Despite rapid oil prices declines, valuation gaps between buyers and sellers, and regulatory impediments to cross-border transactions, Canadian M&A is expected to increase in the next year, according to 46% of respondents in a study, Charting the course: The future of Canadian M&A in volatile markets.
An additional 22% believe the volume of dealmaking will remain the same, but 32% expect it to somewhat decrease.
“The backdrop of oil price volatility and geopolitical uncertainty does not seem to have profoundly impacted the level of Canadian M&A that people are expecting in 2015,” says Grant Kernaghan, managing director of Canadian Investment Banking at Citi. “Looking ahead, cross-border activity should remain healthy, particularly for inbound transactions.”
Also, the continued availability of low-cost financing for cross-border and domestic M&A is expected to support activity levels as companies pursue growth. Increasingly, respondents predict that Canadian firms will look to international markets to meet their targets.
Here are some additional findings.
- 56% of respondents cite inorganic growth as the main driver behind Canadian M&A, followed by sales of private businesses (38%) and strong valuations of companies (36%).
- The majority expect private equity activity to increase in cross-border and domestic deals, with 44% projecting these firms will conduct the most acquisitions in 2015.