KPMG surveys reveal most Canadian CEOs plan mergers to fuel growth, with SMBs following closely behind
According to two KPMG surveys, nine out of 10 Canadian CEOs from large organizations are considering acquisitions over the next three years to drive growth.
Of these, four in 10 are planning major deals. Similarly, nearly three-quarters of small and medium-sized businesses (SMBs) are also considering acquisitions.
The KPMG International CEO Outlook, which surveys global CEOs, found that mergers and acquisitions (M&A) ranked as the second-most important growth strategy for Canadian CEOs, just behind organic growth. However, for CEOs globally, M&A was the top priority over organic growth.
Among Canadian CEOs, 41 percent indicated they were likely to pursue acquisitions that would significantly impact their operations, while 49 percent anticipated deals with a moderate impact. Only 9 percent said they were unlikely to make any acquisitions.
In terms of growth strategies over the next three years, 28 percent of Canadian CEOs chose organic growth, 23 percent prioritized M&A, and 21 percent identified strategic alliances.
Global CEOs, however, ranked M&A highest at 26 percent, followed by organic growth at 23 percent, and strategic alliances at 18 percent.
In contrast, KPMG in Canada’s Private Enterprise survey showed that while SMBs are less reliant on M&A as a primary growth strategy, they still plan to make deals.
34 percent of SMBs expect to make acquisitions with a significant impact, 43 percent foresee moderate acquisitions, and four percent are seeking to be acquired themselves.
John Cho, KPMG in Canada’s National Leader of its Deal Advisory practice, commented on the market’s outlook, stating, “Recent interest rate cuts by central banks in Canada and the US, and lower inflation are breathing life back into the M&A market.”
“As the cost of capital eases, investors and corporates are becoming more confident about making acquisitions, so we expect to see dealmaking activity pick up; in fact, 2025 could be one of the busiest years for M&A in quite some time,” he continued.
Cho further explained that as economic conditions improve, businesses and institutional investors will become more acquisitive. He noted that an increase in acquisition targets is likely as private equity funds begin to exit their investments after years of cautious activity.
“As the economy starts to improve, more small and mid-sized businesses will be looking for funding to help support their next stage of growth. All these factors point to a busier M&A market,” Cho added.
For SMBs, private capital will be a key strategy in their expansion plans. Survey data revealed that 77 percent of respondents are seeking investments of 10 years or more and are looking for long-term partners with patient capital.
Additionally, 78 percent of respondents viewed raising private capital as more critical to their growth strategy than public markets.
Neil Blair, president of KPMG in Canada Corporate Finance Inc., remarked that private capital has become increasingly important for Canadian organizations over the past few years. He stated that the cost and complexity of going public have made it less attractive for many companies.
“Almost eight in 10 (79 per cent) respondents said the immense and increasing cost of compliance, governance and disclosure requirements makes going public or being a publicly traded company problematic. If the compliance and governance burden could be eased, however, three quarters of respondents said they would definitely consider going public,” stated Blair.
Blair emphasized that private capital offers an alternative, but businesses are looking for more than just funding.
“Private capital is an attractive option for growing businesses, but business owners aren’t just looking for funding – they want true partners who understand and value their vision and purpose. There’s more at stake to doing a deal nowadays,” Blair said.
Blair also noted that the M&A landscape has become more complex, with factors like environmental, social, and governance (ESG) standards, emerging technologies, and data privacy concerns playing increasingly important roles.
“Three quarters of SMBs told us they find the M&A landscape far more complex than five years ago because of decarbonization, the growth of AI, concerns over data quality and privacy, and the ability to integrate these into their systems,” he said.
He added that digitally savvy businesses that embrace innovation are more likely to benefit from M&A deals. “More than eight in 10 (81 per cent) SMBs think generative AI would make their company more valuable to prospective buyers,” Blair said.
Maximizing value from acquisitions remains a priority for organizations. Nearly 79 percent of SMB respondents said they were looking for ways to create more value ahead of a sale, but 68 percent found it difficult to assess the true value of potential acquisitions.
Blair and Cho recommended several strategies for companies to maximize value from deals, including using data, analytics, and AI to identify competitive advantages, maintaining dedicated M&A personnel and processes, and engaging third-party advisors to discover additional value creation opportunities.
