CEOs of large corps see M&A as key to growth: KPMG

Leaders at SMEs still prefer organic growth over M&A, the KPMG research finds

By: Maddie Johnson
September 23, 2021 September 23, 2021
12:42

At large corporations in Canada, the vast majority of CEOs see merger and acquisition (M&A) activity as key to their growth strategies, according to new research from KPMG LLP.

These CEOs are on the hunt for acquisitions, with approximately nine out of 10 (96%) planning to make an acquisition within the next three years — up from 86% a year ago, and compared with 87% of their global peers, according to KPMG’s 2021 CEO Outlook.

In addition, 65% said M&A, joint ventures and/or strategic alliances collectively will form the most important strategy for achieving three-year growth objectives. In contrast, only 1% said they are seeking to be acquired (compared with 3% globally).

“Canadian business leaders are feeling acquisitive thanks to lower cost of capital, stronger balance sheets, and their company’s growth prospects,” said Benjie Thomas, Canadian managing partner, advisory services at KPMG in Canada, in a release.

However, according to KPMG’s Business Outlook Poll, leaders at small- and medium-sized enterprises (SMEs) still prefer organic growth over M&A.

Seventy-one per cent of primarily mid-sized businesses in Canada identified organic growth as a top strategy to achieve expansion objectives within the next three years. They’ll target innovation, research and development, new investments and products, and recruitment.

The survey found only about one in five (17%) of SMEs said mergers would be critical for achieving their three-year growth objectives, while 29% said acquisitions will be key — approximately one third (34%) are seeking to be acquired because they “can’t afford to make the investments required to succeed in an increasingly digital economy.”

Nearly six in 10 (59%) of SMEs said they want or intend to partner with an innovative startup, such as a fintech, insurtech or agtech company, to bolster growth.

“Deal making will be crucial for SMEs that need to transform their businesses to compete in today’s increasingly digital marketplace,” said John Cho, partner and national leader, deal advisory, KPMG in Canada, in the release.