'2025 could be one of the busiest years for M&A in quite some time'
Business seems to be going well for many organizations, and most are looking to expand their companies for growth in the near future, according to a recent KPMG report.
Overall, nine in 10 Canadian CEOs of large organizations are planning acquisitions over the next three years, with four in 10 considering major transactions that could significantly impact their operations.
Nearly three-quarters of small and medium-sized businesses are also considering making acquisitions.
Among Canadian CEOs, 41% said they are likely to make acquisitions that will significantly impact their operations, according to KPMG International's CEO Outlook. Nearly half (49%) are likely to do deals that moderately impact their business and only 9% are unlikely to make an acquisition, based on the survey of 1,325 CEOs between July 25 and Aug. 29, 2024.
Source: KPMG
There is high optimism among Canadian business leaders when it comes to their company’s outlook and the prospective growth of the Canadian economy as a whole, according to the same KPMG report.
By contrast, KPMG in Canada's Private Enterprise survey show small- and medium-sized businesses (SMBs) are relying less on M&A as a top growth strategy, but they're still planning to do deals. In fact, 34% are considering significant acquisitions, 43% are expecting to make acquisitions with moderate impact on their organizations, and 4% are seeking to be acquired, based on the survey of 735 business owners or executive level C-suite decision makers at small-and-medium-sized Canadian companies between Aug. 13 and Sept. 4, 2024.
Source: KPMG
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"Recent interest rate cuts by central banks in Canada and the U.S., and lower inflation are breathing life back into the M&A market. As the cost of capital eases, investors and corporates are becoming more confident about making acquisitions, so we expect to see dealmaking activity pick up; in fact, 2025 could be one of the busiest years for M&A in quite some time," says John Cho, KPMG in Canada's national leader of its Deal Advisory practice.
However, three-quarters of SMBs report that these complexities – factors such as decarbonization, emerging technologies, and environmental, social, and governance (ESG) standards reshaping deal strategies – make the M&A process more challenging than it was five years ago.
“That underscores the need for sellers to differentiate and position themselves in the M&A market and find novel ways to create and demonstrate value to investors," Blair says.
HRD Previously wrote about HR’s role in M&A deals.
How do you prepare for mergers and acquisitions?
In preparing for M&A deals, both acquirers and potential sellers are focused on maximizing value. Eight in 10 SMBs are seeking ways to enhance their company’s worth ahead of a sale, while 68% report challenges in determining the true value of acquisition targets, according to the KPMG report.
"Businesses that are digitally-savvy and have a culture of innovation are likely to get more out of a transaction. Integrating generative AI into their operations, for example, could help sellers boost the value of their business, and our survey bears that out: more than eight in 10 (81%) SMBs think generative AI would make their company more valuable to prospective buyers," says Blair.
In March, the Royal Bank of Canada (RBC) received federal approval to proceed with its acquisition of the Hongkong and Shanghai Banking Corporation (HSBC).