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      Nine in 10 CEOs of large Canadian organizations are considering making acquisitions in the next three years to help boost growth - with four in 10 planning major deals - and nearly three quarters of small and medium-sized businesses are considering making acquisitions, according to a pair of KPMG surveys.

      In KPMG International’s CEO Outlook, a survey of global CEOs, Canadian chief executives cited mergers and acquisitions (M&A) as their second-most important growth strategy over next three years, just behind organic growth, while CEOs in global markets cited M&A  as their top priority – ahead of organic growth.

      Among Canadian CEOs, 41 per cent said they are likely to make acquisitions that will significantly impact their operations, 49 per cent are likely to do deals that moderately impact their business and only 9 per cent are unlikely to make an acquisition.

      What is the most important strategy to achieve growth objectives over the next three years?

      Source: 2024 Canadian CEO Outlook

      Appetite for M&A over the next three years

      Source: KPMG International CEO Outlook and KPMG in Canada Private Enterprise Business Survey

      By contrast, KPMG in Canada’s Private Enterprise survey showed small- and medium-sized businesses (SMBs) are relying less on M&A as a top growth strategy, but they’re still planning to do deals: 34 per cent are considering significant acquisitions, 43 per cent are expecting to make acquisitions with moderate impact on their organizations, and four per cent are seeking to be acquired.

      “Recent interest rate cuts by central banks in Canada and the U.S., 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,” says John Cho, KPMG in Canada’s National Leader of its Deal Advisory practice.

      “As economic headwinds begin to ease, businesses and institutional investors will naturally become more acquisitive. The supply of acquisition targets will likely increase as well, as more private equity funds exit their investments after years of cautiously sitting tight. 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,” Mr. Cho adds.

      For SMBs looking to expand, tapping private capital will be a key strategy, survey data shows: eight in 10 respondents are looking for a long-term investor with patient capital and advice that can help them scale up, and 77 per cent are seeking an investment of 10 years or more.

      Tapping private capital


      Just over three quarters (77 per cent) of SMB respondents are considering or would consider teaming with private-equity investors as long as they don’t load up their balance sheet with debt, and 78 per cent said raising private capital is more important to their growth strategy than the public markets.

      Neil Blair, partner and President of KPMG in Canada Corporate Finance Inc., says private capital has become an increasingly important source of growth for Canadian organizations over the last few years because the alternative – going public – has become more onerous and complicated, according to Canadian business leaders.

      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.

      “Public markets have become more complex and harder to navigate, and many businesses don’t want to deal with that complexity because it can be costly, time-consuming and resource-intensive for many organizations. 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,” Mr. Blair says.

      Creating value in a complex M&A market


      In addition to having strong relationship dynamics with their investors, sellers are contending with increasingly important factors such as environmental, social and governance (ESG) standards and regulations, and emerging technologies, Mr. Blair says.

      “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. That underscores the need for sellers to differentiate and position themselves in the M&A market and find novel ways to create and demonstrate value to investors,” he says.

      “Businesses that are digitally-savvy and have a culture of innovation are likely to get more out of a transaction. Integrating generative AI into their operations, for example, could help sellers boost the value of their business, and our survey bears that out: more than eight in 10 (81 per cent) SMBs think generative AI would make their company more valuable to prospective buyers,” Mr. Blair adds.

      Getting more value out of a deal is a key consideration for organizations whether they are acquirers or targets: nearly eight in 10 (79 per cent) SMB respondents are looking for ways to create more value for their company ahead of a sale, while 68 per cent have difficulty deciphering the true value of potential acquisitions.

      Mr. Blair and Mr. Cho recommend the following strategies for acquirors and prospective sellers to get more value from a deal:

      • Use data and analytics and AI tools to identify competitive advantages and synergies
      • Have dedicated M&A personnel, processes and activities in place pre- and post-deal
      • Engage third-party advisors to help identify additional value creation opportunities

      For more insights on M&A, see our latest article, Getting to the Real Deal.

      About the KPMG CEO Outlook


      The 10th edition of the KPMG CEO Outlook, conducted with 1,325 CEOs between July 25 and August 29, 2024, provides unique insight into the mindset, strategies, and planning tactics of CEOs. All respondents oversee companies with more than US$500 million in annual revenue and a third of the companies surveyed have more than US$10 billion in annual revenue. The survey by KPMG International included CEOs from 11 key markets (Australia, Canada, China, France, Germany, India, Italy, Japan, Spain, the U.K. and the U.S.) and 11 key industry sectors (asset management, automotive, banking, consumer and retail, energy, infrastructure, insurance, life sciences, manufacturing, technology, and telecommunications). Note: Some figures may not add up to 100 per cent due to rounding.

      About the KPMG Private Enterprise™ Business Survey


      KPMG in Canada surveyed 735 business owners or executive level C-suite decision makers at small- and medium-sized Canadian companies between August 13 and Sept. 4, 2024, using Sago's premier business research panel. Thirty-seven per cent helm companies with more than C$500 million and less than C$1 billion in annual revenue, a quarter have more than C$300 million and less than $500 million in annual revenue, 26 per cent have between C$100 million and C$300 million in annual revenue, and 13 per cent have between C$10 million and C$50 million in annual revenue.