M&A trends continue strong as corporate Canada sees a significant increase in deal volume

As the COVID-19 vaccination program continues to roll out across North America, corporate Canada is seeing some of the strongest strategic transactions they’ve seen to date.

In an interview with Canadian Lawyer, co-heads of the firm’s M&A practice John Emanoilidis and Michael Amm confirmed robust M&A activity in Canada and across borders despite the potential risk from a fourth wave of the pandemic.

John noted that domestic deal volume has increased 49 per cent in the first half of 2021 and the total value of Canadian outbound M&A has already surpassed 2020 levels.

“The drive to do strategic deals has returned, and we're seeing Canadian companies making some bold plays that reflects their high level of confidence," John said.

“Private equity also continues to make its presence known on the M&A scene, with a lot of ‘dry powder’ cash on hand.”

Even with the recent surge in cases among the unvaccinated, deals will continue to maintain momentum with strong equity markets and an abundance of capital available.

Read: Q3 Torys Quarterly: Cross-border M&A is booming

Michael agreed, acknowledging the incredible activity in deal volume and deal size he’s been seeing.

“Clients on the acquisition side have spent the pandemic focused on understanding the key strategic objectives of their business and are now ready to execute on important deals that will move them ahead,” he said.

Domestic M&A deals have almost doubled compared to the same period last year, mainly due to some large transactions.

Meanwhile, the United States remains the destination of choice for outbound M&A activity. Although Canadian dealmakers have already invested in growth opportunities in Europe, France, the U.K. and Spain this year.

“This surge in outbound activity is a recognition by corporate Canada of the need to build scale and accelerate growth in international markets as the world is seen to be emerging—slowly—out of the pandemic,” John said.

As reported by the firm in the Q3 edition of the Torys Quarterly, foreign investment in Canada appears to be on the decline relative to deal activity recorded in 2020. However, John said that Canada is still seen as a desirable destination for investment due to the country's skilled workforce and stable political environment.

“The impact of travel restrictions has also been part of the relatively slower pace of inbound deals, as well as more of a focus on home countries and what I’d call domestic resiliency.

"We're seeing governments increasingly vigilant on the regulatory front, whether it is with regulated industries or general industries where there is a competition concern,” Michael added.

Mike and John said that while valuations are relatively high in the current market, it hasn't reached the level of “irrational” exuberance, and we can continue to expect deal activity to increase in the near future.

You can read more about our Mergers and Acquisitions work on our practice page.