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Canadian M&A Deal Flow Poised for Robust 2022

Despite potential challenges, the coming 12 months look positive for Canadian deal flow.

M&A Canada 2022

2021 was an extraordinary year for mergers and acquisitions (M&A) globally — especially for Canada. “Canadian M&A Outlook,” a discussion that streamed live on December 14, 2021, looked back on an exceptionally busy year of dealmaking and ahead to what should be an equally busy 2022.

The virtual event, produced in partnership with Mergermarket, featured Jill Chua, managing director, financial institutions and financial technology at Raymond James; Mario Nigro, a partner at Stikeman Elliott; and me, Brian Hwang, director - corporate development & global partnerships at Intralinks. The free-flowing discussion hit on topics like the growing importance of Canadian venture capital (VC) funds, what impacts inflation and interest-rate rises may have this year and the development of the special purpose acquisition company (SPAC) market.

The overall theme was the record-breaking pace of the current M&A market. From an SS&C Intralinks perspective, I said that we’re looking at a record start to 2022 and that we expect Q1 2022 quarter-on-quarter growth of greater than 10 percent compared with Q4 2021.

The panel expects deal activity to continue despite the Omicron COVID-19 variant, with the other speakers noting that the market has become so used to doing deals remotely that the process of M&A could continue seamlessly — even if new lockdowns are instituted. However, they did think a new COVID-19 wave could impact specific sectors, reducing activity in exposed markets like restaurants. It was also pointed out that a new variant could further boost sectors like Technology.

An eye on tailwinds

By contrast, the speakers did see inflation as having the potential to slow down deal activity across the market. Rising inflation could see buyers delay their activity to get more visibility on challenges such as staffing costs, often a concern for fast-growing technology companies. An increase in interest rates could impact deal economics as debt structures become more expensive.

While that may be in the future, the present environment was said to be more about competition for quality assets among buyers. One speaker noted that even traditionally conservative Canadian private equity (PE) funds have had to become more aggressive to compete with U.S. buyers looking across the border. It was also pointed out that the record fundraising from Canadian PE companies has pushed them further up into the large-cap space, leaving a growing gap in middle-market funding. That gap is being filled by innovative new private structures, including an explosion of independent sponsors and search funds.

Throughout the webinar, the main takeaway is that despite some potential challenges, the future looks positive for Canadian deal flow.

A full recording of the webinar is available here

Brian Hwang

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