Canadian M&A entered 2025 under pressure, tariffs on the horizon, inflation still biting and the lowest deal count in two decades. Yet by mid-year, value had surged. Dealmakers describe a selective but busy market driven by a handful of large energy and infrastructure transactions.
M&A deal value in Canada increased sharply in the first half (H1) of 2025, reaching approximately CA$113.7 billion (a nearly 70% year-over-year increase).1 However, overall transaction volume remained flat at roughly 511 deals, reflecting a market focused on fewer, larger and more strategic transactions.
Market confidence improved after a cautious first quarter. Dynamics early in the year were shaped by inflation, uncertainty surrounding foreign investment and valuation friction. By late spring, these pressures eased, unlocking a series of new and previously delayed transactions.
This mix of concentrated value and cautious execution is shaping how buyers and sellers approach the rest of the year. This article highlights the defining themes of H1 while pointing to some of the strategies and conditions that should shape outcomes in H2.
Sector trends
Energy was a leading sector by value in H1 2025, driven by both traditional and transition-focused assets. While traditional oil and gas consolidation continued, there was a notable shift toward infrastructure-aligned and transition-facing energy assets, such as storage, logistics and grid-scale platforms. The sector attracted ongoing foreign investment due to predictable, long-term returns and stable regulatory regimes, though transactions in this sector can carry heavier regulatory requirements, Indigenous engagement and approval risk allocation in the purchase agreement.
Technology remained the most active sector by volume, with transactions focused mainly on mid-market software-as-a-service (SaaS) and digital infrastructure companies. SaaS and digital infrastructure companies provide attractive opportunities to US sponsors and corporates seeking steady revenue and scalable models. A limited IPO window reinforced private transactions as the preferred exit.
Mining M&A was subdued early in the year. Q2 saw larger transactions by deal size but fewer deals. Other sectors, including healthcare and logistics, saw continued interest in platform assets with high-margin, regulated or repeatable revenue profiles.
Private equity: Process, structures and exits
Private equity (PE) activity in H1 2025 mirrored the overall market pattern, with higher dollar volumes but fewer transactions. Sponsor-led buyouts totalled CA$18.1 billion, up 65% year-over-year, although the number of deals shrank substantially. While some firms paused new acquisitions early in the year, dealmakers report increased mid-market opportunities in a less competitive environment than the low-cost-capital years of 2021–2022.
With public markets subdued and limited IPO activity, some general partners prioritized sponsor-to-sponsor transactions and strategic exits for scaled assets. Continuation vehicles and secondaries provided flexibility in sectors where capital interest persisted, though fund-level liquidity constraints continued to slow exit timelines.
Deal activity was concentrated on transactions with clear integration pathways and durable EBITDA profiles. Fewer full auction processes were seen; many transactions occurred through bilateral outreach or preemptive approaches, especially where the buyer and seller were aligned.
Private credit played a key role in supporting private equity activity. Sponsors utilized unitranche, holding company and hybrid capital structures to navigate tighter lending markets. In transactions for companies valued under CA$500 million, the ability to access and commit capital quickly often determined which bidder succeeded. Sellers prioritized buyers who could close with speed and certainty, making capital readiness a true differentiator.
Cross-border activity
Cross-border M&A accounted for close to 50% of Canadian deal activity in H1 2025. Inbound deal flow softened in Q1 due to trade-related tension and political developments abroad, but by Q2, buyer confidence largely returned, particularly in sectors offering long-term asset profiles.
Cross-border activity in H1 2025 reflected a more selective environment. Inbound deals from the United States fell below 100, with 97 transactions worth CA$24.8 billion. Trade-policy uncertainty, particularly proposed US tariffs, has prompted Canadian counterparties to explore structures such as earnouts, spin-offs and targeted divestitures to navigate cross-border execution risk.
Outbound activity increased, as Canadian funds and strategics sought acquisitions in the US and Europe, motivated by valuation alignment and diversification. Some acquirers acted to build behind the tariff wall, anticipating long-term changes in trade and industrial policy. Foreign investment review remained a critical diligence factor, but proactive engagement and structural planning kept most cross-border processes on track.
Transaction conditions and process dynamics
Market conditions for completing transactions improved in Q2. Valuation gaps narrowed across several sectors as interest rate expectations stabilized and capital availability became clearer. Transaction timelines remained tight, but deal teams operated with greater certainty than in 2023.
Private credit continued to support deal activity. With traditional lending still selective, sponsors and strategics turned to net asset value (NAV) credit facilities, multilender syndicates and holdco debt to close transactions on tight timelines. Success often depended on the speed of the due diligence process and the availability of committed capital.
Limited auctions, preemptive outreach and insider-led processes were common. Prepared sellers—with clean financials, ready diligence materials and structural flexibility—were best positioned to transact.
Outlook for H2 2025
Canadian M&A is entering the second half of 2025 with strong momentum. Political headwinds have eased, interest rates are stable and buyer-seller expectations are more closely aligned. For well-prepared participants, market conditions remain favorable.
Mining and critical minerals are expected to be more active as regulatory clarity improves and federal permitting frameworks mature. Technology and business services should continue to drive volume, with private equity and cross-border strategics focused on platform roll-ups and carve-outs.
Liquidity pressures will persist for private equity, but M&A remains the primary exit route. Secondary transactions, strategic divestitures and sponsor-to-sponsor deals are expected to comprise the bulk of PE-led sell-side activity in H2.
Infrastructure and transition-aligned energy will remain central for buyers seeking long-duration assets and stable cost profiles. Early regulatory planning and capital certainty will be essential for success in cross-border deals.
Conclusion
As Canadian M&A enters the second half of 2025, the market is defined by competition for quality assets and a premium on speed, preparation and certainty. Buyers who were deliberate and ready to transact were rewarded in H1.
Our team continues to advise on some of the most complex and high-value transactions in the market. For clients navigating this environment, an informed and disciplined approach remains the surest path to successful outcomes.
Footnote
1. Mergermarket, Canadian M&A H1 2025 Data, Mergermarket Intelligence Report, July 2025.
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