2022 Canadian M&A industry and market trends

Dealmakers optimistic for the year ahead despite changing market conditions

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.

1 Source: Capital IQ data, PwC Canada analysis.

Industry and market forecast

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.”

Michelle Grant

Michelle Grant
National Deals Leader for Energy, Utilities, Mining and Industrials, Partner

Energy, utilities, mining and industrials

  • M&A activity in the energy sector in the last year was somewhat cautious, driven primarily by companies looking to expand their assets in core areas, build scale to achieve synergies and diversify to natural gas. A notable example is the merger of ARC Resources and Seven Generations Energy, which made the combined company Canada’s largest producer of condensate and third-largest producer of natural gas.1 We also saw increasing interest in partnerships with Indigenous groups, including the Haisla Nation partnering with Pembina Pipeline Corporation to develop the proposed Cedar LNG project.2
  • The utilities sector experienced a healthy M&A environment in 2021, both for greenfield (particularly, energy transition assets) and operating asset opportunities. The sector also saw strong outbound investment as Canadian investors looked to acquire or expand their foreign assets, such as Northland Power’s acquisition of a solar and wind portfolio from Helia Renovables in Spain.3 In the year ahead, we expect to see Canadian utilities with growth objectives continuing to explore unregulated markets and overseas markets with highly attractive returns.
  • Mining also saw robust M&A activity in 2021, with continued consolidations in the gold sector. There were more deals in the copper sector this year than last, including the acquisition of Mantos Copper S.A. by Capstone Mining Corp.4 We saw continued interest from foreign companies, including the public battle for Noront Resources by a subsidiary of BHP Lonsdale and Wyloo Metals,5 a deal that highlights the increasing interest in the battery metals space. The Canadian federal government encouraged this interest, introducing funding and incentives in 2021 to support and accelerate the development of a battery metals value chain.
  • M&A in the industrials space was quite diverse. We saw activity ranging from more mature companies conducting deals centred around carbon capture storage and Industry 4.0 or digital transformation technologies, to special purpose acquisition company (SPAC) backed acquisitions of development-stage EV manufacturers and EV battery technology companies. There was also continued consolidation within the engineering and construction subsectors.
  • Interest in ESG and climate change accelerated across the EUMI space, with a growing number of deals focusing on renewable energy producers, EV and battery manufacturers, carbon-neutral mining companies or processors, and companies facilitating a circular supply chain. We also saw investors increasingly demanding consistent, high-quality ESG information and accountability from potential target companies.
  • Looking further ahead into 2022, we expect to see more investors and companies forging partnerships, joint ventures and alliances to build competitive advantage, move development projects forward and respond to the broader spectrum of ESG issues. Given that energy transition in Canada is still at an early stage, it’s well situated to attract growing interest from investors in 2022 and beyond.

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.”

Philip Heywood

Philip Heywood
Partner, National Financial Services Deals Leader

Financial services

  • Last year was one of the busiest we’ve seen for financial services M&A in Canada, especially when it came to mid-market and private transactions. In 2021, we saw a record number of deals and transactions, many at historically high valuation multiples.
  • As discussed in our Canadian mid-year update, the pandemic has accelerated many of this industry’s underlying trends, including an increased emphasis on digitization. This shift to digital, driven both by consumer demand and a quickly evolving regulatory environment, continues to fuel M&A activity. Organizations that don’t have the tech infrastructure they need to compete can obtain the capability by acquiring an entity that does.
  • On the lending side, there’s an increased focus on consumer finance. In particular, we’re seeing a focus on “buy now, pay later” businesses as consumers are attracted by low-friction payment deferral options. This shift, both in physical stores and online, provides an enhanced touchpoint with the consumer and demands a compelling front end and e-commerce capability with technology-driven rapid underwriting. This need has expanded market opportunities for fintechs and alternative lenders.
  • Many of Canada’s big banks are finding themselves overcapitalized due to lower-than-expected loan losses and the release of regulations that required them to hold higher amounts of capital through the initial phase of the pandemic. Some are looking to expand their footprint in other geographies (in particular, the United States), while many financial institutions, including banks, credit unions and insurers, are looking to deploy equity into less capital-intensive assets yielding non-interest income, such as wealth management.
  • In the asset and wealth management subsector, we expect more businesses to come to market as pressures to consolidate increase and an aging founder population looks for avenues for succession. With significant demand for these businesses from traditional financial institutions, we expect to see a notable increase in M&A activity in the subsector in 2022, with distribution and a differentiated affluent customer base driving significant premiums.
  • Over the next six months, we expect to see financial services companies focusing on integration and synergy capture to drive value from the assets they’ve acquired over the last year. New transactions will also likely be focused on value creation as companies continue to transform by adding capabilities and new products.

“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.”

