A new paper from PwC Management Services LP says despite long-standing productivity challenges in Canada, and potential policy changes from the new United States administration, the firm is cautiously optimistic about merger and acquisition (M&A) activity, noting a modest uptick in recent deal activity.
From July 1 to Nov. 30, 2024, there were 1,068 deals completed in all sectors across Canada, with a total value of $227-billion. “In H1 2025, we expect Canadian M&A markets to continue on this slightly upward trajectory, with a steady increase in activity as the year progresses,” they write in the firm’s 2025 Canadian M&A outlook. “The increase in activity from July to November 2024 reflects a gradual recovery rather than a rapid surge, as ongoing concerns about the productivity crisis continue to weigh down the industry.”
The potential for drastic policy change from the new U.S. administration also introduces uncertainty. Although some firms may seek to set up shop in the U.S. to avoid losing market share, they say this uncertainty about trade policies could delay transactions while companies reassess their risk mitigation strategies.
Multiple challenges
The multiple challenges facing Canadian business, they say, are a unique opportunity for dealmakers to be part of the productivity solution. Among the paper’s recommendations, they suggest developing and implementing acquisition strategies that specifically address the problems in question.
In discussing productivity at some length, the paper makes four recommendations: “Develop acquisition strategies that avoid the trap of assuming linear progression in your industry,” they write. “Continuously conduct market scans for emerging technologies.” They also encourage companies to continuously assess labour supply, particularly in key professions, and scale to keep up with technological advances.
Harnessing technology
In looking at different sectors, they say financial services is a leader in harnessing technology to drive transformation. “With a strong appetite for growth through inorganic strategies, this sector is actively acquiring technology-enabled businesses to optimize operations, reduce costs and enhance customer engagement,” they add.
“As in prior years, the financial services sector in Canada continues to be very active in terms of M&A. We’re seeing a significant volume (and often sizable transactions) driven, in many cases, by appetite to transform through inorganic strategy.”
They also say private equity is expected to play a significant role in addressing productivity challenges by consolidating smaller businesses to achieve scale and support technology investment.
