Canadian M&A industry and market trends

Opportunities ahead for dealmakers as they shape the post-pandemic economy

By many indications, the coming year looks like it will be a busy one for mergers and acquisitions (M&A), both globally and here in Canada.

As we all continue to navigate the effects of the COVID-19 pandemic and move towards economic recovery, consolidation may be inevitable for companies facing imminent distress. This year, we expect to see opportunistic buying and selling, particularly within sectors that have been deeply impacted by the pandemic. While Canadian M&A total deal value was down in 2020 when compared to 2019, total deal volume was up, and we saw a promising resumption of higher value deals in the last quarter.

Headwinds remain, but the prognosis for dealmaking in 2021 is marked by opportunity and transformation—and we could even see fierce competition for some companies. For many organizations, dealmaking may be the best, and fastest, way to get access to the skills, resources and technology they’ll need to create value in the world of tomorrow.

Explore our Canadian industry and market M&A forecast for 2021.

“During the course of the pandemic, it’s been fascinating to see how quickly organizations have moved from defensive tactics to offensive M&A strategies. Deals that were put on hold are coming back to market and net new sellers are taking advantage of the shortage in deal supply and near record high valuations, bringing deal volumes back to pre-pandemic levels. M&A will play a key role in our economic recovery—and in many organizations’ strategies.”

—Domenic Marino, National Deals Leader, Partner, PwC Canada

Energy, utilities, mining and industrials

“We’re at a critical juncture in energy, utilities, mining and industrials (EUMI). Over the last year, we’ve seen accelerated progress toward carbon neutrality and an increased focus on environmental, social and governance (ESG) factors. Here in Canada, there will be significant opportunities for those companies that can figure out how they’re going to deal with this transition in a meaningful way—and what they’re going to do with legacy operating assets.”

—Michelle Grant, National Deals Leader for Energy, Utilities, Mining and Industrials, Partner
  • Deal activity in EUMI has now largely resumed after a significant pause at the start of the pandemic. But the effects of COVID-19 continue to reverberate: the transition to carbon neutrality has accelerated, and the pandemic’s long-term impact on global and local supply chains is still unknown. While there are opportunities, many questions remain about how the future of EUMI will look in Canada.
  • When we look at 2021, in energy, we expect to see an increase in deal volume, continued upstream consolidation and restructuring. In utilities, the ongoing process of reducing exposure to conventional power generation may lead to some divestitures and the redirection of investments into renewables. In mining, we expect to see continued consolidation, especially in the gold sector. In industrials, we expect to see deals focused on securing supply chains and continued consolidation in the engineering and construction segments, and we also may see some insolvencies because of supply chain issues.
  • Moving forward, competitive differentiators in all these sectors will be healthy balance sheets, access to capital and the right alliances. For legacy companies in particular, partnerships and joint ventures with newer companies that have the expertise and skills they need will be critical as they look to derisk and diversify their service offerings.

Michelle Grant

National Deals Leader for Energy, Utilities, Mining and Industrials, Partner, Vancouver and BC Region, PwC Canada

+1 604 806 7780 ext 7184

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Tech, media, telecommunications and consumer markets

“When we look at how COVID-19 has affected consumer markets, it’s really a tale of two cities: we’re seeing a huge divergence between, for example, traditional bricks-and-mortar organizations versus those with sophisticated e-commerce platforms and an optimized bricks-and-mortar footprint. What we can say about this sector as a whole is that, going forward, M&A will be coloured by quickly and likely irrevocably changing consumer habits.”

—Shoshana Baizer, Deals Technology, Media, Telecommunications and Consumer Markets Leader, Partner
  • We’re seeing some stark disparities in these sectors as a result of COVID-19: businesses that have thrived during the pandemic are looking to expand by doing M&A, either by staying true to their core or by diversifying with transactions to pivot their brand. But for those that have been hit harder by the pandemic, restructuring will likely be their next move, especially as government support subsides.
  • As we move into the future, competitive differentiators within consumer markets will be e-commerce capabilities and sophistication, and the user experience, and more generally, the ability to be agile and adapt to quickly changing consumer tastes. Coming out of the pandemic, we’re also seeing a lot more consumer focus on local and/or ethical brands, and this is a provocative cultural shift we expect will impact M&A strategies, at least in the short term.
  • Many organizations within the Canadian technology, media and telecommunications sectors, where we’ve already seen considerable consolidation, are coming out of the pandemic strong. This year, we expect to see additional diversification of portfolios via M&A in these sectors. We also expect to see continued significant investment in 5G and operating systems, especially given the expectations of many that remote work is here to stay.
  • M&A will be a key part of the growth we’re going to see in these sectors in the next few years, and there’s already an appetite for it, especially among corporates with strong balance sheets and private equity with considerable dry powder. Shareholders are looking for companies with a clear value creation plan and are evaluating everything through a lens of technology. With tech coming out of COVID-19 relatively unscathed, it’s clearer than ever that tech enablement and digitization need to be at the forefront of every company’s strategy.

