The deal economy may be slowing outside Canada, but corporate chiefs in Canada are planning to use mergers as a tool to grow.
A new survey from PricewaterhouseCoopers shows that Canadian chief executive officers are twice as likely to use mergers and acquisitions to grow as global rivals. PwC said M&A was the number one tool cited by Canadian CEOs planning strategic change, and one quarter of all Canadian CEOs surveyed are planning to do a merger or acquisition. That's more than twice the global average of 12 per cent. Canadian chiefs also are more interested in joint ventures and strategic alliances.
M&A bankers always cite a few key factors that drive deals: economic optimism and stability of markets are high on the list. CEOs have to be optimistic about their businesses to take risks, and they have to be confident that markets will support them with funds to do the deal. Also, nobody wants to agree to buy something for $1-billion that's worth $900-million the next week after a swoon in markets.
On one of those fronts, Canadians are feeling better. But it's a key one: the ability to get the backing to do a transaction from lenders and shareholders.
The survey showed that while half of Canadian CEOs are concerned about the lack of stability in capital markets, it's less extreme than the global result. For example, while 15 per cent of Canadian CEOs said they were "extremely concerned," that was less than the 25 per cent globally who said they were extremely concerned.
"This relative optimism is likely attributable to the strength of the Canadian banking system, the stellar post-crisis performance of the natural resources sector and an ability to raise capital on public exchanges," PwC said. "Strong Canadian corporate balance sheets were also likely behind this optimism."
No surprise then that almost three-quarters of Canadian CEOs said they were confident about their ability to finance growth. Interestingly, however, CEOs here in Canada were less optimistic about the global economy, with only 13 per cent expecting it to improve in the next year. U.S. CEOs, by contrast, were closer to 20 per cent.