Despite the ups and downs of trade negotiations and market uncertainty in 2018, Canada experienced a strong M&A market last year. According to PwC Canada’s M&A year in review and 2019 outlook, growth was helped by abundant capital and a growing economy with low unemployment. Aggregate deal value was up 20% over 2017 and the volume of transactions rose by 8%.

Top sectors for deal activity in 2018

• With the legalization of recreational cannabis in October 2018, it’s no surprise that the healthcare industry was among the top sectors for deal volume, which rose by 87% over 2017.
• The financial services industry saw a significant rise in deal volume, up 31% over 2017.
• And the technology sector grew 29% in deal volume over 2017.

Outbound deal activity was strong despite questions around tariffs, protectionism and the fate of the North American Free Trade Agreement. Canadian companies showed an appetite for businesses based in both the US and elsewhere in the world, which drove a 17% year-over-year increase in outbound transaction volume in 2018.

“Despite geopolitical headwinds, many Canadian dealmakers took a global view when pursuing opportunities in 2018,” says Dave Planques, National Deals Leader, PwC Canada. “Large investors still have a lot of money to deploy and we expect dealmakers to maintain their enthusiasm heading into 2019,” adds Planques.

What’s coming in 2019?

Strong M&A activity will continue. According to PwC’s 22nd Global CEO Survey, 59% of Canadian CEOs are planning on new M&A to drive their revenue growth in 2019, up from 44% in 2018.

Although 2019 looks to be another year of uncertainty, with a federal election looming, the possibility of global trade disruption and a potential slowdown in the economic growth cycle, we expect the abundance of capital accessible to investors to continue to support M&A market activity.

Technology will continue to have an impact on the deals landscape. Companies focused on data security, an ever-growing issue, will be among the list of top M&A candidates. Fintechs, especially those with proven business models that could attract the interest of more established counterparts like banks and insurance companies, will also be targets.

With recreational cannabis now legal in Canada and medical cannabis rapidly expanding internationally, 2019 will be a pivotal year to show investors a return on capital. Canadian companies may look to leverage their industry expertise and experience to gain a first-mover advantage abroad. While not all cannabis companies will succeed, Canadian licensed producers are currently positioned as the industry’s global leaders.

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About PwC Canada

At PwC, our purpose is to build trust in society and solve important problems. More than 7,400 partners and staff in offices across the country are committed to delivering quality in assurance, tax, consulting and deals services. PwC Canada is a member of the PwC network of firms with more than 250,000 people in 158 countries.