In 2020, Canadian M&A activity declined in both transaction count and total implied enterprise value (EV) as the effects of the COVID-19 pandemic, along with growing political tensions across the world, caused significant concerns for investors. There were 1,712 Canadian companies sold over the course of 2020, representing total disclosed EVs of $61.6 billion. Of the transactions completed, 74.2% were domestic acquisitions, a number which is in line with historical averages.
With an abundance of liquidity remaining in the market, strategic buyers and private equity funds are once again actively looking to undertake major investments after a slower-than-expected year of deal activity in 2020. Buyers also have increasing visibility on a post-pandemic world as global vaccination efforts unfold, which should further stimulate pent-up demand for deal-making. In many industries battered by the pandemic, acquirors should enjoy a strong negotiating position as the market dynamics appear to have shifted from seller-friendly to buyer-friendly. Buyers and investors with healthy balance sheets will see this environment as an opportunity to acquire high quality assets at attractive valuations.
Governments around the world have invoked unprecedented economic measures to support workers, businesses and financial institutions. While capital markets were extremely volatile throughout last spring and summer, lenders and investors have now recalibrated and are once again focused on new business development vs. triaging their portfolios. While lenders are back in financing mode, leverage metrics will likely remain more conservative than pre-pandemic levels which may be reflected in M&A valuation multiples.
S&P Global Market Intelligence as of January 13, 2021; Duff & Phelps analysis. All publicly disclosed transaction information available in S&P Global Market Intelligence.
For all data herein: All transaction values are in Canadian dollars (unless otherwise noted) and refer to transactions with reported financial data. All transaction data refers to acquisitions of majority stakes (minority deals were excluded). M&A transactions in 2020 include those between January 1, 2020 and December 31, 2020.