New report predicts higher M&A activity in 2025 but urges reforms to unlock full economic potential
Sapling Financial Consultants has released its report, ‘Canada’s M&A Market Set for Growth Amidst Competition Barriers in Key Sectors,’ which reveals that competition restrictions continue to influence nearly one-third of Canada’s economic activity.
Led by senior analyst Santiago Munera, the report highlights the implications of these barriers and forecasts significant mergers and acquisitions (M&A) activity in 2025.
The report shows that restrictions on competition shield approximately 31 percent of Canada’s economic activity in 2023, a decrease from 35.1 percent in 2017.
When isolating the GDP contribution of highly sheltered industries, such as those affected by foreign investment restrictions, government intervention, and interprovincial trade barriers, the share drops to 20.64 percent, down from 22.25 percent in 2017.
This reduction reflects modest progress in addressing these challenges, but the barriers remain substantial.
Rob Hong, co-founder and CEO of Sapling Financial Consultants, emphasized the importance of competition in Canada, stating, “The data tells a compelling story about the state of competition in Canada.”
He highlighted 2023 data showing modest progress, with the share of the economy shielded from competition decreasing from 22.25 percent in 2017 to approximately 20.64 percent.
However, he pointed out that broader restrictions, including interprovincial trade barriers, occupational licensing, and healthcare regulations, still affect 31 percent of Canada’s economic activity.
He stressed the need for reforms to reduce these barriers, foster innovation, and unlock the economy's full potential.
Sapling forecasts a surge in M&A activity for 2025, driven by opportunities to spur innovation, lower consumer costs, and create jobs.
However, the report cautions that competition barriers could limit the full potential of these benefits.
Key sectors such as telecommunications, utilities, and renewable energy are expected to see significant investments and modernization, but consumer outcomes may vary depending on regulatory changes.
In the telecommunications and broadcasting sector, consumers in rural areas could continue to face high prices and limited choices unless foreign investment restrictions are eased, or new competitors are introduced.
In the finance and insurance industries, M&A activity is expected to increase as companies adapt to changing market conditions, including the rising impact of climate change on insurance claims.
The oil and gas sector is predicted to see more investment in carbon capture technologies and renewable energy integration.
However, geopolitical tensions and production constraints could still cause price volatility.
Utilities and power generation companies are likely to consolidate further to scale operations and modernize grids, but consumers may face higher energy costs as the expenses of transitioning to renewable energy are passed on.
In the grocery retail industry, the report highlights persistent market concentration and high levels of consolidation.
While dominant players are likely to retain control, independent suppliers and online grocery platforms could gain traction if policymakers implement significant policy interventions.
Sapling’s analysis emphasizes the need for policymakers to address competition barriers. Without reforms, Canada’s economy could miss the full benefits of increased M&A activity.
