The report identifies a number of market factors which are
keeping demand for M&A high, including:
The closing of the valuation gap: The
valuation gap (the difference in asset evaluation between
purchasers and sellers) is starting to close. In 2015, volatility
in prices, particularly among commodities, meant that there was a
significant gap between what buyers and sellers thought was a fair
price in valuations. In 2016, commodity prices have stabilized,
leading a majority of executives to view the valuation gap to be
less than 10%. Accordingly, negotiations on price are expected to
be less difficult.
An increase in distressed asset sales:
Although commodity prices have rebounded from recent lows, the
prolonged downturn in that sector has meant that an increasing
number of companies have had to sell assets to maintain
A shift in private equity firms' focus:
Private equity firms may be finished the net selling of their
portfolio investments, a process which has taken several years.
Activity on the buy-side of the market may once again be their main
focus, which EY predicts would bring between $465 billion and 1.3
trillion dollars to bear on possible mergers or acquisitions.
The rebalancing of the Chinese economy: While
the report concludes that the Chinese economy is unlikely to be an
engine for global growth, it is in the midst of re-orienting
towards consumers. As a result, the number of Chinese outbound
acquisitions has surged, as Chinese businesses are looking to
acquire western corporations with strong intellectual-property
The report ultimately concludes that M&A will remain one of
the most potent tools for corporate growth in today's economy.
In an era of sluggish growth, management teams will increasingly
need to think about how to grow earnings and gain market advantage.
M&A offers one area of diversification for growth, and
successful deals can create corporate tailwinds even in the face of
torpid market growth.
The author would like to thank Scott Pollock, articling
student, for his assistance in preparing this legal
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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