The Canadian mergers and acquisitions landscape remains poised for renewed activity in 2026. Although dealmakers continue to navigate geopolitical uncertainty and macroeconomic volatility, momentum that began building in late 2025 has carried into the new year. A more favourable interest rate environment and a recalibrated approach to tariff-related risks have helped restore confidence among market participants.
Recent geopolitical developments, including the emerging conflict involving Iran, also serve as a reminder that global instability remains a live variable for dealmakers and could influence energy markets, supply chains and investor confidence in ways that remain difficult to predict. Against this backdrop, the Canadian market continues to attract interest from corporate acquirers, private equity sponsors and institutional investors, driven in part by the federal government’s nation-building agenda and the country’s deep natural resource base.
Positive trends shaping the 2026 outlook
The second half of 2025 marked a notable inflection point for Canadian M&A activity. Following several quarters of subdued deal flow, both deal value and volume began to climb as buyers and sellers reached greater alignment on valuation and risk allocation. This trend has continued into 2026, with many market participants pointing to robust pipelines and pent-up demand that is gradually converting into completed transactions across a range of sectors.
The initial shock of tariff announcements and trade policy uncertainty that defined the first half of 2025 began to stabilize in the second half of the year as market participants adapted their strategies, allowing more transactions to move forward with greater confidence. While trade policy remains an important consideration, market participants have become more accustomed to operating in this environment.
At the same time, earlier reductions in interest rates by the Bank of Canada have contributed to a more accommodative financing environment for M&A. Lower borrowing costs have improved the economics of leveraged acquisitions, enabling private equity sponsors to deploy capital more actively and corporate acquirers to pursue strategic transactions that may have been more difficult to justify in a higher-rate environment. The valuation gap between buyers and sellers has also narrowed, helping facilitate deal execution.
Industries to watch
Canada’s abundant reserves of critical minerals, energy resources and agricultural commodities continue to attract inbound investment from foreign acquirers. As global supply chains increasingly prioritize security and diversification, Canada’s stable legal and regulatory framework positions the country as an attractive destination for capital seeking access to essential inputs. Mining, energy transition and agribusiness transactions are therefore likely to remain important drivers of deal activity through 2026.
Technology transactions also continue to be a significant component of the Canadian M&A landscape. Areas such as artificial intelligence, cybersecurity and digital infrastructure are attracting growing investor interest, particularly as governments and businesses prioritize technological resilience and digital sovereignty. With public markets remaining challenging for many technology companies, M&A continues to serve as a primary exit pathway for founders and investors.
Perhaps the most distinctive feature of the current M&A landscape is the influence of federal nation-building policy initiatives. Government priorities centered on national security, technological sovereignty and economic resilience are increasingly shaping the strategic calculus for acquirers operating in key sectors. Defence and aerospace (reinforced by Canada’s recently announced CA$180 billion Defence Industrial Strategy), sovereign artificial intelligence, critical infrastructure and domestic manufacturing are all areas where policy tailwinds may support increased investment and consolidation. Companies aligned with these national priorities may find themselves attractive acquisition targets, while acquirers advancing these objectives may benefit from regulatory support or government partnership opportunities.
Trade uncertainty remains
Although markets have proven resilient in the face of trade policy volatility over the course of 2025, tariffs and broader trade dynamics remain relevant considerations for dealmakers. Policymakers have increasingly emphasized diversification of Canada’s trade relationships in order to reduce reliance on a single trading partner. At the same time, the United States continues to be Canada’s most significant inbound and outbound M&A partner.
While the United States Supreme Court recently struck down tariffs imposed under emergency powers, the decision offers little reprieve, as sectoral tariffs remain in place, alternative statutory mechanisms remain available to U.S. policymakers, and the upcoming review of the Canada-United States-Mexico Agreement (CUSMA) introduces another layer of uncertainty for market participants.
Increasing transactional and regulatory complexity
While deal activity is expected to continue recovering through 2026, ongoing economic and political uncertainty may result in greater scrutiny of potential transactions. Buyers are increasingly conducting more extensive diligence and negotiating flexible pricing mechanisms, such as earn-outs and rollover equity arrangements, in order to bridge valuation gaps and manage risk. These dynamics can contribute to longer transaction timelines.
Regulatory considerations are also playing a more prominent role in transaction planning. Over the past several years, the Canadian government has introduced a number of measures that increase scrutiny of M&A transactions, including amendments to the Competition Act and the Investment Canada Act (ICA).
Notably, recent amendments to the Competition Act have introduced a rebuttable presumption of anti-competitiveness where certain market share or concentration thresholds are exceeded, effectively reversing the onus onto merging parties to demonstrate that a transaction will not substantially lessen competition.
As well, recent changes to the ICA have expanded Canada’s national security review regime for foreign investment and introduced a new mandatory pre-closing notification requirement for investments involving certain prescribed business activities. The sectors that will trigger this requirement have yet to be defined by regulation. Based on government signalling to date, the regime is expected to focus on sensitive areas, including advanced technologies and other sectors of national security or economic security significance.
As a result, regulatory strategy has become a threshold consideration in transaction planning, particularly for transactions involving foreign acquirers evaluating investments in sensitive sectors, where early assessment of potential national security issues (including through voluntary pre-closing filings to start the statutory review clock) can be critical to managing deal timing and execution risk.
Conclusion
After a more active end to 2025, there are signs that Canadian M&A activity may continue to strengthen through 2026. A more stable interest rate environment, evolving federal industrial policy and improving alignment between buyers and sellers are all factors that could support a more active transaction market.
At the same time, geopolitical developments, trade policy dynamics and regulatory scrutiny continue to introduce complexity into the dealmaking environment. For market participants, the outlook for 2026 may therefore be best characterized by cautious optimism: opportunities for strategic transactions remain present, but successful execution will likely depend on careful planning, regulatory awareness and disciplined transaction structuring from the earliest stages of a deal. In an environment of heightened regulatory scrutiny and geopolitical uncertainty, certainty of execution is increasingly the defining feature in competitive transactions.
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Amaan Gangji, Partner, has a practice focused on mergers and acquisitions, private equity, technology, and corporate/commercial matters. He is recognized by Chambers & Partners and Best Lawyers in Canada. He was named a Lexpert Rising Star in 2023, featured in Lexpert’s Finance and M&A Guide as a Lawyer to Watch, and has led a transaction shortlisted for ACG BC’s Deal of the Year. Amaan advises on complex share and asset acquisitions and other strategic transactions involving Canadian, U.S. and international stakeholders. He regularly acts for institutional clients and private equity sponsors on complex, cross-border transactions ranging from mid-market to multibillion-dollar deals, including matters involving competition and foreign investment considerations.
Katherine Zhou, Associate, practices corporate and commercial law, advising clients on complex transactions to help them achieve strategic business objectives. She has extensive experience guiding private businesses and private equity funds through the lifecycle of various transactions, including mergers and acquisitions, corporate reorganizations, equity investments, and debt financings. Katherine is also skilled in drafting commercial agreements and contracts tailored to her clients' needs. Her work spans a wide range of industries, with particular experience in cross-border acquisitions and financings.
Crystal Szeto, Associate, has a practice focused on mergers and acquisitions and general corporate law. She assists clients with a variety of transactions, including share and asset acquisitions and dispositions, corporate reorganizations and financings, as well as preparing various types of commercial agreements.