Proposed US tariffs may slow Canadian merger and acquisition (M&A) activity in early 2025, but according to KPMG in Canada’s deal advisory leaders, long-term opportunities could arise as businesses adapt.
The tariffs, proposed by US President Donald Trump shortly after taking office, include a potential 25 percent levy on Canadian goods starting in February. In response, the Canadian government has indicated it may introduce counter-tariffs. The uncertainty created by these trade measures is already affecting the M&A landscape.
Marco Tomassetti, president of KPMG Corporate Finance Inc., noted that while North American private company M&A activity has gained momentum in the past year—driven by low interest rates and abundant capital—tariffs could create short-term challenges. “We will see some deal activity stall as buyers and sellers assess the impact of tariffs on earnings,” said Tomassetti. Businesses exposed to the US market may face downward pressure on valuations and increased risks of failed deals, prompting many to delay going to market.
Buyers are also expected to proceed cautiously, given the difficulty of valuing companies amid earnings uncertainty. Tomassetti explained that buyers may demand deal protections that sellers find unappealing or pause acquisitions until the trade landscape stabilizes. Despite these challenges, Tomassetti remains optimistic about sectors less impacted by US exposure, such as service-based companies with strong pricing power, which continue to attract interest and achieve strong valuations.
In the longer term, potential changes to trade agreements like the Canada-United States-Mexico Agreement (CUSMA) could drive cross-border deals. Neil Blair, partner and national leader of KPMG Canada’s deal advisory practice, suggested that Canadian firms might pursue acquisitions in the US to bypass trade restrictions. “A trade war will spur cross-border deals as Canadian companies acquire U.S. assets to comply with supply chain requirements,” Blair said.
A recent KPMG survey supports this outlook, revealing that 90 percent of Canadian CEOs are considering acquisitions within the next three years, with 40 percent planning significant deals.
KPMG advised Canadian firms to conduct impact assessments, develop mitigation strategies, and conduct rigorous due diligence when navigating the evolving trade environment. As Blair emphasized, strategic planning and professional advisory services will be critical for businesses seeking to navigate uncertainty while positioning themselves for future opportunities.