Key Takeaways
- Canadian dealmaking activity is expected to increase in 2026, driven by nation-building efforts and a stronger business outlook
- 33% of business leaders plan to make a major acquisition in the next 18 months to capitalize on potential growth opportunities
- The federal government’s focus on infrastructure, cautious optimism about the Canadian economy, and a steady interest rate environment will underpin dealmaking activity
- Demographic shifts and the need for stronger Canadian-to-Canadian trade will also drive mergers and acquisitions
- The government’s investment-focused budget and plans to spur $1 trillion in investment over five years will be a catalyst for M&A activity
Introduction to Canadian Dealmaking Activity
Canadian dealmaking activity is expected to pick up in 2026, driven by nation-building efforts and a stronger business outlook, according to a new survey by KPMG Canada. The survey found that 33% of business leaders polled indicated plans to make a major acquisition in the next 18 months to capitalize on potential growth opportunities. This is a significant increase in dealmaking activity, and it is expected to be driven by a number of factors, including the federal government’s focus on infrastructure, cautious optimism about the trajectory of the Canadian economy, and a steady interest rate environment.
Factors Driving Dealmaking Activity
The survey’s findings are clear: companies in Canada are looking to do acquisitions, and there is a general tone in business that there needs to be stronger Canadian-to-Canadian trade. Marco Tomassetti, president of KPMG Corporate Finance Inc. Canada, noted that the government’s nation-building agenda will be a catalyst for M&A activity in 2026, especially in the private mid-market. The federal government’s investment-focused budget, which aims to spur $1 trillion in investment over five years, will also play a significant role in driving dealmaking activity. The plan promises generational investments in key projects, including $25 billion for housing, $30 billion for defence and security, $115 billion for major infrastructure, and $110 billion to drive productivity and competitiveness over five years.
Government Initiatives and Dealmaking Activity
The federal government has launched a number of initiatives to support dealmaking activity, including the creation of a new major projects office to fast-track nation-building proposals and streamline the federal approval process. Some of the projects identified include ports, railways, and energy corridors. Tomassetti noted that businesses operating in adjacent industries where some major projects are being proposed could be acquisition targets. For example, suppliers of components to these projects may need to scale up to become large enough to service these projects, leading to M&A consolidation. The government’s initiatives are expected to create a pipeline of potential acquisition targets, and businesses are likely to take advantage of these opportunities.
Interest Rates and Dealmaking Activity
The steady outlook for interest rates will also keep capital both accessible and affordable, making it easier for businesses to finance deals. Many economists expect the Bank of Canada to keep its key policy rate unchanged at 2.25% for the majority of the year. Tomassetti noted that the Canadian mergers and acquisitions environment "felt pretty good" at the beginning of last year and appeared to be normalizing following the COVID-19 pandemic. However, trade tensions and tariffs led to many deals being halted or terminated. The clarity on the costs of financing such deals will help to drive dealmaking activity, as businesses will have a better understanding of the costs associated with acquiring other companies.
Trade Tensions and Dealmaking Activity
While trade tensions and tariffs had a significant impact on dealmaking activity in the past, the situation has improved in recent months. Tomassetti noted that deal activity in Canada did come back in the second half of 2025, and although there is still a "lot of noise" surrounding trade, it had less of an impact outside of a few sectors. However, a change in the trade situation could still pose a risk, particularly with the Canada-United States-Mexico agreement scheduled for a review in July. The agreement has shielded Canada from the worst impacts of U.S. President Donald Trump’s tariffs, but any changes to the agreement could have a significant impact on dealmaking activity.
Conclusion and Future Outlook
In conclusion, Canadian dealmaking activity is expected to increase in 2026, driven by a number of factors, including the federal government’s focus on infrastructure, cautious optimism about the Canadian economy, and a steady interest rate environment. The government’s investment-focused budget and plans to spur $1 trillion in investment over five years will be a catalyst for M&A activity, particularly in the private mid-market. While trade tensions and tariffs still pose a risk, the clarity on the costs of financing such deals and the government’s initiatives to support dealmaking activity are expected to drive growth in the sector. As Tomassetti noted, "the survey is pretty clear on a few things. One is that companies in Canada are looking to do acquisitions. That’s very prominent." With the right conditions in place, Canadian dealmaking activity is expected to thrive in 2026.