Insights & Info

Insights > Canadian M&A Activity Mirrors U.S. Trends

Canadian M&A Activity Mirrors U.S. Trends

By Generational Equity

Canadian M&A

According to Reuters:

Canadian M&A Jumps 28% in Third Quarter; Canadian mergers and acquisitions activity for the third quarter hit its highest since 2016 as historically low interest rates and strong equity markets helped companies to revive transactions that were put on hold due to the pandemic.

"Higher deal flow in the third quarter was driven by a combination of factors including strong equity markets, historically low borrowing costs and market confidence in a gradual COVID-19 recovery," said Jake Lawrence, Group Head and CEO, Global Banking and Markets, Scotiabank.

As we have discussed in past articles, 2021 is shaping up to be a record year for M&A activity throughout the world, but especially in the U.S. and Canada.

Much of this growth in 2021 is pent-up demand due to the pandemic shutting down the economy for the first two quarters in 2020. However, in the last two quarters of 2020 and continuing so far in 2021, we have witnessed an incredible explosion in M&A demand.

Economic recovery and historically low interest rates have also fueled demand. Record dry powder with private equity firms has also made the competition for deals tight. Professional buyers are using 2021 and most likely 2022 to gain market share, add key assets and build businesses in industries and markets poised for significant growth.

However, again according to Reuters, the party will likely not last forever:

"I guess the big threat that's overhanging the M&A landscape is the threat of rising interest rates," said Sarfraz Visram, Head of Canadian and International Mergers & Acquisitions at Bank of Montreal.

Ah yes, the old interest rate conundrum. Quite simply, since most deals have some component of the transaction financed, as interest rates rise (which they surely will do) it becomes more expensive for buyers to acquire companies. This not only drives the purchase price down, but it can also put the brakes on deals left and right.

So, we believe that if your business is buyer ready (i.e. will pass buyer scrutiny during due diligence) the time to act is now if you are the owner of a privately held company in the U.S. or Canada.

As interest rates rise, as they are predicted to do in 2022 and 2023, the cost of borrowing will potentially impact the net proceeds you may receive upon exit. You will most likely still sell your company, but the premium buyers will be on the sidelines, and you will leave significant chips on the table by waiting to move in late 2022 and 2023.

To learn more about all the factors (in addition to interest rates) that are making this a true seller’s market, call us at 972-232-1121 or provide us with your contact information and we will reach out to you and have a confidential discussion regarding your business and personal financial goals.

Carl Doerksen is the Director of Corporate Development at Generational Equity.

© 2021 Generational Equity, LLC All Rights Reserved

Make an informed decision

The best decisions in life are informed decisions. We release educational business insights like this every week. Subscribe to make sure you don’t miss the latest news, views and analysis.

Success

Success, you have been added to our list.

Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.
Ralph Noblin, President of Noblin & Associates
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.
Jay Dinnison, Owner of Sharpe Mixers
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!
Eric Erlandson, Owner, Action Fastenings, Inc.
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!
Andy Graham, Vice President, Modern Heating & Plumbing
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.
Jay Dinnison, Owner of Sharpe Mixers
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.
Robert Evans, President and CEO of Mealtracker Dietary Software
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.
Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.
Robert Evans, President and CEO of Mealtracker Dietary Software
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.
Michael J Polarek, President, Paragon Packaging
We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.
Michael J Polarek, President, Paragon Packaging
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.
Andy Graham, Vice President, Modern Heating & Plumbing
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.
Larry Moore, Owner, A Company Portable Restrooms
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.
Terry D. Wickman, President, Keytroller
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).
Bil MacLeslie, CEO, ipHouse
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”
Karen S. Williams, CFO, BW Manufacturing
T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.
Bryan D. Horn, Owner, Over Under Clothing
Generational Equity’s assistance was invaluable in compiling and marketing our business.
Bil MacLeslie, CEO, ipHouse
We thank you Eric and Generational Equity making our dream come true.
Larry Moore, Owner, A Company Portable Restrooms
Dear Chris and Andre, I just wanted to say thanks for all your help. Even though this process was not an easy one, it was comforting to know that I had a capable team standing beside me. You made me feel like we were almost your only client or at least the most important one. Thanks again, and I will recommend your service in the future.
Shenille Engelhart, Owner – CLS Technology
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.
Bil MacLeslie, CEO, ipHouse
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.
Pete L.
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.
Karen S. Williams, CFO, BW Manufacturing
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.
Terry D. Wickman, President, Keytroller