Canadian executives taking a pause on M&A activity

Confidence is there, but deal intentions are lacking

Mario ToneguzziCanadian executives are feeling optimistic about the country’s economy – as well as the global economy – but they’re not that keen on making acquisitions, says a new report released Tuesday by EY.

The 19th edition of the Global Capital Confidence Barometer found that 73 per cent of Canadian executives see corporate earnings as improving and 81 per cent felt the same way about mergers and acquisitions.

But at the same time only 46 per cent of respondents intend to actively pursue acquisitions in the next 12 months.

“Confidence is there, but deal intentions are lacking,” said Doug Jenkinson, Partner in EY Canada’s Transaction Advisory Services practice in a statement. “Canadian executives are taking stock after recent record levels of M&A activity. Unachieved synergies in recent transactions and rising geopolitical uncertainty is pushing deals down the boardroom agenda for the time being.

“Realizing synergies and optimizing integration can mean the difference between a good and a bad deal. Most executives value synergies at about a third of the total deal value. That’s why it’s so important that businesses invest in the right corrective measures to help them achieve the synergies identified when the deal was struck.”

The survey found that 53 per cent of Canadian executives say they achieved lower synergies than expected this year and 19 per cent say changes in trade and tariff policies are making them reconsider potential acquisition targets.

“The shift from NAFTA to USMCA is on the minds of executives, and many are waiting for more clarity before firming up deal plans,” said Jenkinson. “It’s an opportune time to invest in existing operations and strengthen core competencies in order to act quickly once the dust settles.”

EY is a global leader in assurance, tax, transaction and advisory services.

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