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April 2015 | 12th edition

Capital Confidence Barometer: Canadian highlights

Our latest Capital Confidence Barometer finds Canadian companies finally seem to be ready to re-enter the deal markets. Almost three-quarters of Canadian executives surveyed expect to pursue an acquisition in the next 12 months. At 72% of respondents, this is significantly higher than their global and US counterparts at 56% and 61% respectively and is at the highest level since we launched the Barometer in 2009.

After two years of caution around M&A, Canadian executives have narrowed the number of deals in their pipeline and focused in on their acquisition targets. In a dramatic change from our October 2014 Barometer, when 78% of Canadian companies had 5 or more deals in their pipeline, only 9% are looking at that many deals today. In this most recent survey, 85% of Canadian respondents said they were looking at just one or two deals, and the majority of those deals will likely be smaller scale, cross-border transactions.

Canadian executives were also unanimous in their companies’ organic growth strategy. While global and US respondents are focused on a range of innovative and conventional approaches, Canadian respondents are focused entirely on investing in new geographies and markets. Canadians are looking south – to the US (as always), but also to South America. Columbia, Chile and Argentina are all in the top 5 investment destinations, which is consistent with Canada’s focus on the natural resources sector.

What this survey has shown is an interesting dichotomy between Canadian executives’ confidence in the global economy and their confidence in the Canadian economy. A massive 93% of respondents saw the global economy improving, yet only 13% of those respondents saw the local economy improving. This trend was consistent across the globe; however, Canada’s pessimism in its economy was more dramatic than in other countries. This isn’t terribly surprising given the recent volatility in energy and currency markets that have affected the Canadian economy over the last six months.

Likewise, there was a sizable increase in the number of respondents who see the Canadian economy declining. 30% of Canadian executives indicated a negative view, compared to just 2% of respondents who expressed the same sentiment last October.

We continue to see increasing numbers of Canadian companies focused on cost reductions and operational efficiencies – 48% of respondents are now focused on this area, up from 39% in October. But the protracted period of holding course may be coming to an end in the next 12 months, as new entrants to the M&A market finish reviewing their options and commit to and least one acquisition. After years of adopting a “wait-and-see” attitude, Canadians now seem ready to take a rational approach to re-entering the transactions arena.

Key findings