A slight uptick in deal activity has hinted at a positive outlook for Canada’s mergers and acquisitions market this year, according to PwC’s 2025 Canadian M&A Outlook report.
This rise was observed from July 2024 to November 2024, and it comes as the market grapples with long-term productivity concerns and possible policy changes introduced by the incoming US administration. As per PwC, these productivity concerns originated during the 1980s digital revolution and continue to hinder economic progress.
"Addressing Canada's productivity crisis is essential for fuelling economic growth and enhancing our competitiveness on the global stage," said Sean Rowe, national deals markets and value creation leader at PwC Canada, in a statement. "Dealmakers should look to embrace technological transformation and invest in innovation to drive sustainable progress."
The financial services sector has adopted technology to spur transformation, with organizations acquiring technology-enabled businesses to optimize operations, save costs, and enhance customer engagement through cloud-based platforms, artificial intelligence, and machine learning.
M&A activity is also set to tick up in the advanced manufacturing, hi-tech, and healthcare technology sectors. According to PwC, intellectual property and technological solutions development will drive expansion and establish leadership; moreover, private equity investments are expected to help tackle productivity concerns through small business consolidation to achieve scale and prop up automation and technology investment.
PwC added that labour productivity has dropped and capital investment stalled due to Canada’s sluggish embrace of digital transformation and underutilization of natural resources. Moreover, the incoming US administration may introduce trade policy adjustments such as tariff uncertainty and free trade continuation in North America, slowing transactions down.
"Canada's productivity crisis means that Canadian businesses must take immediate actions to ensure their long-term success. The uncertainty brought about by potential policy changes from the new U.S. administration coupled with the acceleration of the digital revolution and the rise in geopolitical risks adds another layer of challenges for Canadian businesses," said Michael Dobner, national economics leader at PwC Canada. "However, these multiple challenges also present a unique opportunity for dealmakers to be a key part of the solution, by developing and implementing acquisition strategies that address these challenges."
The full 2025 Canadian M&A Outlook report can be accessed here.