Shoshana Baizer

Shoshana Baizer
Deals Technology, Media, Telecommunications and Consumer Markets Leader, Partner

Technology, media, telecommunications and consumer markets

  • The last year was one of the biggest Canadian M&A years in history. It was the year of the megadeal, driven by strategic acquisitions that strengthened buyers’ core business. Megadeals (defined as deals with total deal value equal to or greater than CA$5bn) accounted for 52% of Canadian M&A market activity in 2021, compared to only 21% of activity in 2020.1 Leading the megadeal pack was Rogers’ agreement to purchase Shaw.2 While not quite reaching megadeal status, Boston Scientific’s announcement of its intent to acquire Baylis Medical’s cardiology segment3 highlights the continued interest from our US neighbours in Canadian businesses. While overall activity may not be as robust in 2022, we believe it will continue to be a healthy M&A year for tech, media, telecommunications and consumer markets.
  • The tech sector led the charge in 2021 as the world became increasingly comfortable working in a virtual environment. We also saw the welcome re-emergence of the Canadian tech darling, with several startups achieving unicorn status. But with so much volume on the market, many buyers are being ultra-selective, so as we move into the future, tech companies still need to have the fundamentals in place, including a customer-focused approach, to show they’re a strong investment.
  • M&A activity among Canadian telecommunications companies in 2022 will likely drive higher valuations. We expect to see accelerated diversification by telecom companies in Canada to meet rapidly changing consumer expectations and to create value in a 5G-enabled digital economy. As interest in the metaverse grows, Canadian telecom companies will need to quickly figure out how their media and telecom divisions can jointly participate in the ecosystems being established by the leading tech players. The pace of this transition will be fed by monetization, creating significant deal opportunities.
  • Divestitures will continue in the consumer markets sector in 2022 as businesses focus on redefining and strengthening their core. Agility will be key to meeting customers’ changing preferences. On the flip side, companies with solid balance sheets and strong financial positions will be well equipped to acquire targets. Interest in consumer markets from private equity will remain strong, and value creation will continue to be the guiding principle. We also expect environmental, social and governance (ESG) factors, such as net-zero commitments, sustainable sourcing and ethical supply chains, to have an increasing impact on investment decisions, borrowing rates and multiples.
  • Inflation will be an important consideration in the next 6 to 12 months. Rising interest rates, supply chain issues and labour shortages are making it more challenging than ever to run a business. Companies that were in a strong position in 2021 will likely continue to maintain that strength in 2022, but there will be room for opportunistic investments, as some private companies may decide it’s the right time to sell.

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.”

Christine Pouliot

Christine Pouliot
Partner, Deals, Montréal office and Managing Director, Corporate Finance

Private companies

  • The M&A market was strong for private companies in 2021, helped by an abundance of available capital and low interest rates. The private company sector led the way in Canadian M&A market activity in 2021, with total deal value exceeding CA$171bn, up from CA$105bn in 2020.1 Most industries were active, with valuations reaching all-time highs. Several US private equity buyers came to Canada looking for opportunities to avoid fierce competition in the US market. Driving factors for private M&A activity were digital transformation and expansion into products and services to adapt to the new reality ushered in by the pandemic, for example, health-care services companies expanding into wellness and mental health services offerings.
  • 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.

  • Talent retention will likely be one of the most discussed transaction topics in 2022. As labour scarcity becomes even more palpable, we expect to see more deals in which talent with specific key skills or expertise is at the centre of an acquisition rationale—a trend known as “acqui-hire.” Even in cases where the core reason for an acquisition isn’t talent, we’re still expecting talent profile and skills to influence the transaction structure and be core aspects of due diligence.
  • Environmental, social and governance (ESG) performance is taking a more significant place in the criteria private equity buyers are considering when looking at a private company transaction. They’re interested in understanding a private company’s vision on ESG, their two- to three-year ESG plan and ESG objectives. We expect ESG factors to become even more prominent in 2022.
  • Where relevant, cybersecurity will continue to be a key component of due diligence by buyers. With an increasing number of companies being the victims of cyber attacks, it will be important for selling companies to make sure they have a robust cybersecurity infrastructure and crisis management plan as they go into a transaction.

1 Source: Capital IQ data, PwC Canada analysis.

“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.”

Michael Shea

Michael Shea
Deals Private Equity Leader, Partner

Private equity

  • As noted in our Canadian mid-year update, value creation was top of mind for PE investors in 2021. We’ve continued to see leaders in the sector invest in functional capabilities to identify and drive more robust value-creation plans at their portfolio companies and to justify higher valuations for potential acquisitions in a competitive deals market.
  • One particular area in which we expect continued focus in 2022 is digital transformation, both at the fund level and within portfolio companies. Accelerated use of automation is helping with ongoing workforce issues due to labour shortages and increasing costs. Migration to the cloud is allowing for scalability and access to additional computing resources, but also for making sure portfolio companies are receiving optimal usage and performance from their cloud investments. Investments in enhanced data and analytic infrastructure and capabilities to improve access to and reliability of data are driving better day-to-day business decisions.
  • Over the past year, one of the best examples of analytics driving PE value creation relates to product pricing. Radical shifts in costs, demand and supply have created more uncertainty about how companies evaluate product pricing. In addition to considerations for their existing portfolio companies, PE funds are now paying more attention to price optimization and strategy as part of their due diligence and value-creation plans for target companies. Timely access to the right data to drive pricing analysis and feed complex pricing models will be essential to navigate these issues.
  • Given the pressure to execute on increasingly complex value-creation plans and achieve results, people factors are becoming more important parts of deal due diligence and value-creation planning. While leadership assessment and transition, talent identification, retention and cultural alignment have always been key, we’re now seeing acquirers evaluating these factors earlier in their assessment process and more rigorously.
  • Environmental, social and governance (ESG) is quickly rising on the radar of PE investors. During 2021, a number of major Canadian PE and pension funds committed to net zero, announced interim targets to reduce portfolio emissions and established transition funds. While many initiatives are still in the early stages and limited funds have been invested to date, we expect the ESG focus and fund-specific activities to accelerate. This will likely drive additional pressure from limited partner investors for metrics and transparent ESG disclosures.
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