Anyone who follows the Canadian tech sector know the story of the past eighteen months, outside of RIM’s woes, has been M&A.
Canada has lost billions in market value with the exits of companies such as Bridgewater, Miranda, Zarlink, 20-20 Technologies, March Networks and Ruggedcom.
Today, a new survey from from Ernst & Young says this phenomenon is part of larger trend, driven by low interest rates and the Eurozone crisis. Ernst and Young expects Canadian companies might just become the hunter, not the hunted. 44% of Canadian companies expect to pursue M&A in the next 12 months, says the report.
Tony Ianni, Transaction Advisory Services Partner at Ernst & Young says Canada find itself in a unique position. “Canadian firms are looking to acquisitions to gain share in existing markets and, to a lesser extent, to gain share in new markets,” he said, adding: “Canadian companies are also more inclined to look at mergers and acquisitions as a means of taking advantage of the Eurozone crisis, far more so than survey respondents from other countries.”
The survey, the seventh twice-yearly report since 2009, is part of Ernst & Young’s Capital Confidence Barometer queried more than 1,500 senior executives from large companies around the world and across industry sectors. Ernst and Young looked to gauge corporate confidence in the economic outlook, understand boardroom priorities over the next 12 months, and identify the emerging capital practices.
A caveat to the survey, Ianni warns, is the availability of credit. Although banks in Canada survived the financial meltdown of 2008 and 2009 relatively unscathed, he says, they are still taking a risk-averse approach. This has a particular impact on smaller, private companies. The survey revealed that 90% of the deals expected over the next year would be less than $500-million in value.