Bringing buyers and sellers together in the exciting world of mergers and acquisitions (M&A) here in Canada has been our specialty at Templeton Marsh for many years. And it’s because of our experience in this market that I often get asked to offer insight or to predict what the year ahead may look like. Although the world is changing, and changing quickly, the fundamentals of the M&A market herein Canada are solid. It’s with this thought in mind that I’d like to share with you my views on 2021. Looking at the big picture, we, at Templeton Marsh, still see as strong and buoyant M&A market in Canada for 2021, even though others might see a decline. The reasons why are simple, but significant.
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BUYERS vs. SELLERS
There are still more buyers than sellers on the Canadian market. These buyers are either flush with cash, after many very successful years, or have the wherewithal to borrow aggressively and cheaply.
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Servicing these types of loans will not be challenging as long as interest rates remain at, or near, their current historical lows (there are no indications this is going to change any time soon), and dealers continue to generate positive cash flow. -
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QUALITY ASSETS
ButtonGood assets are hard to come by, and that’s what all the buyers want. This desire, in turn, leads to competition between buyers to acquire “that Toyota or Honda store,” for example, that they may have had their eye on for some time. This dynamic leads to the same high multiples that have been paid over the past few years.
Additionally, sellers of less desirable brands will want to participate in this strong market and will therefore, by offering to sell, add to the strength of 2021’s mergers and acquisitions activity.
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COMFORT ZONES
Many of the bigger buyers are now willing to move out of their geographic and brand comfort zones and look farther afield. They’re willing to look at franchises that they didn’t previously consider or own.
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Domestic operators are now looking at imports, and import operators are now looking at domestics, etc. And dealers are looking out of province, going east or west, to find the stores they want. -
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MARKET STRENGTH
ButtonWe see continued growth in M&A for 2021, with multiples for today’s top brands (Toyota, Honda, Mercedes-Benz, BMW, Subaru, JLR) staying high, while multiples for other brands (domestic and niche franchises) stay steady, with some gains for Ford.
The market is so strong, and our network of buyers so widespread, that there are great opportunities to sell, even for franchises that may currently be facing some challenges.
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U.S. BUYERS
ButtonPresident Trump notwithstanding, there is little chance US buyers will be looking north for deals anytime soon. There isn’t a deal in Canada that a local buyer could not do. In fact, we know of at least four or five potential buyers with war chests in excess of $150 million!
We at Templeton Marsh have excellent working relationships with some of the better known US groups, and I can assure you that none have expressed anything more than a passing interest in Canada.
The reasons why are simple. Americans can still take advantage of acquisition opportunities at home. They don’t need to look northward. And as far as Canada is concerned, there are very few Canadian platforms large enough for Americans to get excited about. Those large enough are invariably the Canadian buyers with the massive war chests.
Our fast-paced and exciting industry is changing. There’s no doubt about it. Regardless, the fundamentals of the M&A market are strong, and whether you’re buying or selling, 2021 is going to be another exciting year.
To help you navigate the choppy waters of change, we invite you to contact our team at Templeton Marsh. Whether you’re buying or selling, we can help you make the most of the transaction.
