Economic optimism underpins strong M&A market

The environment for mergers and acquisitions (M&A) looks healthy to Canadian companies, according to a survey of executives by Ernst & Young Global Ltd. (EY).

The firm reports that the latest reading from the EY Global Capital Confidence Barometer is at its second-highest level ever, with 76% of executives saying they expect to pursue M&A in the next 12 months.

This high level of dealmaking confidence comes against a backdrop of economic optimism, EY said.

It reported that 92% of Canadian executives expect the local economy to improve, up from 54% two years ago; and 93% believe that the global economy is improving, too.

“Canadian executives expect increases in corporate earnings, credit availability and the stock market over the next 12 months. These conditions are setting the stage for growth,” said Doug Jenkinson, partner in EY Canada’s transaction advisory services practice.

EY says that most Canadian companies (78%) are anticipating revenue growth of more than 10% in the coming year, which will drive corporate investment and enable firms to maintain their workforces.

“Executives are also looking at how investments in artificial intelligence, automation and technology can improve workforce productivity,” Jenkinson noted.

Additionally, the firm said that “technology and talent” and “sector convergence” are seen as the most prominent drivers for strategic M&A.

“Canadian executives are focused on becoming smarter, stronger and evaluating all aspects of their capital agenda to maximize positive market conditions—while not losing sight of the potential for economic or political setbacks,” said Jenkinson. “A decade on from the global financial crisis and those lessons of caution and discipline still remain critical to success.”

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