October 2013 - April 2014
Canadian Capital Confidence Barometer
Canadians holding course
With confidence in the Canadian economy strong, Canadian executives continue to wait for the right deal conditions.
The Canadian results of our latest Capital Confidence Barometer show that Canadian executives are still confident in the state of the global economy, and even more so in the Canadian economy. But as indicated in our last Barometer in April 2013, this continued confidence still isn’t translating into increased transaction activity. Canadian executives expect to remain cautious over the next 12 months — and now, US confidence and expectations of M&A activity have surpassed Canada for the first time in two years.
Overall, Canadian confidence in the local economy has continued to increase — 98% of respondents think the Canadian economy is stable or improving, up from 79% a year ago, and 85% six months ago. But companies are continuing to hold back on M&A activity while they wait for more favourable economic conditions, for the right deal — or perhaps even for someone else to make the first move.
Although Canadian companies have shown increased conservatism around their growth strategies while they continue to focus on their core business by optimizing their capital structures, there are signs that activity may be close at hand. Canadian confidence in credit availability remains high and more respondents indicate that their companies are more willing to use debt and equity to finance deals — an indication that more transactions and potentially larger deals may be coming. Another indication: Canadian executives see both the quality and number of acquisition opportunities increasing while, more are looking at larger transactions to fill their inorganic growth targets.
Ultimately, while the fundamentals for a strong rebound in dealmaking activity are in place, it’s clear the recovery will be slow to arrive. That said, the good news is that the deals that will get done will most likely be stronger, marked by improved diligence and integration efforts, and thus should yield better success.
Tony Ianni, Partner, Transaction Advisory Services