U.S. Tariffs and Canadian M&A Activity
Recent reports indicate that U.S. tariffs could potentially impact mergers and acquisitions (M&A) activities in Canada. However, U.S. private equity firms continue to show a keen interest in Canada’s property and casualty (P&C) brokerage sector, according to a financial services expert. Andrew Mathias, managing director and partner at KPMG Corporate Finance, stated, “There are enough opportunities in Canada, and several processes are currently underway involving U.S. private equity firms.” He further added, “Some larger entities with U.S. private equity backing remain active, and there’s been no slowdown despite ongoing tariff discussions.”
Impact of Tariffs on Brokerage Businesses
While the M&A markets are evaluating the potential consequences of tariffs and counter-tariffs, brokerage businesses are perceived differently compared to industries like retail, which must ensure product availability on shelves. “U.S. private equity firms continue to focus on the Canadian landscape due to the saturation of the U.S. market, where competition is intense among numerous PE firms and strategic buyers,” Mathias explained to CU. “Valuation multiples remain high, so investing in Canada offers less competition, and the weaker Canadian dollar makes acquisitions more cost-effective.”
Technological Acquisition Motivations
According to Mathias, brokerages seeking to acquire competitors are primarily interested in expanding their operations and accessing new markets. Additionally, they are eager to leverage artificial intelligence (AI) applications utilized by the firms they acquire. However, when acquisitions focus on obtaining AI technology, due diligence is crucial to ensure these applications integrate seamlessly with existing operations. “If I’m a consolidator aiming to acquire a tech entity, I want to do it right the first time,” Mathias mentioned to CU. “Acquiring multiple different tech solutions can lead to integration challenges.”
Sometimes, larger brokerages with advanced technology hesitate to acquire firms using entirely different or custom AI and tech solutions due to integration challenges. “It can create a barrier,” Mathias noted. “Larger players often develop their own platforms or identify the right target with compatible technology. This synergy enables them to introduce AI into a brokerage lacking it, rather than attempting to overlay or replace existing platforms.”
