Future of M&A in the lower mid-market for Canada

What is the future of M&A in the lower mid-market for Canada this coming year?

Having operated through five major recessions since Robbinex was founded in 1974, we have learned that economic downturns follow a consistent pattern:

Six months before a recession is officially declared, buyers and their bankers gradually withdraw from acquiring and financing transactions. They typically return to active participation about halfway through the recession.
Sellers, however, tend to withdraw from the market until six months to a year after the recession has been officially declared over.

Why is this? The true value of a business lies in its ability to generate future earnings, and a recession creates significant doubt about that future. As a recession nears its end, buyers and bankers return because they can more accurately forecast upcoming performance. Conversely, sellers often leave the market because declining revenues and profits reduce their company’s valuation; they do not return until financial performance has fully recovered.

COVID-19, which began in early 2020, behaved economically much like a recession, albeit a much longer one. As the landscape stabilized and the future became more predictable, transaction activity began returning to normal levels in early 2024.

Economic uncertainty returned following the U.S. election in November 2024. M&A transactions in the lower middle market stalled due to the instability created by new tariffs, coupled with the economic friction and threats to Canadian sovereignty. Furthermore, the political transition following the resignation of Prime Minister Trudeau and the subsequent election last April left a temporary void regarding Canada’s strategic response to these tariffs.

However, I strongly believe that M&A transactions in the lower mid-market will begin returning to normal levels around April or May 2026. I expect activity to run at accelerated levels throughout the remainder of 2027 and into 2028–2029 to accommodate the massive pent-up demand created by both the COVID era and recent trade tensions.

WHY APRIL/MAY? Our new government’s economic and business strategies, as they take full effect, are positioned to make Canada an economic powerhouse. The “re-tooling” of the Canadian economy is currently underway; in fact, a book could be written on the transformation our country will experience over the next three to five years. Key drivers include:

The SAFE agreement recently signed with Europe, granting Canada access to a $240 billion equipment procurement budget to sell defense items to NATO countries.
Increasing defense spending to 5% of GDP by 2035, resulting in approximately $150 billion annually. This includes $105 billion in core military spending and $45 billion for infrastructure —more than triple current levels—creating significant job growth.
Ongoing discussions regarding 88 Gripen aircraft, including plans for Canadian assembly plants, alongside Rolls Royce expanding its jet engine facilities in Montreal and Winnipeg.
Restoration of diplomatic relations with the Kingdom of Saudi Arabia.
$70 billion in new investment from the United Arab Emirates into energy, mining, AI, and logistics.
A new agreement signed in October to expand agri-food trade with Mexico, strengthening bilateral trade and technical cooperation in grains, oilseeds, horticulture, and animal protein.
Free trade negotiations with MERCOSUR (Brazil, Argentina, Uruguay, and Paraguay) aimed at completing a working agreement during 2026.
Renewed free trade agreements with Europe, the UK, Australia, Japan, South Korea, and Singapore.
Implementation of the free trade provisions of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) alongside ASEAN members.
Consideration of new bilateral trade agreements with China.
Resumed talks with India on an ambitious Comprehensive Economic Partnership Agreement (CEPA) with a goal to increase trade by $50 billion by 2030.
Expansion of shipping facilities on both the West and East coasts, Montreal, and likely Hudson Bay, to facilitate trade with the Far East and Europe.
Pipeline extensions to move new, technically modified low-carbon fuels to Asian markets.}
Development of the “Ring of Fire” in Northern Ontario.
Billions of dollars in capital and tax incentives to encourage foreign direct investment.
Reduction of interprovincial trade barriers.
The renegotiation of CUSMA (USMCA). With the U.S. midterm elections approaching in November 2026, the challenges U.S. businesses face without a stable trade agreement—combined with the inflationary effects of tariffs—will likely incentivize the Trump administration to initiate serious negotiations by February or March of this year.

I have closely watched our country’s governance for decades, and I can sincerely say that for the first time, our country is being run with a business-like focus. The objective is the best interest of all citizens for a “United” Canada, rather than the interests of a single political party or province. This economic re-tooling takes time. While growth may not be exponential at this exact moment, the economy is relatively stable, giving Canadian manufacturers the necessary window to pivot products and secure new markets.

Productivity has remained steady, and Canada avoided the recession that many predicted. Job growth has consistently outperformed forecasts. CUSMA will not be canceled, and many unreasonable tariffs will eventually be significantly reduced or eliminated.

I anticipate that by April or May of this year, many of these government initiatives—both federal and provincial—will be well underway, though some may take two to five years to reach full maturity.

We must remember that major transactions require time:

Selling a home takes 2 to 6 months to secure a buyer and another 2 to 3 months to close.
Selling a business, from inception to completion, can easily take 15 to 24 months (or longer).
Scaling a mid-sized business to double its revenue can take 3 to 4 years to secure approvals, build facilities, hire staff, and stabilize the supply chain.

As it becomes clear that Canada is successfully reducing its economic dependence on the U.S. and that these initiatives are delivering results, the media will shift toward a more positive narrative regarding Canada’s evolution. These strategic business plans and international negotiations, combined with a resilient economy, will bring Buyers, Investors, Bankers, and Sellers back to the table.

In my opinion, for those contemplating a business transaction in the near future, the time to initiate the planning process is now. Preparation is the differentiator between a transaction and a successful transition.

For Strategic Buyers: Embarking on a structured acquisition program is vital to identify synergies and ensure long-term value creation in a recovering market.
For Owners Planning an Exit: Whether considering retirement or a career change, utilizing a comprehensive exit-planning framework is a superb way to maximize business value and ensure a smooth succession.
For Those Seeking Expansion: Engaging with a professional cooperative network can provide the cross-border expertise and support needed to scale operations during this period of economic re-tooling.

The current economic landscape rewards the proactive. By starting the groundwork today, business owners and investors will be positioned to make the right decision, at the right time, and for the right reason.

About the Author: Doug Robbins Doug Robbins is the founder of Robbinex, a premier business intermediary firm specializing in the transition of mid-market companies. With over 50 years of experience and more than 1,500 successfully completed assignments, Doug is a renowned expert in M&A, business valuations, and strategic succession planning. He is dedicated to helping business owners navigate the complexities of selling or transitioning their companies with clarity and integrity.