Global M&A activity has risen over the last 12 months, says new research from Grant Thornton.
In Canada, it adds, 40% of businesses plan to grow through mergers and acquisitions over the next three years. In the U.S., nearly half (48%) plan to make acquisitions. Overall, North America is trending above the global average of 31%.
In contrast, only 19% of businesses in emerging markets are expected to grow through M&As over the same period. That’s down from 27% last year.
Digging deeper into North American activity, the research finds there’s a difference between U.S. and Canadian acquisitions: the majority of domestic businesses (84%) say they’ll focus on scooping up Canada-based companies and only 27% are considering cross-border buys. At the same time, more than half of U.S. businesses (51%) are looking at international transactions.
“Given the global demand for quality products and the fact that Canada has a solid reputation on the world stage, these survey results have yielded some significant insights,” says Jeff Pocock, national leader of Grant Thornton’s private equity practice in Canada. “A large proportion of privately held businesses are looking to transact in the next five years, consistent with the growing demographics of succession-based businesses.”
He adds, “According to economic forecast numbers released last year, 20% of Canadian businesses are owned by [executives] aged 55 and over. And in the coming five years, nearly $2 trillion in businesses assets are poised to change hands,” based on CIBC data.
This transition will “significantly increase[e] the liquidity in the Canadian market,” he continues. “Combined with that, we’re seeing an increasing number of U.S. and global private equity firms entering Canada [and] if foreign firms continue to purchase Canadian businesses at an increasing rate…we could see a re-shaping of the economic landscape that lasts into the next generation.”
Pocock predicts it’ll be a problem “if the federal and provincial governments don’t enhance their current programs” and laws.
The data for Grant Thornton’s paper was based on interviews with more than 12,500 CEOs, managing directors, chairmen and other senior executives from all industry sectors. Its study was conducted between January and December 2013.