Economic Gains, Energy, and Tech Sector Prospects Look to Drive Canadian M&A

New York & Toronto – A majority of the 50 M&A dealmakers surveyed see Canadian M&A increasing in overall volume and value in 2018, according to a new study produced by Citi in conjunction with Mergermarket.

The report, Reaching New Heights: The outlook for Canadian M&A in 2018, finds that a growing economy, strong consumer spending, cash-rich corporate balance sheets, and firming oil prices will help to push domestic activity. Meanwhile, Canada's recent focus to cut down on its dependence on fossil fuel and provide technology funding is predicted to drive tech-based acquisitions for inbound and outbound activity in 2018.

Beyond the energy sector, tech looms large in the minds of Canadian dealmakers, especially when it comes to cross-border activity. Respondents in this survey said they expect Canadian firms to seek out foreign tech acquisitions — and for buyers from abroad to purchase Canadian tech as well. Meanwhile, an anticipated drive by corporates to enter new markets has dealmakers predicting that Asian countries will have the most cross-border targets for Canadian acquirers, and the most buyers of Canadian assets.

"As the uncertainty around NAFTA has increased, it is clear that there has been a shift in the target countries for cross-border M&A deals," said Grant Kernaghan, Managing Director at Citigroup Global Markets Canada. "Although the U.S. will always be an important market for Canada, as the report reveals Asia is expected to become more of a focus for outbound investment in the coming year."

Key findings of this report include:

• Over three-quarters of respondents believe Canadian M&A activity will increase in 2018, both in volume (78%) and value (74%).
• The energy sector was voted as the top area to see the biggest increase in both domestic and inbound M&A activity for 2018, while technology, media & telecoms M&A is expected to see the most for outbound activity.
• Top challenges for Canadian dealmakers in 2018 according to experts include regulatory hurdles (44%), geopolitical and macroeconomic risk (42%), and uncertainty over the results of the NAFTA negotiations (40%).
• Nearly half of respondents (46%) believe domestic activity in 2018 will be fueled by accumulated cash stockpiles at Canadian companies.

Click here to view the results and download the full PDF of the report

Citi
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