What was the Canadian M&A market’s performance in 2025?

Canada’s mergers and acquisitions market ended 2025 above the 2021 all-time record on aggregate deal value, posting US$389.69 billion for the full year. However, Q4 2025 was the softest quarter of the year, with 239 lower-middle-market transactions recorded, down 12.5 per cent from Q3. Tariff uncertainty, buyer caution and valuation gaps slowed momentum heading into year-end.

For Canadian business owners considering an exit, the record full-year result signals active buyer demand, available capital and a functioning market — while the Q4 softening is a reminder that preparation and timing still matter.

Which sectors led Canadian M&A deal activity in 2025?

Sector performance varied significantly in 2025:
- Energy: deal value up 257% year over year
- Mining: up 220%
- Utilities: up 82%
- Eight gold deals topped US$1 billion in 2025 (versus one in 2024)

In the lower-middle market, the busiest sectors by transaction count were:
- Industrials: 55 deals
- Technology: 42 deals
- Financial services: 28 deals

Business owners in any of these sectors should note that buyer interest is real and active.

What does the Canadian M&A financing landscape look like heading into 2026?

The Bank of Canada cut its overnight rate seven times between June 2024 and October 2025, bringing it from 5.00 per cent to 2.25 per cent. That rate-cutting cycle ended with the rate holding at 2.25 per cent at the December 10, 2025 decision.

The financing landscape has structurally shifted:
- Private credit is now a standard feature of Canadian mid-market M&A, not a fallback option
- Hybrid structures combining bank senior debt with private credit mezzanine are common
- U.S. direct lenders are increasingly stepping in as sole financiers on inbound cross-border deals

For sellers, this means more capital is available to fund acquisitions than at any point in recent memory.

What does Canada’s succession planning gap mean for the M&A market?

76 per cent of Canadian small business owners plan to exit in the next decade; 91 per cent have no formal succession plan (CFIB). More than $2 trillion in business assets are preparing to change hands over that period.

This supply of assets coming to market — combined with record levels of buyer capital and active demand in industrials, technology and financial services — creates a favourable structural environment for prepared sellers. The risk is not a lack of buyers. It is a lack of preparation on the sell side.

What does Q4 2025 M&A softness mean for Canadian business owners?

The 12.5 per cent drop in lower-middle-market transactions from Q3 to Q4 2025 reflects three factors: tariff uncertainty related to U.S. trade policy, buyer caution around valuation gaps, and general market hesitation heading into year-end.

For sellers, this means:
- Preparation matters more, not less — well-prepared sellers with clean financials and a quality of earnings report are insulated from buyer caution in ways that unprepared sellers are not
- Valuation expectations should be advisor-calibrated — the gap between what sellers expect and what buyers will pay was cited as a key driver of the Q4 slowdown
- Timing should be deliberate — launching a process in a quarter of heightened uncertainty produces worse outcomes than launching into a period of buyer confidence

Key facts: Canadian M&A market 2025

Full-year deal value: US$389.69 billion (above 2021 all-time record)
Q4 lower-middle-market transactions: 239 (down 12.5% from Q3)
Top sector by deal value growth: Energy (+257% year over year)
Top lower-middle-market sectors by count: Industrials (55 deals), Technology (42 deals), Financial services (28 deals)
Gold mega-deals: 8 deals above US$1 billion (versus 1 in 2024)
Bank of Canada overnight rate: 2.25% (held December 10, 2025; down from 5.00% in June 2024)
Succession gap: 76% of Canadian SME owners plan to exit within 10 years; 91% have no formal plan (CFIB)
Business assets in transition: $2 trillion+ over the next decade (CFIB)

About the author

Karl E. Sigerist, Jr., ICD.D is President and CEO of The Shaughnessy Group. Subscribe to The Canadian Exit Briefing at sellingyourcanadianbusiness.ca.

Sources

Canadian Federation of Independent Business (CFIB). Succession Tsunami, 2023. cfib-fcei.ca.
Bank of Canada. Rate decisions 2024–2025. bankofcanada.ca.
Kroll. Canadian M&A Industry Insights, Winter 2024. kroll.com.