Bennett Jones's Jean Tessier spoke with Canadian Lawyer about firm's quarterly M&A report
Foreign investment in Quebec’s energy transition has driven M&A in the province this quarter, and interest rate cuts are providing optimism that the momentum will continue, according to a new report from Bennett Jones LLP.
“It looks like a bounce-back quarter, at least in Quebec,” says Jean Tessier, a partner who advises clients on M&A, private equity, and corporate finance in Montreal at Bennett Jones LLP. He says it has been slow for a year but has recently been involved in several competitive M&A auctions. “It was a bit of like a breath of fresh air.
“There's a lot of optimism and a general sense that we’ve probably turned the corner.”
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Tessier says he hopes Q2’s competitive landscape foretells a new trend, noting that the Bank of Canada’s consecutive interest rate cuts could help spur the momentum.
The Quebec government has a “2026 Energy Transition, Innovation, and Efficiency Master Plan” with strategies to make environmentally sustainable reforms to residential real estate, business, transportation, and innovation in the province. According to Investissement Québec, the province’s desire to be a leader in the energy transition attracted a record $13 billion in foreign direct investment for the fiscal year ending March 31, which beat the previous year’s record high of $6 billion.
The recent infusion of foreign direct investment was led by Sweden’s Norhtvolt, which is building a $7 billion electric vehicle (EV) battery plant east of Montreal. US and South Korean companies have also announced large investments in Quebec’s EV manufacturing industry.
“Quebec institutions are also directly involved in financing those projects,” says Tessier. “You also see some strategic players involved in taking positions. You see a lot of joint ventures forming because they need to neutralize the risk, given how big those projects are.”
He says many of the M&A transactions are byproducts of these major investments. These include strategic real estate, including land acquisitions and acquisitions for specific technologies that feed into the EV industry.
“We've been quite fortunate in Quebec with the government’s will to invest in the energy transition quite heavily and aggressively.”
On July 24, the Bank of Canada cut its key interest rate to 4.5 percent, following a previous 0.25 percent cut in June. According to Bennett Jones’ report, inflation is expected to reach 2 percent by the end of 2025.
“This is part of the good news that may make it so that players looking in on the sidelines will gain confidence and jump in,” says Tessier, adding that he hopes this will be followed by another rate cut before the end of the year.
In its 2024 budget, the federal government raised the inclusion rate on annually realized capital gains above $250,000 from 50 to 66.6 percent.
“That's one thing that had a direct impact on transactions we were working on,” says Tessier. “Probably the biggest story of Q2, in Quebec, just like in Canada.”
They closed transactions that were advanced enough before the change went into effect on June 25. The change has led to a wave of reorganizations, and he says private equity firms are pickier and have less flexibility on valuation for exits.
For Canada-wide transaction volume, Q2’s 666 deals made it the third-best quarter since the beginning of 2023. Deal counts have been on an upward trajectory for three consecutive quarters. Deal value in Q2 – $59.12 billion – was a steep rise from Q1, in which 621 deals amounted to only $23.18 billion. June was Q2’s busiest month, with 250 transactions worth $28.16 billion.
In Quebec, two significant transactions stood out. Both were in the financial services sector and together valued at close to $10 billion. One was the go-private of the fintech payments company Nevei, and the other was the National Bank of Canada’s acquisition of Canadian Western Bank.
Next in line in terms of deal size was the $4.18 billion acquisition of European SaaS company Aareon by Caisse de dépôt et placement du Québec (CDPQ) and the private equity firm TPG. CDPQ also recently sold its stake in the Budapest Airport for $3.37.
Quebec’s fourth and fifth largest transactions in Q2 were a significant acquisition of uranium deposits and a merger of two gold companies.
Bennett Jones opened its Montreal office in September 2023, and Tessier says it has since grown the M&A practice to around 15 lawyers.
