Canada’s mergers and acquisitions (M&A) market rebounded over the last half of 2024 with clear upward momentum following lower deal volumes in 2023 and early 2024. Several factors indicate this positive momentum may continue in 2025, including the stabilization of inflation globally, the steady reduction in interest rates, and the significant dry powder accumulating with private equity firms. However, Canada’s M&A market also faces ongoing headwinds in 2025, as recent geopolitical shifts and trade-related uncertainties have already led to a more cautious start to the year, while Canadian regulators maintain a heightened focus on M&A activity.
Positive trends for M&A activity in Canada
Reports show a slight upward trend in deal count in 2024, with a marked increase in deal value compared to the previous year. This trend, driven by the latter half of 2024, is one that many expected to continue. Several factors still point to the potential for sustained growth in Canada’s M&A market.
2025 began with the Bank of Canada cutting its policy rate by 25 basis points in January, with further reductions expected. TD Economics forecasts an additional 100 basis points in cuts this year. Easing inflation and the availability of transaction financing on increasingly favourable terms may also stimulate deal-making. A weaker Canadian dollar continues to enhance the purchasing power of foreign investors. Meanwhile, private equity firms, armed with significant dry powder and a rise in expected exits, were poised to increase M&A activity through 2025.
As well, Canada’s reputation for regulatory predictability and political stability has historically attracted foreign investors as a safe market. Canadian companies in high-growth industries remain prime acquisition targets for investors looking to expand their market reach and enhance their portfolios. For instance, Canada’s materials industry saw significant public M&A activity in 2024, with critical minerals continuing to attract foreign investors due to their role in the transition to renewable energy. Other attractive sectors include information technology, financials, and healthcare, where demand has been strong. Additionally, efforts to reduce interprovincial trade barriers and increase productivity through innovation, AI and digital transformation could further enhance the M&A landscape, particularly for domestic deals.
Tariffs and trade uncertainty
With the trade relationship between Canada and the U.S. in flux due to the threat and imposition of tariffs and a potential shift in U.S. trade policy, M&A activity cooled at the start of 2025 in both markets, as parties remain cautious amid ongoing trade uncertainty. The U.S. has traditionally been Canada’s largest source of foreign direct investment, followed by Australia, the United Kingdom, and France, while also being the top destination for Canadian buyers. However, uncertainty for Canadian companies with U.S. exposure may dampen their appeal for both domestic and international buyers, while a weakening Canadian dollar reduces the purchasing power of Canadian buyers looking to acquire U.S. and other international targets.
Given these concerns, Canadian companies may pursue strategic acquisitions in the U.S. to mitigate the impact of U.S. tariffs on Canadian exports, such as acquiring U.S. businesses or manufacturing facilities to avoid tariffs and maintain access to key markets. Similarly, U.S. acquirers may consider purchasing companies along their supply chain in Canada to control costs and reduce exposure to tariffs through vertical integration. Investors may also prioritize companies with low U.S. exposure, strong local demand, pricing power, or service-based models, ensuring a steady pipeline of attractive targets despite trade uncertainty. Acquirers may also explore alternative deal structures, such as earn-outs, rollover equity, or minority investments, to mitigate risks and bridge valuations in an evolving trade landscape. While the duration of trade uncertainty remains unclear, if and when these pressures ease, we may see a sharp rebound in M&A activity, as dealmakers move quickly to capitalize on pent-up demand and improved conditions. Despite these near-term challenges, trade-related structural shifts could spur new cross-border deal-making in the longer term.
Regulatory considerations
Several changes in Canada’s regulatory landscape are also expected to impact M&A transactions in 2025, adding complexity and potentially extending timelines.
In March of 2024, Bill C-34 was passed to modernize Canada’s regulatory framework for foreign direct investment. As of September 3, 2024, a number of the amendments to the Investment Canada Act (ICA) have already come into force, largely intended to grant the Minister more flexibility and greater authority to take action quickly and strengthen Canada’s ability to review foreign investments for national security concerns. Notably, among the additional amendments to the ICA that remain to be implemented but are anticipated to come into force in 2025 is a new pre-implementation filing requirement for acquisitions by non-Canadians, including some minority investments, in certain sensitive sectors (such as critical minerals). A full list of sensitive sectors remains to be prescribed.
On March 5, 2025, in light of the rapidly shifting trade environment, the Government of Canada updated the Guidelines on the National Security Review of Investments under the ICA to explicitly recognize the importance of economic security in assessments of Canada’s national security concerns, which now specifically includes as a factor in making determinations the potential of the investment to undermine Canada’s economic security through the enhanced integration of the Canadian business with the economy of a foreign state. In applying this factor, it will consider, among other things, the size of the Canadian business, its place in the innovation ecosystem, and the impact on Canadian supply chains. Perceived opportunistic or predatory investment behaviour by non-Canadians may also attract scrutiny. While the policy update serves as a political signal and may lead to increased regulatory attention, its application is likely to be infrequent.
The Competition Act has also recently seen significant reform, including amendments introducing a new rebuttable structural presumption of anti-competitiveness where certain market share or concentration thresholds are exceeded (effectively a reversal of onus onto the merging parties if demonstrated), an expansion to the range of mergers requiring advance notification to the Competition Bureau, and an increased period post-closing during which the Competition Bureau can challenge non-notifiable mergers, among other things.
M&A outlook
Overall, while Canada’s M&A market ended 2024 with strong momentum and optimism for 2025, early 2025 has seen a more cautious start, as dealmakers continue to navigate shifting trade dynamics. Still, the easing of inflation, declining interest rates, and abundant private equity capital are poised to drive continued activity, particularly in high-growth sectors. However, uncertainty surrounding U.S. trade policy will temper optimism for now, while evolving regulatory requirements will add complexity, requiring careful navigation.
As acquirers refine their strategies to mitigate risks and seize opportunities, Canada remains a compelling market for investment, underpinned by its economic resilience and appeal to both domestic and foreign buyers. On balance, dealmakers remain cautiously optimistic about 2025 if trade uncertainty dissipates, and those who proactively adapt to sectoral shifts, target resilient businesses, and leverage flexible deal structuring alongside strategic cross-border opportunities will be best positioned to thrive in Canada’s dynamic M&A market.
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Amaan Gangji is a partner based in the Lawson Lundell Vancouver office. Amaan has a practice focused on mergers and acquisitions, private equity, technology, and corporate/commercial matters. He is recognized as a leading lawyer in Canada by Chambers and Partners (Corporate/Commercial), the Canadian Legal Lexpert Directory (Mergers and Acquisitions), and the Best Lawyers in Canada (Mergers and Acquisitions). He was also named a Lexpert Rising Star in 2023, distinguishing him as one of Canada’s leading lawyers under 40, recognized for leading a transaction that was a finalist for ACG BC’s Deal of the Year award in 2023, and featured in Lexpert’s Special Edition: Finance and M&A Guide as a Lawyer to Watch in 2024.
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Katherine Zhou is an associate in the Business Law Group in the Vancouver office of Lawson Lundell. Her practice focuses on general corporate and commercial law. She assists clients in a variety of transactions, including corporate reorganizations, mergers and acquisitions, debt financings and drafting commercial agreements and contracts.