Canada's M&A appetite strongest since 2009: EY survey

Executives optimistic about domestic economy

TORONTO, Dec. 1, 2015 /CNW/ - Nearly three quarters of Canadian executives (73%) have M&A plans for the next year, compared to only 24% in October 2014, according to EY's latest Canadian Capital Confidence Barometer. This level only slightly trails the US, which has the highest rate among all countries surveyed. For Canada, this is the highest rate in the survey's history.

"Canada is bullish in its pursuit of acquisitions," says Doug Jenkinson, EY's Transaction Advisory Services Partner. "M&A outlook is also positive in the U.S., where 74% of companies are planning on making deals this year — the highest out of all countries surveyed. We're seeing a very healthy market overall."

According to the survey, Canadian eagerness for M&A is supported by a higher optimism about the domestic economy. In fact, 38% of respondents see the Canadian economy improving, compared to just 13% in April 2015. This optimism is reflected in the steady growth of deal pipelines, with almost 90% of Canadian respondents looking at more than one M&A opportunity at once. This is almost double from April 2015.

Prudent approach
"Despite the high appetite to acquire, we have confidence this isn't an overheating market," says Jenkinson. "Executives told us they're being extremely prudent in evaluating opportunities – and 82% said they're willing to walk away from deals that aren't fully aligned with their corporate strategy. This is a sure sign of a strong, but thoughtful market."

While executives are upbeat about what's to come, they're also bracing for uncertainty in the next year — from volatility in commodities and currencies, to political instability in the Eurozone, to the upcoming US presidential election. As a result, they're taking a measured, prudent approach to corporate strategy and are increasingly focused on cost reduction and operational efficiency.

Canadian focus
The Canadian market is becoming the focus of Canadian M&A activity, as 66% of companies are investing in domestic deals in the coming year. Part of the explanation for this may lie in the tumultuous commodity markets, which have impacted the flow of capital. There are signs that the Canadian oil and gas industry will see an increase in transactions in the coming year as players address balance sheet pressure. Globally, 90% of oil and gas executives expect the M&A market to accelerate in the next 12 months — a sharp increase from 50% of respondents a year ago.

"After an extended period of a wait-and-see approach in M&A, we've seen very robust activity during the last few quarters. Our latest Capital Confidence Barometer suggests this strength will continue for some time," says Jenkinson. "Executives are embracing M&A as a tool for generating long-term growth as part of a bigger strategy to make their companies more competitive in the next decade."

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About EY's Global Capital Confidence Barometer
The EY Global Capital Confidence Barometer is a biannual survey of more than 1,600 senior executives from large companies around the world and across industry sectors. This is the 13th semiannual Barometer in the series, which began in November 2009; respondents for the 13th edition were surveyed August and September. The objective of the Barometer is to gauge corporate confidence in the global and domestic economic outlook, to understand boardroom priorities in the next 12 months, and to identify emerging capital practices that will distinguish those companies building competitive advantage as the global economy continues to evolve.

About EY
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

For more information, please visit ey.com/ca. Follow us on Twitter @EYCanada.

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SOURCE EY (Ernst & Young)

Sasha Anopina, [email protected], 416 943 2637; Julie Fournier, [email protected], 514 874 4308; Leigh Kjekstad, [email protected], 604 648 3807