Heightened political risk has the potential to drive further merger and acquisition (M&A) activity in Canadian financial services. That’s according to Jordan Baimel, partner, financial services deals at PwC Canada. The advisory firm published its M&A forecast for the country on Tuesday.
“With [president-elect Donald] Trump coming in, there’ll be opportunities for Canadians to leverage M&A to potentially combat some of the challenges that a broad tariff policy might have,” Baimel said. “It increases the need for scale.”
Baimel said that could take the form of domestic and international expansion in order to diversify company exposure to economic factors.
It’s less clear how Prime Minister Justin Trudeau’s decision to step down and the anticipated Canadian federal election will affect the deal flow.
“There’s a lot of uncertainty with Trudeau’s resignation,” Baimel said. “It really depends on what the new policies are from future leadership, and how they will be implemented.”
PwC Canada has forecast a “gradual recovery” in M&A activity across the domestic economy this year, driven primarily by the need for improved productivity. That’s less of a factor in financial services, where there is a “ferocious appetite for scale, especially in distribution,” Baimel said.
“We’re projecting continued, significant transactions across all financial services verticals, from insurance, asset management, payments, banking and non-bank lending through to fintech,” he said.
Wealth management is a hotspot.
CI Financial Corp. struck a deal with Abu Dhabi-based Mubadala Capital to go private in November. The deal valued CI’s equity at close to $4.7 billion, implying an enterprise value of $12.1 billion. Mubadala Capital is the alternative asset management division of the sovereign wealth manager Mubadala Investment Co.
On Wednesday, New York-headquartered Focus Financial Partners announced plans to make Cardinal Point, which it acquired in 2021, a hub that will “lead Focus’ consolidation and expansion efforts in Canada,” Michael Nathanson, CEO of Focus Financial Partners, said in a release.
And in December, Wellington-Altus Financial Inc. said it is seeking a private equity partner to buy 20%–30% of its advisors’ shares.
“There will be a significant level of M&A activity in the wealth space across Canada, both this year and in the near term,” Baimel said.
These deals are more affordable to finance, as a result of falling interest rates. But that’s only part of the story. There are multiple organic drivers that have combined to make wealth management attractive. More Canadians have money to invest, legacy planning is in full swing and there remains a “relatively fragmented advisor population,” Baimel said.
“Many small shops need to gain scale through technology transformation and just general growth. We’re at the perfect point, where the supply and demand have started to come together. I think that means more assets coming to market.”
Private equity players are poised to move aggressively, which Baimel said will be good for the domestic market. “Private equity has created a very clear value creation playbook through U.S. registered investment advisor roll-ups, which could be applied to a degree in Canada.
“There are knowledgeable investors that have a history of success and creating value for stakeholders,” he said.
A 2024 study by the Private Equity Stakeholder Project, a U.S. nonprofit that tracks the industry, found that the sector had a hand in 11 of the largest U.S. corporate bankruptcies in the first half of the year. Just one of those deals was in the financial services industry.