2024 marked a resurgence in public market deal making activity, supported by a notable uptick in large transactions (>$1B).

The jump was supported by a number of sizeable take-privates, which looks to have continued into 2025 with the $10B buyout of Innergex in February.

We’ve started to look into the M&A environment in Canada to find out what’s driving this surge in activity.

What’s driving Canadian takeouts?

Of the handful of recent takeout transactions we looked at, U.S. private equity accounted for half of them.

These buyers are likely being opportunistic, given the weakness in our home currency…

… and our public market valuations.

Canadian companies haven’t been incentivized to stay public either, with secondary market financing conditions in a multi-year downtrend.

How else are companies unlocking value?

For public companies that intend on staying that way, it’s not all bad news. There are a number of levers we’re seeing get pulled to unlock value from the Canadian universe.

They generally fall into two buckets: focus strategies and scale strategies.

Focus strategies tend to work for businesses that have grown a little more complex than peers. The market has a tougher time assigning value to these names because there’s no true comparison.

By selling some of that complexity, the market is shown how valuable the unique asset is, which can then be reflected in the share price. GFL Environmental (GFL) is a perfect example of this.

The company operates two distinct segments - a solid waste business and an environmental services business.

By divesting a piece of the ES business for $8B at >16x EBITDA, it showed the market what it was worth and the market responded, pushing the multiple GFL trades at in-line with the deal.

Through this mechanism, GFL effectively sold ~9% of its EBITDA and got 25% of its EV in proceeds - not a bad trade!

Scale strategies tend to work for smaller companies, or companies without access to a particular market. By acquiring or merging with a company, revenue grows and shared costs can be trimmed. The downside here is that it takes time for the market to believe you.

The $15B Veren/Whitecap deal is a perfect example of this, with the combined company expecting to unlock an additional $200M in synergies via headcount reduction, operational overlap, and better financing terms, among other benefits.

With broad market sentiment hanging in the balance we believe we’re entering a stock picker’s market, so being cognizant of which strategies companies are taking should become more important going forward.