Canadian executives are so bullish on the economy that 76% of them expect to pursue M&A in the next 12 months, the second-highest percentage ever reported in the decade-running EY Global Capital Confidence Barometer.
The 20th edition of the survey shows dealmaking optimism well above the historical average of 50% despite near daily headlines forecasting economic doom and gloom — and recession.
Domestically, 92% of Canadian respondents see the local economy improving, compared with only 54% two years ago. And 93% believe the global economy is improving.
“A number of factors are supporting corporate confidence and appetite to do deals,” says Doug Jenkinson, Partner in EY Canada’s Transaction Advisory Services practice. “Canadian executives expect increases in corporate earnings, credit availability and the stock market over the next 12 months. These conditions are setting the stage for growth.”
More than 78% of Canadian companies are targeting revenue growth greater than 10% in the coming year. The top two capital investment areas include digital and technology efforts and restructuring and improving existing operations.
What’s more, executives are clearly focused on maintaining employee headcount with only 3% planning cuts. That’s consistent with the reduced unemployment rate (5.7%) reported in April 2019 by Statistics Canada’s labour force survey.
“This is a strong indicator of a positive economy, but more important are the metrics demonstrating the desire to keep businesses competitive and resilient amid disruption,” says Jenkinson. “Executives are also looking at how investments in artificial intelligence, automation and technology can improve workforce productivity.”
Technology and talent (22%) along with sector convergence (22%) rank as the greatest strategic drivers for pursuing M&A among Canadian executives.
“Canadian executives are focused on becoming smarter, stronger and evaluating all aspects of their capital agenda to maximize positive market conditions — while not losing sight of the potential for economic or political setbacks,” says Jenkinson. “A decade on from the global financial crisis and those lessons of caution and discipline still remain critical to success.”
Access more Canadian highlights from the latest EY Global Capital Confidence Barometer.