After a slump in mergers and acquisitions (M&A) in 2023, Canadian capital markets ruled out a promising 2024 for deal-making. With lower interest rates projected in the coming year, Canadian energy, power, and mining companies are expected to take the lead. Banking professionals suggest in a report that a more normalized environment will encourage investors to invest in merger and acquisition deals.

Last year, announced Canadian M&A dropped 27% to $183.9 billion, LSEG data indicated. However, energy and power M&A increased by 56% YoY to a five-year high of $70.4 billion, powered by significant deals such as Couche-Tard’s $3.3 billion acquisition of some of TotalEnergies’ gas stations and Canadian Baytex Energy’s $2.5 billion bid for Ranger Oil.

The mining sector also saw significant growth last year, with a 34.7% YoY rise in M&A to $26.4 billion. The Glencore-led consortium’s $9 billion acquisition of Teck Resources’ steelmaking coal unit drove this growth. The bankers anticipate that this trend will continue in 2024. As demand for raw materials increases, mining companies will continue to look for mergers and acquisitions opportunities.

Despite this expected growth, tight funding markets and increasing regulatory scrutiny of deals still present headwinds. Similarly, Initial Public Offerings (IPOs) remained at a standstill as just one deal was announced on Canada’s main stock exchange last year, the Toronto Stock Exchange. Yet, hope remains high for change in 2024. Toronto Stock Exchange operator TMX Group reported having approximately 1,600 companies in its IPO pipeline.

The report also suggested continued consolidation in the resource sectors, especially energy, driven by significant companies looking to achieve economies of scale and technology to lower costs. Bankers suggest that the mining sector will continue to witness similar growth. In conclusion, while Canadian deal-making slowed down significantly last year, there’s hope for continued growth in 2024, led by the energy, power, and mining sectors.