Activity in mergers and acquisitions is picking up after a few slow years, and Canadian companies, including many in Ottawa, are seeing the benefits.
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Activity in mergers and acquisitions is picking up after a few slow years, and Canadian companies, including many in Ottawa, are seeing the benefits.
Lawyer Virginia Schweitzer has spent 25 years practising corporate finance, securities, mining and technology law, as well as M&A. She is co-managing partner of Fasken Ottawa — a law firm specializing in business law and litigation — where her clients include companies from across Canada and the United States.
From small private companies to public corporations, Schweitzer said her clients have started looking for opportunities to acquire other firms, but their scope has narrowed. Instead of casting a wide net to find innovation and talent, she said companies are taking a more domestic approach. And, in the midst of ongoing tensions with the U.S., she said Canadian companies are looking to acquire other Canadian companies, with Ottawa’s innovative tech startups reaping the benefits.
In this conversation with OBJ, Schweitzer breaks down the broad trends she’s noticed in the M&A space, why Ottawa is seeing an uptick and whether that trend will last.
The transcript has been edited for length and clarity.
Your expertise is in M&A. Is there anything in particular that you’ve been thinking a lot about?
First of all, there's more M&A. There's been an uptick. Things were a little bit quiet for a while, but now they’re up. There's also been an increase in Canadian companies acquiring Canadian companies, so more of a consolidation in the Canadian marketplace generally. That’s maybe (a result of) our new focus on Canadian, but it’s maybe something people haven't thought about as much.
Focusing more on Ottawa specifically, in the tech sector and the tech-adjacent sector, focusing on areas like defence and dual-use technologies is becoming very, very vogue.
So we’re seeing an uptick in M&A now. Why had things slowed down previously?
That’s probably just a global economy picture. Instability in the economy causes (private equity) firms and others to sit back a bit and take stock of what’s going on before they start investing their money. It’s not that there isn’t money out there, but when it’s a turbulent economy, we don’t know what’s happening. Everybody takes a pause, takes a look and then they dive in for the right opportunities.
You look at the Canadian budget: where’s the spending going to be? Infrastructure, digital infrastructure, defence, where? And then the money goes looking for those opportunities. I think it’s not that the economy has stabilized a whole lot now — it probably hasn’t — but I think people have gotten used to the new normal and now they’re better able to navigate it.
You deal with all kinds of companies of different sizes, public and private. Where are you seeing the most M&A activity right now?
It’s probably in the SME (small and medium-sized enterprise) space, particularly as it relates to Ottawa. That’s the sweet spot, particularly as it relates to tech. These are some of the niches we have in Ottawa: aerospace, cybersecurity, AI, cloud computing. Some of those companies are smaller, but that’s where we’re seeing growth and activity.
What happens is they create new technology and grow, then they catch the eye of some suitors who pick them up, rather than trying to build that themselves. It’s a testament to Ottawa itself that we have a lot of skilled workers in and around innovation who are looking to build new things. And once they build, that’s when they catch the eye of sometimes very, very large corporations who want to bring those people into the process and into the larger company.
We have a lot of accelerators, innovation hubs, things that are happening within the city that encourage that and help build that interest and activity. Then it takes off on its own from there.
If we’re looking at Ottawa tech companies, why are they looking to be acquired?
When people go into business, they have two paths: one is to build (the product) and then sell it, and the other is to build it, build it big, and become a public company. There’s always money needed for these companies. They try to finance, and you get to a point where either finding additional financing is more difficult, or you’re at a point where you really need to make a big leap. You’ve got customers. That’s often when you find a strategic partner and sometimes that discussion moves to ‘let’s go all in.’
Founders are motivated by different interests. You want to make some money, of course, but that’s sometimes because you want to get involved in a different business, or you’re at a point in your career where you want to do different things or work within a bigger organization. You may be beholden to various shareholders who have other objectives as well. All those things play a role.
The other thing is that you might be looking for a private equity firm that comes in and is consolidating in a particular area. Then you can end up selling various parts of the business later on. It’s not always a strategic partner but a PE partner.
And then there are those who want to go all the way and they are probably looking around to acquire other businesses to bulk up and consolidate within whatever space they’re growing, with the goal of ultimately becoming a public company.
You mentioned a growing trend of Canadian consolidation. How has that trend fluctuated over the years, especially locally?
It depends how far back you go. There was a time where we had, in the Ottawa market, pretty significant, larger companies that were doing the acquiring. More recently, we’ve seen more of the innovation, the building. Companies from the U.S. were looking to acquire those innovative companies. Often, larger companies have trouble innovating, so they look outside to bring innovation in. So we’ve seen lots of U.S. companies and PE firms coming in.
But we have a lot of PE firms in Canada as well. The trend of Canadian consolidation is newer in terms of more self-sufficiency. We look at the geopolitical economy and what’s going on, and we decide, well, why don’t we see what’s in Canada? I can’t tell if that trend will continue or not, but time will tell.
(The trend) is also more on the acquirer side. The target companies are looking for suitors, generally. They’re looking, sometimes, for the best price. Sometimes they’re looking for how their employees will be impacted, or, if the founders are staying within the company, how they’ll be able to continue developing the technology. And I suspect they’re not looking for acquirers that have to be Canadian. They’re looking globally.
Is anything else on your mind that we haven’t touched on?
I think that Ottawa is just really well-positioned. It’s well-positioned from a business community perspective, with a lot of skilled workers and a lot of business professionals, in the law field but also in accounting, consulting, engineering. All those things companies really need to succeed. 
