M&A Trends in Canada: What Buyers and Sellers Should Know in 2025
October 1, 2025 · 5 mins
The Canadian mergers and acquisitions (M&A) market has been anything but predictable. Over the past five years, business owners and investors have dealt with pandemic shutdowns, rising interest rates, supply chain challenges, and global uncertainty. These shifts have made one thing clear: trying to perfectly time the market rarely works.
As we move through 2025, Canadian M&A activity has had its challenges but is still showing some signs of strength. Private capital is abundant, interest rates have begun to ease, and sector-specific opportunities are fueling activity. At the same time, threats of tariffs and ongoing trade uncertainties, more rigorous due diligence, increasingly complex deal structures, and evolving tax and policy changes are re-shaping how transactions are completed. For buyers and sellers alike, understanding these trends is key to achieving success in today’s environment.
The New Normal: Change and Uncertainty
In recent years, uncertainty has been the rule rather than the exception. Lockdowns, rising interest rates, tariffs, and global conflicts have all left their mark on Canadian deal activity. For business owners, the challenge is clear: waiting for stability can mean missing real opportunities.
In today’s environment, the better approach is to focus on what can be controlled:
- Strengthening business fundamentals by reducing risk and diversifying supply chains.
- Investing in people and technology.
- Building resilience that stands up in uncertain conditions.
For buyers, that means targeting companies with strong fundamentals and leadership depth. For sellers, it means preparing early so the business can withstand extended due diligence and still present as a compelling acquisition.
The 2025 Rollercoaster: Optimism Meets Caution
The start of 2025 brought renewed optimism. Interest rates, which had been a major drag on deal activity, finally began to ease. At the same time, private equity firms and institutional investors were sitting on record amounts of “dry powder,” capital waiting to be deployed. This created a wave of early activity.
But momentum slowed as tariffs and ongoing trade tensions reintroduced uncertainty. Many deals stalled while buyers reassessed market risks. Now, heading into Q4 2025, there is some renewed sense of stabilization, or at least some sentiment of just “getting on with it”, despite the uncertainties. Buyers are motivated to put capital to work, and sellers with well-prepared businesses are still finding strong demand.
The message is clear: good businesses still trade very well. The challenges are more pronounced for companies with inflated pricing expectations, weaker fundamentals, or complex risks attached.
Leading Sectors in Canadian M&A
Some sectors are capturing disproportionate attention in the Canadian market:
- Industrials: Consolidation and efficiency gains continue to drive activity in manufacturing and distribution.
- Information Technology: Growth in AI, cybersecurity, and digital solutions keeps IT companies in high demand.
- Energy and Infrastructure: Government and private investment in infrastructure and renewable projects are fueling transactions.
These areas are expected to remain active through the year, especially in the mid-market where private equity and strategic buyers are looking to scale.
Due Diligence: Longer, Deeper, and More Complex
One of the most significant shifts in recent years has been the expansion of due diligence requirements. What used to be standard only for large-cap transactions is now commonplace in deals as small as $5 million to $20 million.
Today’s diligence process often includes:
- Quality of Earnings reports: Scrutinizing the reliability of reported profits.
- Cybersecurity reviews: Identifying risks of data breaches or weak systems.
- Environmental diligence: Ensuring compliance and spotting hidden liabilities.
- Personnel diligence: Assessing leadership depth and retention risks.
The result is longer timelines. What once took under 90 days now often stretches past 120. For sellers, the takeaway is clear: prepare early and address potential issues before going to market.
Creative Deal Structures Are Bridging Valuation Gaps
With buyers tightening their approach and many sellers holding firm on price, creative structures are being used more often to get deals across the line. Some examples of common items sellers should be expecting to see come up in deal negotiations could include:
- Vendor Take-Back (VTB) Notes: Sellers finance part of the purchase, easing capital needs for buyers.
- Earnouts: Future performance determines additional payments, balancing risk.
- Equity Rollovers: Sellers keep a stake in the company, a structure attractive to private equity.
- Reps & Warranty Insurance (RWI): Increasingly used to protect both sides; being seen even in smaller deals today.
These structures can create flexibility and help deals close in a market where valuation gaps might otherwise derail negotiations. A key takeaway for most sellers is, don’t expect to see full cash at closing upon sale.
Tax and Policy Shifts: Planning Is More Important Than Ever
Canadian business owners have had to contend with a moving target when it comes to tax policy. In recent years, the federal government introduced, then rolled back, a change to the Lifetime Capital Gains Exemption (LCGE) inclusion rate. At the same time, rules were eased for family intergenerational business transfers, and Employee Ownership Trusts (EOTs) were introduced as a new succession planning tool.
While some changes have been positive, the broader theme is complexity. For sellers, early tax planning is essential to avoid surprises and to maximize after-tax value. For buyers, awareness of how these policies affect structuring can be the difference between a smooth close and unnecessary delays.
What Buyers and Sellers Should Take Away
As 2025 continues to unfold, several key insights stand out:
- For Buyers: Capital is abundant, but discipline is high. Focus on strong fundamentals, moving efficiently through diligence, and keep an open mind to creative structures to get deals across the finish line.
- For Sellers: A well-prepared business still attracts strong offers. Worry less around trying to time the market, and more about what is within your control. Early planning around tax, compliance, and operational resilience is essential. Be flexible on structure to meet the market.
- For Both: Uncertainty may be the norm, but opportunities remain strong in Canada’s mid-market. Deals are being done with patience, preparation, and the right advisory support.
Navigating M&A in 2025
Canadian M&A is evolving, but the opportunities are there for those who understand the landscape. Buyers and sellers alike must recognize that timelines can be longer, deal structures are more creative, and preparation is more critical than ever.
At the end of the day, what you can control matters most: building a resilient business, approaching the market with realistic expectations, and surrounding yourself with the right advisors.
Whether you’re preparing to sell, looking to acquire, or planning ahead, our team helps you move forward with clarity and confidence.
Jeff MacKenzie, Partner
jeff.mackenzie@confederationgroup.ca
