Over the last year, we’ve seen an astounding level of mergers and acquisitions (M&A) activity here in Canada, as measured by both deal value and volume.
In 2021, Canadian deals activity increased by 117% compared to 2020, and deals volume increased by 24% over the same time period.1
What does this mean for the year to come? While activity in 2022 may not surpass 2021 levels, we expect it to be robust. And we’re already seeing some key trends to watch across industries and markets. Across the board, there’s ever-increasing interest in environmental, social and governance (ESG), and we expect it to become a key driver of value. Organizational talent profile and skills are additional factors increasingly shaping deals.
M&A will continue to be a powerful tool to create value, but given the competition and high values we’re seeing in the market, it will be increasingly critical to make sure deal strategy is informed by data and industry insights and underpinned by technology.
Interested in learning more about Canadian M&A activity in the past year and our thoughts about what might be on the horizon?
Explore our Canadian industry and market M&A forecast for 2022.
“M&A activity across the energy, utilities, mining and industrials (EUMI) sectors was robust in 2021. Mining remained the dominant sector for deal making, buoyed by continued consolidation in the gold sector and a growing interest in battery metals and other strategic minerals. We also saw deal activity related to battery storage, electric vehicles (EVs) and supply chain resilience. In addition, environmental, social and governance (ESG) and the transition to net zero gained significant momentum. We expect ESG to be a key driver of deal activity in 2022.”
1 “ARC Resources closes strategic Montney combination with Seven Generations,” Cision Canada, April 6, 2021, https://www.newswire.ca/news-releases/arc-resources-closes-strategic-montney-combination-with-seven-generations-803650092.html.
2 “Haisla Nation partners with Pembina Pipeline Corporation in proposed Cedar LNG project,” Pembina Pipeline Corporation, June 8, 2021, https://www.pembina.com/media-centre/news/details/135507/.
3 “Northland Power acquires onshore renewable portfolio in Spain,” Umesh Ellichipuram, Power Technology, last modified November 16, 2021, https://www.power-technology.com/news/northland-power-portfolio-spain/.
4 “Capstone and Mantos Copper combine to create Capstone Copper, a premier copper producer with transformational near-term growth,” Capstone Mining Corp, November 30, 2021, https://capstonemining.com/news/news-details/2021/Capstone-and-Mantos-Copper-Combine-to-Create-Capstone-Copper-a-Premier-Copper-Producer-With-Transformational-Near-Term-Growth/default.aspx.
5 “BHP extends offer for Noront Resources as talks with Wyloo continue,” The Canadian Press, BNN Bloomberg, November 24, 2021, https://www.bnnbloomberg.ca/bhp-extends-offer-for-noront-resources-as-talks-with-wyloo-continue-1.1686588.
“As we move out of the pandemic, financial services will continue to see significant deals activity, accelerating the shift to the new ‘digital-normal.’ Future transactions will also likely have a very focused value-creation lens because valuation multiples are still high, making value realization critical.”
“Inflationary pressures, supply chain issues, labour shortages, impending interest rate hikes, ever-increasing valuations and renewed COVID-19 concerns will make 2022 an interesting year for M&A. While some would-be investors may be turned off, this environment will likely create opportunities for others. ESG considerations will also continue to become more important, impacting valuations and borrowing rates.”
1 Source: Capital IQ data, PwC Canada analysis.
2 “Rogers and Shaw to come together in $26 billion transaction, creating new jobs and investment in Western Canada and accelerating Canada’s 5G rollout,” Rogers, March 15, 2021, https://about.rogers.com/news-ideas/rogers-and-shaw-to-come-together-in-26-billion-transaction-creating-new-jobs-and-investment-in-western-canada-and-accelerating-canadas-5g-rollout/.
3 “Boston Scientific Corporation to acquire Baylis Medical Company,” Baylis Medical, October 6, 2021, https://www.baylismedical.com/news/boston-scientific-corporation-to-acquire-baylis-medical-company/.
“Private companies wishing to differentiate themselves will need to focus on digital transformation, securing their supply chain and building a business model based on recurring revenue as much as possible. Sellers that have talent with highly needed skills will also have an advantage—if they’re able to retain that talent.”
Even though many government subsidies are due to run out in 2022, we’re not expecting significant changes to the M&A landscape of private companies, as these subsidies were already discounted in the valuation of targets. But companies that have survived the pandemic mostly because of the subsidies may have a difficult time when they run out, potentially creating distressed M&A opportunities for buyers. This will be a trend to watch in the coming year. Aging private owners who don’t have a succession plan will also remain a strong driver of M&A activity.
“In 2021, both the number of private equity (PE) deals and overall deal value surpassed the levels we saw pre-pandemic—with digital infrastructure, health care and core infrastructure assets among the hottest targets. Competition for deals was very high, driven by a significant amount of dry powder and low interest rates. The strength of fundraising activities across large and mid-market funds will likely add fuel to the investment fire for the remainder of 2022.”
Interested in learning more about how to use M&A to your organization’s best advantage?
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