Trends in Canadian M&A

A strong year-end bolstered Canadian M&A activity into 2016, making last year the most active year in Canadian dealmaking since 2007. The year got off to a robust start, with overall Canadian M&A deal values reportedly increasing by 154 percent over the same period in 2015. Going forward, the depressed Canadian dollar could operate to reduce valuations of Canadian-based target companies.

Trends this year may be shaped by a change in government. Newly-elected Liberals ran on campaign promises of more public support for renewable energy, increased taxes on high-income earners and planned deficit spending for three years to spur economic growth. One impact may be a boost to the renewable energy sector. The government has stated its commitment to phase out fossil fuel subsidies, speed the approval process for energy projects and implement new climate change regulation. In addition, with government spending on infrastructure poised to increase by C$5 billion annually, investors will look to capitalize on new Canadian projects.

In 2015, direct investments by Canadian pension funds were made in a variety of industries, and this kind of direct deal activity should continue and perhaps increase in 2016.

For the first time in recent memory, the energy sector was dethroned in 2015 as the most active in M&A (in terms of deal value). Nevertheless, market participants expect this year to be robust in energy M&A, as both strategic and financial acquirers take advantage of undervalued Canadian assets.