’re being extremely prudent in evaluating opportunities – and 82% said they’re willing to walk away from deals that aren’t fully aligned with their corporate strategy. This is a sure sign of a strong, but thoughtful market.”

While executives are upbeat about what’s to come, they’re also bracing for uncertainty in the next year — from volatility in commodities and currencies, to political instability in the Eurozone, to the upcoming US presidential election. As a result, they’re increasingly focused on cost reduction and operational efficiency.

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The Canadian market is becoming the focus of Canadian M&A activity, as 66% of companies are investing in domestic deals in the coming year. Part of the explanation for this may lie in the tumultuous commodity markets, which have impacted the flow of capital. There are signs that the Canadian oil and gas industry will see an increase in transactions in the coming year as players address balance sheet pressure.

Globally, 90% of oil and gas executives expect the M&A market to accelerate in the next 12 months — a sharp increase from 50% of respondents a year ago.

To read the full report, click here.

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