Western provinces more likely to make mergers and acquisitions
TORONTO—Canadian companies want to spend a bit more time fixing themselves up before getting into bed with other businesses, according to a new survey by Ernst & Young.
It asked companies across the globe about their business confidence and M&A plans.
Canadian firms were more self-assured about their operations in the current economy compared to companies in other countries—78 per cent and 70 per cent, respectively.
“Canada hasn’t experienced the same degree of downturn as many other economies have. As a result, we’re seeing confidence bouncing back here at higher levels,” says Tony Ianni, a partner at Ernst & Young’s Transaction Advisory Services practice.
Despite the confidence boost, many Canadian companies aren’t ready to start making deals.
Ianni says there’s a lot of activity taking place in Western Canada, where businesses are riding the commodities boom.
Regions that were harder hit by the recession, such as Ontario’s manufacturing belt, are busier cleaning up their balance sheets.
“The manufacturing sector is still struggling with a high exchange rate. Folks there are focusing internally on improving operational efficiency,” Ianni says.
As a result, Canadian M&A activity is likely to flatten compared to a three per cent hike globally.
And even companies that can afford to make transactions say it hasn’t been easy.
More than half said the valuation gap between buyer and seller expectation has become a deal-breaker. And good assets are getting rarer, creating more competition and higher valuations.
Political unrest in the Middle East and economic uncertainty in Europe could also block plans, they said.