Canada braces for M&A uptick in 2024 as economy stabilizes; tech, healthcare, and minerals sectors to lead. (BNN Bloomberg)
Anticipated stability in Canada's economic conditions is forecasted to spark a surge in mergers and acquisitions (M&A) this year. Michael Morrow, BDO Canada's managing director of M&A and capital markets, attributed a 35% drop in 2023's M&A activities to economic uncertainties. However, he predicts a rebound in corporate deal-making, estimating a potential increase of up to 40% in mergers this year.
Morrow foresees a gradual improvement throughout 2024, expecting a slower pace in the first quarter due to residual uncertainties from the previous year. As economic clouds dissipate and with signs of recovery, he believes M&A activities will pick up momentum by mid-year.
He emphasized that numerous Canadian businesses awaiting transitions have held off from entering the market to sell, setting the stage for a resurgence in deal-making. Similarly, a report by PWC in December aligned with Morrow's views, highlighting the sluggish M&A scene in the third quarter of 2023, predicting a slow progression in the following quarter, and foreseeing a potential normalized deal flow post anticipated interest rate reductions.
Echoing the sentiment, law firm Bennett Jones expressed optimism about the M&A landscape in 2024. Their blog anticipates a shift from last year's cautious approach by buyers to a more proactive stance as market conditions stabilize.
Experts predict a shift in deal trends, anticipating fewer massive deals while large companies target small and mid-cap firms. Morrow outlined technology, healthcare, and food and beverage sectors as key drivers for the M&A resurgence due to their sensitivity to economic slowdowns.
PWC identified commercial real estate, energy, and mining sectors as potential hotspots for mergers this year. The report highlighted the significance of critical minerals in the energy transition, driving demand and prompting supply chain participants' concerns about future mineral supplies.
Despite the projected slow start to the year, major deals are on the horizon. The Royal Bank of Canada's $13.5 billion acquisition of HSBC Canada recently secured federal approval, set to conclude in the first quarter of 2024. Looking ahead, Glencore, a Swiss commodities trader, aims to finalize a US$6.93 billion deal for a 77% stake in Teck Resources' coal business by the third quarter.
These anticipated mergers and acquisitions, alongside the gradual stabilization of economic factors, suggest a potential resurgence in Canada's deal-making landscape, providing avenues for business transitions and strategic expansions across various sectors.
