Canadian M&A Recovery Linked to Productivity Optimization

Canada is facing a productivity crisis that could impact companies in 2025. The mergers and acquisitions market might take a hit due to this issue. Despite potential challenges like US policy changes, there is hope that the M&A market will bounce back this year.

According to a report from PwC Canada, deal activity in Canada increased marginally from July to November 2024. During this period, there were 1,068 deals worth a total of $227 billion. The financial services sector is leading the charge in embracing technology to drive growth. This sector is actively acquiring technology-enabled businesses to streamline operations, reduce costs, and improve customer engagement.

Some noteworthy deals in the financial services industry in 2024 include National Bank’s acquisition of Canadian Western Bank, Mubadala Capital’s acquisition of CI Financial, and Scotiabank’s investment in KeyCorp. Apart from financial services, other sectors like advanced manufacturing, hi-tech, and healthcare technology are expected to expand.

Michael Dobner, the National Economics Leader at PwC Canada, highlights the urgency for Canadian businesses to address the productivity crisis. Uncertainty from potential policy changes in the US, combined with the digital revolution and geopolitical risks, poses challenges. However, these challenges present opportunities for dealmakers to develop acquisition strategies that tackle these issues.

The report also predicts that private equity investments will play a crucial role in overcoming productivity challenges. This involves consolidating smaller businesses for scalability and investing in automation and technology.