Mergers and acquisitions to pick up in 2025 as conditions ease: KPMG

KPMG says nine in 10 Canadian CEOs are considering making an acquisition within the next three years to help boost their company's growth.

A pair of surveys by the firm released Monday (Oct. 7) show four in 10 Canadian CEOs are planning major deals, while nearly three quarters of small- and medium-sized businesses are considering acquisitions.

Canadian chief executives see mergers and acquisitions as their second-most important growth strategy in the next three years, behind organic growth and ahead of strategic alliances, according to KPMG.

Meanwhile, smaller businesses rely less on these deals as a top growth strategy, but many are still planning to make acquisitions in the coming years, and 4% are seeking to be acquired. 

“Recent interest rate cuts by central banks in Canada and the U.S., and lower inflation are breathing life back into the M&A market," said John Cho, national leader for KPMG in Canada's deal advisory practice, in a press release.

"As the cost of capital eases, investors and corporates are becoming more confident about making acquisitions, so we expect to see deal making activity pick up; in fact, 2025 could be one of the busiest years for M&A in quite some time."

Cho added that the supply of acquisition targets will likely also increase next year as economic headwinds ease and more private equity funds exit their investments after years of sitting tight.

"As the economy starts to improve, more small- and mid-sized businesses will be looking for funding to help support their next stage of growth," he said.

"All these factors point to a busier M&A market."

The KPMG report said that tapping private capital will be a key strategy for small- and medium-sized businesses considering expansion.

Roughly 80 per cent of survey respondents said they are looking for a long-term investor with patient capital and advice that can help them scale up, while 77% are seeking an investment of 10 years or more.

Sourcing private capital has become increasingly important to Canadian organizations looking to grow in recent years because the alternative—going public—has become "more onerous and complicated," said Neil Blair, partner and president of KPMG in Canada Corporate Finance Inc.

“Public markets have become more complex and harder to navigate, and many businesses don’t want to deal with that complexity because it can be costly, time-consuming and resource-intensive for many organizations," he said.

"Private capital is an attractive option for growing businesses, but business owners aren’t just looking for funding—they want true partners who understand and value their vision and purpose."

Blair and Cho said they recommend potential buyers and prospective sellers use data, analytics and AI tools to identify competitive advantages and synergies in order to get more value from a deal.

They added it's important to have dedicated merger and acquisition personnel, along with processes and activities in place pre- and post-deal.