KPMG survey reveals Canadian CEOs are prioritizing acquisitions and organic growth to drive future success
Canada’s Private Enterprise Business Survey by KPMG International reveals that nine in ten Canadian CEOs are considering mergers and acquisitions (M&A) to boost growth over the next three years.
Notably, 41 percent of these CEOs are likely to make high-impact acquisitions, while 49 percent foresee deals that will moderately affect their businesses. Only 9 percent are unlikely to make any acquisitions.
On a global scale, 45 percent of CEOs also plan to engage in high-impact acquisitions, with 40 percent pursuing moderate ones, reflecting a shared appetite for M&A strategies.
According to the survey, Canadian CEOs see organic growth as the top strategy for achieving growth objectives, with 28 percent ranking it highest.
M&A follows closely at 23 percent, and strategic alliances come in at 21 percent. Globally, M&A is the top priority, with 26 percent of CEOs favouring it over organic growth (23 percent) and strategic alliances (18 percent).
While large Canadian organizations show a strong inclination towards acquisitions, small and medium-sized businesses (SMBs) are also preparing to pursue M&A strategies.
KPMG highlights that 34 percent of Canadian SMBs plan to make acquisitions with significant impact, while 43 percent anticipate deals with moderate consequences.
However, 18 percent are unlikely to make any acquisitions, and 4 percent are actively seeking to be acquired.
Despite these intentions, Canadian SMBs are less dependent on M&A as their main growth strategy, compared to larger corporations. They still plan to engage in deals, but the focus is on acquisitions with moderate impact rather than large-scale transformative ones.
“Recent interest rate cuts by central banks in Canada and the US, and lower inflation are breathing life back into the M&A market,” says John Cho, KPMG in Canada’s national leader of its Deal Advisory practice.
“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,”
Cho further predicts that 2025 could see one of the busiest periods for M&A in quite some time.
He explains that “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.”
For small and mid-sized businesses, finding capital to support growth remains a critical challenge. The survey shows that eight in 10 SMB respondents are looking for a long-term investor with patient capital, seeking investment terms of 10 years or more to help them scale up.
Furthermore, just over three-quarters (77 percent) of SMBs are open to partnering with private-equity investors, provided they don’t burden their balance sheets with excessive debt.
Private capital has become an increasingly important part of the growth strategy for these businesses, as 78 percent say raising private capital is more essential than tapping into public markets.
“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,” says Neil Blair, partner, and president of KPMG in Canada Corporate Finance Inc.
“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.”
Blair highlights that environmental, social, and governance (ESG) standards, as well as emerging technologies, are increasingly affecting business transactions.
He 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.”
These factors are driving Canadian CEOs and SMBs to rethink their strategies for maximizing value in the M&A process. Almost eight in 10 (79 percent) SMBs are actively looking for ways to enhance their company’s value ahead of a potential sale.
However, 68 percent of respondents report difficulties in determining the true value of their potential acquisitions.
Blair and Cho both emphasize the importance of strategies to maximize value creation in the M&A process.
They recommend using data, analytics, and AI tools to identify synergies and competitive advantages, having dedicated M&A personnel in place, and engaging third-party advisors to uncover additional value creation opportunities.
This ongoing focus on creating value in an increasingly complex M&A market is expected to shape the growth strategies of Canadian businesses, both large and small, over the next three years.