Shoshana Baizer

Deals Technology, Media, Telecommunications and Consumer Markets Leader, Partner, Toronto, PwC Canada

+1 416 815 5204

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Private companies

“As we begin to move out of the pandemic, we expect to see a perhaps once-in-a-generation situation: private equity that’s eager to spend and low interest rates that can facilitate that spending. If you’re a private business owner, you may find some great opportunities if you’re prepared to put yourself in the market.”

—David Bryan, Partner, Deals & Alberta Region Private Company Services Leader
  • For many private company owners, any thoughts about M&A at the start of 2020 quickly turned into thoughts about survival as the year went on, and the M&A activity we did see tended to be on the distressed side. But as we progress into 2021 and start to anticipate economic recovery, there will be unique opportunities for those looking to acquire and those looking to sell in the private company space.
  • When we look at where the opportunities will be in 2021, we see a few different streams. As government subsidies taper off, there will be opportunities to acquire distressed assets. We’ll also see consolidation as companies find themselves forced to work together to cut costs and preserve what they have. And there will likely be a wave of sales of family and privately owned businesses, whose owners have made it through but are now ready to move on.
  • Private companies that will be well positioned coming out of the pandemic will be those that took the opportunity to embrace technology and look at new markets and new ways of selling and advertising. These companies will be able to tell a compelling story to investors about how they looked going in, the steps they took throughout this process and how they’re going to look coming out.
  • Another intriguing trend we’re seeing in this space is an increased focus on the part of some private equity and institutional investors on investing and acquiring local organizations in an effort to support local economies. It’s unclear whether this focus will last, but it does present another factor to consider when assessing deal value.

David Bryan

FCPA, FCA, CIRP, LIT Partner, Deals & Alberta Region Private Company Services Leader, Edmonton, PwC Canada

+1 780 441 6709

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Private equity

“Now more than ever, private equity (PE) funds that have invested in deep value creation capabilities have an edge. But this means going beyond traditional cost takeout and thinking creatively about areas like revenue enhancement and strategic repositioning. These funds can bid more competitively for what’s coming to market in the coming year—and are well positioned to create value immediately post-deal and realize superior returns in current fund vintages.”

—Michael Shea, Deals Private Equity Leader, Partner
  • When we look at inbound and domestic PE activity in Canada over the last year, deal values were down considerably from the prior year. Digging into the numbers, we saw a big drop in the second calendar quarter, primarily driven by initial COVID-19 impacts. But activity rebounded in Q3 and Q4, and this holds promise for the year ahead.
  • Where will the opportunities for PE be in 2021? Generally we expect to see some of the more patient PE funds investing in distressed companies, particularly as government subsidies begin to trail off. In addition, there could be more PE exit activity than what may have been initially expected, as high current valuations may have funds rethinking their “normal” exit horizon in certain sectors.
  • A key theme we’ll be looking out for in 2021 is an increased focus on environmental, social and governance (ESG) factors, particularly on monitoring and measuring ESG compliance. This trend was highlighted in a recent Canadian “Big 8” pension fund joint statement calling for standard disclosures on ESG factors to help with investment decision making as part of a green COVID-19 recovery. We expect to see funds take advantage of ESG opportunities, such as the move to net zero, through strategic investing and ESG-driven value creation opportunities in portfolio companies. We also expect an accelerated focus on diversity and inclusion across the funds, with increased recognition of the positive impact diversity of thought can have on investment returns.
  • When it comes to a Canadian corporate recovery, we expect PE to play a crucial role. Many Canadian PE funds have significant amounts of dry powder to deploy and are looking at revisiting target acquisition cheque size and regions, and at allocating more capital to areas beyond traditional buyouts, including growth capital and special situations.
  • What are PEs looking for right now? We’ve seen an accelerated move toward the health-care and technology sectors, and this has been partially driven by their COVID-19 resilience. For example, in the technology sector, we’re seeing an increased focus on investing in disruptive technologies, both as stand-alone investments and add-on acquisitions for portfolio companies (e.g. acquiring a company that focuses on Internet of Things (IoT) technologies within a sector to improve the use of data in a portfolio company).

Michael Shea

CA, CBV, CFA Deals Private Equity Leader, Partner, Toronto, PwC Canada

+1 416 687 8025

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Next steps

“We expect the pace of deals in Canada to continue to accelerate into 2021 as we see an increased appetite for both acquisitions and divestitures. M&A can be a tremendously powerful tool to create value, but it’s all about how you execute the opportunity and the level and quality of the information and planning.”

—Sean Rowe, Deals Markets Leader and Value Creation Leader, Partner, PwC Canada
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Contact us

Domenic Marino

Domenic Marino

National Deals Leader, Partner, PwC Canada

Tel: +1 416 941 8265

Sean Rowe

Sean Rowe

Deals Markets Leader and Value Creation Leader, Partner, PwC Canada

Tel: +1 416 815 5093

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