The pace of Canadian merger and acquisition activity is plummeting while corporate borrowing rates continue to soar.
Just 460 transactions involving Canadian companies were announced during the second quarter, according to a report from LSEG Data & Analytics to be released Wednesday. That is the lowest deal count for any three-month period since at least 2005 as trade uncertainty and fallout from the Iran war have created a challenging environment for both buyers and sellers.
Domestically, Canada’s corporate debt market continued to blow past records, with businesses issuing roughly $29-billion in corporate bonds between early April and late June, up 39 per cent from the same period in 2025 and 32 per cent above the second-quarter average over the past 10 years. And that figure doesn’t include the nearly $34-billion in maple bonds – loonie-denominated corporate bonds from non-Canadian companies – that were issued during 2026 so far.
Several multibillion-dollar megadeals buoyed total M&A value in the second quarter, with roughly US$77-billion in transactions involving Canadian companies. That is 53 per cent above the second-quarter average of US$50.4-billion over the past 10 years.
Roughly one-third of that total came from just three transactions that were announced over a two-week period in April: Shell PLC acquiring Calgary-based ARC Resources Ltd. for US$16.4-billion, First Capital REIT being sold for $5.2-billion and GFL Environmental Inc. agreeing to pay $5.4-billion for Calgary-based Secure Waste Infrastructure Corp.
“Large deals are still getting done,” said Jeremy Fraiberg, co-chair of the mergers and acquisitions practice at Osler, Hoskin & Harcourt LLP – the top legal adviser for M&A in Canada during the first half of the year. “We still have very robust capital markets.”
Ryan Avey, Canada head of mergers and acquisitions at RBC Capital Markets, the top investment bank for M&A during the first half of the year, said in an interview that the trend in Canada reflects a shifting deal-making environment worldwide.
“Whether you look at Canada or the U.S. or globally, it is a recurring theme,” he said. “Megadeals are much more prominent and less in terms of overall deal count, which is skewing the average deal size up.”
“There is a bifurcation going on in the market where best-in-class businesses are certainly commanding significant investor interest and transacting at premium valuations, while weaker businesses are having a more challenging time with sales,” Mr. Avey said.
The latest quarterly trend marked a reversal from the first quarter of the year, when total deal value fell as the total number of deals hewed closer to historical averages.
Mr. Avey said the uncertainty that has persisted since U.S. President Donald Trump launched a global trade war in 2025 has meant that “big deals are still happening, but the midmarket has been hit, I think, in terms of deal activity.”
Despite surging corporate debt levels, investor appetite for those deals is seemingly insatiable. Rob Brown, co-head of Canadian debt capital markets at Royal Bank of Canada, the top investment bank for debt issuances in the first half of the year, said oversubscription levels in 2026 so far have averaged 2.6, meaning for every dollar in corporate bonds issued, investors asked for $2.60.
“It seems like there is this never-ending pit of cash that investors just have to deploy,” Mr. Brown said. “I wouldn’t say investor demand is unlimited, there is certainly at some point a bit of a breaking point, but we haven’t hit that yet.”
Why investors have so much cash available to invest in corporate bonds is partly because of the COVID-19 pandemic. From mid-2020 through early 2021, companies borrowed huge sums through bonds with three-to-five-year maturities to safeguard against the pandemic’s economic consequences.
Investors are now getting that money back, Mr. Brown said, leaving them flush with cash that can be put toward new deals.
Stock sales in the second quarter continued their steady recovery after sinking to generational lows in 2024, with Canadian equity issuance totalling nearly $7.1-billion, flat on a year-over-year basis and 17.5 per cent below the most recent second-quarter 10-year average of $8.6-billion.
But the real rebound in Canadian equity markets has been a revival of initial public offerings. Jackie Nixon, head of Canadian equity capital markets at RBC, said the successful $1.5-billion IPO of drug maker Apotex Health Corp. in June may convince other companies to go public.
“The more deals that trade well, the better the investor appetite will be to support the next IPO,” Ms. Nixon said. “While we have not seen the floodgates open, we’re working with numerous issuers in the background who are contemplating an IPO later this year or beyond.”