Canadian M&A activity declined in volume and disclosed value in 2024 when compared to 2023. Heightened buyer precautions, challenging credit conditions and general economic uncertainty have led to an overall decrease in Canadian deal flow.
Corporate cash balances continue to be at all-time highs, indicating that large companies have ample capital to drive strategic acquisitions. There is an abundance of dry powder that private equity firms will eventually need to deploy, a positive sign for near-term M&A activity. There continues to be investor interest for strategic assets, however buyers are exercising more precautions to adjust for potential risk, which often creates a value disconnect between the buyer and seller. As expected, interest rates decreased throughout the balance of 2024, with many sellers pushing out sale timelines hoping for stronger valuations from softening credit markets. The new U.S. administration is anticipated to accelerate the North American M&A environment through pro-deal-making regulations and reduced government intervention. Cross-border M&A activity between U.S. buyers and Canadian sellers is expected to increase from the favorable exchange rate between the U.S. and Canadian dollar.
Until the uncertainty of upcoming trade regulations becomes clear in early 2025, Canadian M&A will likely experience a slowdown. Once buyers and sellers understand the scope of new trade policies, deal activity is expected to ramp up quickly. With decreasing interest rates, improving credit conditions and sufficient capital in the market, we anticipate the Canadian M&A environment to be steady in 2025, driven by the latter half of the year.
