Encouraged by the recent surge in activity, Ed Bryant believes the Canadian M&A scene is poised for a major revival thanks to a series of macroeconomic and geopolitical shifts.
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While a fog of uncertainty has enveloped the Canadian economy as a potential trade war with the U.S. looms, Ed Bryant sees plenty to get excited about for his business in 2025.
The president and CEO of Ottawa-based Sampford Advisors, Bryant specializes in providing advisory services to mid-market tech companies that are pursuing mergers and acquisitions in Canada and the U.S.
After M&A activity boomed in Canada early in the pandemic, the following few years saw a lull in transactions as interest rates rose.
But total M&A deal values soared in the third quarter of 2024 to levels not seen since early 2021, according to a recent report from PricewaterhouseCoopers. Encouraged by the recent surge in activity, Bryant believes the Canadian M&A scene is poised for a major revival thanks to a series of macroeconomic and geopolitical shifts.
OBJ sat down with Bryant on Monday morning to discuss the outlook for M&A activity in Canada as a whole and the National Capital Region in particular in the months ahead. The conversation has been edited for length and clarity.
OBJ: PwC is predicting a “steady increase” in M&A activity as the year progresses. How would you assess the market right now?
EB: It’s a bit of a cycle. Going back to COVID, 2020, 2021 and early ’22 was crazy. The level of activity was really high, like we’ve never seen before. But then, as interest rates rose in early ’22, the market really died down. It started to pick up a little bit last year, but it was in fits and spurts. It wasn’t a consistent pickup. As soon as the U.S. election happened, business has really materially picked up since November. Every month seems to get busier and busier. I think the sellers are back; before, the sellers didn’t want to sell their businesses – they were waiting for a better market. Now they’re really contemplating selling, and buyers are being super aggressive as well. We’ve signed up a lot of new mandates in the last month. We’re having a lot of advance conversations with folks on new mandates as well. It’s as busy as we’ve been in two and a half years.
OBJ: In your opinion, why has the U.S. election triggered an uptick in M&A activity?
EB: A lot of people, both buyers and sellers, look at (the Trump administration) as business-friendly. If you look at the administration and how many tech folks are around it as advisers, they’re definitely leaning on tech. And it’s very M&A-friendly. Large-cap M&A the last couple of years in the U.S. was very hard to get done because of the (Biden) administration. So I think you’ve got the triple whammy of business-friendly, M&A-friendly and tech-friendly. Then you layer on the fact that a lot of the private equity funds had taken a couple of years off – they haven’t been deploying capital at the pace they should have been deploying it. And layer on interest rates coming down. That is definitely helping things as well. So it seems like all these things are kind of lining up for what we think is going to be a really strong year this year in terms of M&A.
OBJ: At the same time, the London Stock Exchange Group’s data showed mergers or acquisitions of Canadian companies involving a U.S. buyer were at a 22-year low in January, and overall M&A activity in Canada also fell last month compared with the previous year. What’s going on?
EB: There’s always a bit of a lag. When you announce an M&A deal, that deal was probably in process for six or nine months, or maybe even longer. I think a lot of the stuff we see now is going to translate into a really back-end-weighted 2025.
Canadian buyers are always more cautious than Americans. They’re just not as aggressive as some of the American private equity firms in particular. There’s so many tech companies in Canada that haven’t taken a lot of capital, where the tech founder is (in his or her) late 40s, 50s, looking to retire and a lot of their personal net worth is tied up in their business, and the only way they can monetize that is to sell it. There’s that whole wave that has to come, and that’s the supply side. Those people were waiting for a better market, but now they’re not waiting. They’re really thinking about when they go to market and when they sell.
OBJ: So let’s talk about the elephant in the room. Could a tariff war with the U.S. change the outlook for M&A?
EB: I’ve spoken to hundreds of tech CEOs across the country in the last three months. If you’re running a hardware business, then you’re very worried about tariffs. If you’ve got anything physical crossing the border, those CEOs are very concerned. Software CEOs – and this is pretty consistent across all of them – I’ve never heard any real concern around tariffs. They feel like because it’s not a physical product, worst case if there is a tariff on it, they set up some subsidiary in the U.S., transfer some IP and they sell out of the U.S. to get around the tariffs. They also think it would be very hard to enforce. Someone accessing a Canadian SaaS product on the web, (how do you) apply a tariff to that? It’s quite difficult.
OBJ: What’s your sense of the M&A outlook for the National Capital Region over the next 12 months or so?
EB: I’m encouraged by things in the National Capital Region. I think there’s a lot of good, strong companies that are not just pure startups, but (in) that kind of scaleup area. While we haven’t seen a ton of capital flow into Ottawa in the last couple of years, I think that’s going to change. I think there will be some bigger M&A deals coming up over the next couple of years in Ottawa. I think Ottawa is going to benefit from the same wave that the whole of Canada will benefit from. We still have some very good companies, some good-sized companies, that will do M&A.
OBJ: Do you see any sectors being particularly conducive to M&A activity?
EB: Everybody keeps talking about AI. There’s little pockets of AI, but I don’t see AI driving the M&A (agenda) in Canada. I see it more broadly – that any good B-to-B SaaS product is ripe for M&A. There are obviously things like cybersecurity and that sort of stuff. We are seeing a lot more traditional industry software-related stuff as well – whether that’s industrials or metals and mining, oil and gas, health care and healthtech. Everyone is looking at those industries as (being) behind on technology adoption and therefore ripe for more technology disruption.
OBJ: What about the falling loonie? Does that make our companies more attractive to U.S. buyers?
EB: It doesn’t mean the businesses are any cheaper, because businesses are typically valued as a multiple of revenue. So it doesn’t change the math. But what it does change is it makes a lot of Canadian companies look more profitable. A lot of them are selling into the U.S., so they’re getting U.S. dollar revenue, while their costs are predominantly (in Canadian currency). A lot of companies are hitting record profit levels because of that spread. And that’s good for M&A (activity).
I guess you could see it both ways – that the buyer doesn't believe the profitability because of the exchange rate, maybe. But on paper (the profits) look a lot better. If you’re a buyer and you want to lock in that cost differential, you could do that through exchange-rate hedging or whatever. I think it’s more positive than negative, for sure.
OBJ: Could a change in government in Ottawa have any potential impact on M&A activity?
EB: A lot of companies in Ottawa sell to the federal government. So there is uncertainty around what does the government spending cycle look like and does that get compressed, especially tech spending? There’s just uncertainty there, because you don’t know which way the federal election (could go). If there’s a complete change in government, I think there will be much more scrutiny around government spending. A Liberal government under someone like (Mark) Carney, the jury is out. But I would think Carney would be spending more on tech than the Conservatives would.
