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For most Canadian business owners, 2026 has not felt like a recession or a recovery. It has felt like trying to hold margin while costs keep moving underneath you. Statistics Canada’s Q2 business survey captures that pressure clearly: 64.3% of businesses expected cost-related obstacles over the next three months, up from 58.9% in Q1, and nearly half expected inflation to be a persistent headwind.1
That is not just an operating problem. It’s becoming a valuation problem.
The Bank of Canada’s most recent Business Outlook Survey points in the same direction. Many firms reported that higher input costs — driven by energy prices, freight and supply chain disruption — are difficult to pass through to customers. Weak demand, fixed contracts, competitive pressure and thin margins are all limiting repricing ability. Some firms reported they are already experiencing margin compression as a result.2 The share of businesses planning for a recession nearly doubled from the prior quarter.3
This is the question that now matters most for owners thinking about value: when your costs move against you, who absorbs the pain — and can you prove it?
In a stable environment, buyers could underwrite strong historical margins and assume modest turbulence. In the current environment — a technical recession,4 CUSMA now in annual review mode with no extension5 and input costs elevated — that assumption no longer holds. Buyers are testing whether margins are durable, not just whether they were healthy last year. They want to know which customers accept price increases, which contracts allow repricing, where concentration risk sits and whether management is actively protecting profitability at the product and account level.
Pricing power, understood correctly, is not just “can we raise prices?” It is the ability to protect economics when conditions turn less forgiving. Sometimes that means repricing. Sometimes it means redesigning product mix, diversifying suppliers, tightening working capital or exiting revenue that flatters volume but destroys value. The common thread is control, and control is what buyers pay premiums for.
1. Build a margin bridge. Know exactly what has happened over the past twelve months to labour, freight, energy, and materials costs, and where those costs were absorbed versus passed through. This is the first document a sophisticated buyer will request in diligence.
2. Review your customer and contract mix. Which relationships give you room to reprice when costs move? Which ones lock you into fixed economics while your inputs shift? The answer determines how resilient your earnings look under pressure.
3. Get a current view of value. In this market, the issue is not just what your business earned. It is how believable those earnings are going forward. A current baseline valuation — including the specific levers that would strengthen margin quality — gives you optionality regardless of whether you transact this year or in five.
The most important dividing line in 2026 may not be between businesses that grew and businesses that did not. It may be between businesses that can defend their margin and those that cannot.
In this market, the margin line is the value line.
For more insights and advice on growing or selling your business.
Q2 2026 delivered 45 M&A transactions, the best quarterly result since Q4 2025 and nearly double the 25 deals recorded in Q2 2025. H1 2026 totals 78 M&A and 74 private placements across Canada for 152 combined transactions. The shift is meaningful: private placements have softened from their recent highs, while acquisition activity has accelerated. When owners start choosing exits over growth equity, it signals a market maturing toward consolidation, and that creates a real window of opportunity for owners considering a full or partial exit.
CUSMA Remains in Effect Until 2036”, July 4, 2026; and LeBlanc’s post-review comments reported by Canada’s National Observer, July 6, 2026.
Information technology led all sectors by transaction count at 73 deals — nearly 25% of total activity — followed closely by materials at 71 deals. But by dollar value, the picture flips dramatically: materials dominated at $50.5 billion, and energy delivered $35.1 billion on just 16 transactions. Health care was also active at 39 deals and $17.7 billion. The divergence between volume and value tells an important story: sectors commanding the highest per-deal value are concentrated in resources and life sciences, where value accrues through fewer, larger transactions.
Transaction data sourced from S&P Capital IQ. M&A and private placement counts reflect screened Canadian private-company closed transactions above C$10 million. Valuation multiples use a broader North American screen to ensure sufficient sample sizes for median calculations.
Ontario claimed 120 of the approximately 300 trailing 12-month transactions, confirming its role as the country's M&A hub. British Columbia (67 deals) and Quebec (53 deals) round out the top three, together accounting for roughly 80% of total Canadian deal flow. Alberta contributed a meaningful 41 transactions, with energy deals unsurprisingly anchoring its mix. Atlantic Canada and the prairies remain quieter by volume, though Newfoundland and Labrador (five deals) and Nova Scotia (eight deals) show modest activity — particularly in IT and utilities respectively — signalling emerging pockets of opportunity.
BC: Vancouver-based KOHO Financial raised C$130 million in funding on June 11, 2026, at a C$1.33 billion post-money valuation. Notable investors included Shopify founder and CEO Tobi Lütke, Affirm COO Michael Linford, BDC Capital and HOOPP Capital Partners.
Alberta: Francisco Partners completed its acquisition of Calgary-based Blackline Safety Corp. (formerly TSX:BLN) on June 30, 2026, in a going-private transaction valued at up to C$850 million.
Ontario leads: with 120 deals, Ontario anchored roughly 40% of Canada's mid-market transaction activity in the trailing 12 months.
IG Private Company Advisory provides strategic and transaction advisory services for transactions of $20 million to $1 billion in revenue. Discover how we can help unlock your company's potential.
David Turnbull — Head of IG Private Company Advisory — leads a team with decades of experience across many industries. His team has access to an extensive global network of strategic and financial business buyers and capital providers. This helps business owners navigate growth, capital decisions and transactions with institutional-quality M&A, corporate finance and strategic advice.
1 Statistics Canada, Canadian Survey on Business Conditions, Second Quarter 2026, May 27, 2026. 64.3% of businesses expected cost-related obstacles over the next three months, up from 58.9% in Q1; 48.8% expected inflation to be an obstacle; 34% expected U.S. tariffs to have a negative impact over the next 12 months.
2 Bank of Canada, Business Outlook Survey — First Quarter of 2026, April 21, 2026. Many firms expressed concerns about their ability to pass on higher input costs, citing weak demand, constrained consumer budgets, competitive pressure, fixed contracts and limited pricing power. Some reported they were already experiencing margin compression.
3 Bank of Canada, Business Outlook Survey — Second Quarter of 2026, July 7, 2026. The share of firms planning or budgeting for a recession rose from 9% to 17%. Business sentiment deteriorated, with rising input costs and geopolitical uncertainty weighing on conditions. Firms with fixed-margin business models reported thin margins and no room to absorb cost increases.
4 Statistics Canada, GDP release, May 29, 2026. Real GDP fell 0.1% annualized in Q1 2026, following a 1% annualized decline in Q4 2025: two consecutive quarters of contraction, meeting the definition of a technical recession. Business capital investment fell for the fifth consecutive quarter.
5 On July 1, 2026, the United States formally declined to extend CUSMA in its current form. The agreement was not renewed for a further 16-year term and now moves into annual reviews through its 2036 expiry. See McMillan LLP, “Following July 1st Review, CUSMA Remains in Effect Until 2036”, July 4, 2026; and LeBlanc’s post-review comments reported by Canada’s National Observer, July 6, 2026.
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