Vito Sperduto (00:06):
Hello and welcome to Strategic Alternatives, the RBC podcast where we cover new ways to raise capital, drive growth, and create value in an ever-changing world. With insights and outlooks from the RBC capital markets team, I'm Vito Sperduto, global Head of Mergers and Acquisitions at RBC Capital Markets. And as always, I'm joined by Larry Grafstein, Deputy Chair of Global Investment Banking.
Larry Grafstein
Hey Larry, great to be here.
Vito Sperduto
Today Larry and I are excited to welcome Ben Mandell and Mark Rushton to the program where we'll be discussing the trends that will shape our M&A outlook in the first half of the year, especially going into 24, but certainly for the full year of 2024. Ben is the head of Canadian mergers and acquisitions, and Mark is a managing director on our M&A team in the UK focused across the European landscape. Mark Ben, welcome to the podcast.
Mark Rushton and Ben Mandell:
Good to be here. Thanks for having us.
Vito Sperduto
So we've always talked quite a bit in terms of what's going on across our respective markets and certainly we'll talk a little bit about what's happened over this past year in ‘23. We've mentioned that coming into the year we expected a slow first half, kind of like the second half of ‘22 and a pickup in the second half of ‘23 where we expected some robust volumes. I think we've seen a positive trend in the second half, but it hasn't been quite as strong as we would've liked. Certainly we're starting to see some momentum, especially in the last couple of months of the year with some significant transactions, but it's looking like the overall M&A market globally will likely be down this year versus ‘22 probably in the 18 to 20% range. From a dollar volume perspective, I think the US seems to be leading the cause.
We are in the US market right now, likely to be down about eight to 9% this year versus ‘22 and certainly we've seen some of the larger deals in the market happen in the second half of the year and those have been positives and pretty strong green shoots going into the year. Certainly there's a number of pundits that always talk about the fact that in an election year, especially a significant election year, like ‘24 in the US, there'll be a decline in M&A activity. I think the counterbalance is pent up demand going into the year and so there might be a bit of a slowdown in the second half of the year depending on how things are playing out, but I do feel that the market and our clients have gotten comfortable with it and operating in this environment, especially if you look at the last four years or so that they've been through and they've had to operate in sort of once in a lifetime hopefully type conditions.
Larry and I recently had a conversation with our chief US economist, Michael Reed and also with Blake Gwinn, our head of US rate strategy, and we talked quite a bit about the macroeconomic picture and what's being done by the Fed in the US and also globally in terms of managing inflation, really giving some outlook in terms of what we're expecting from an economic perspective. Michael specifically has said for a long time that he expected the Fed to have been done with rate hikes and start cutting rates in the middle of ‘24 and he was expecting 125 basis points of cuts throughout the duration in 24, which we all look at and certainly that's a positive signal for our clients as we think about transactions and we've gotten some indications from the Fed even just this past week that they seem to be done with rate hikes and certainly are looking at about three rate cuts next year.
The Fed view and certainly the Wall Street economist views are coalescing towards Michael's view. I would say we always talk about amongst all of us, the fact that we need a strong level of confidence to execute M&A transactions and when we talk about confidence, it's confidence by the CEOs and by the boards to be able to make decisions as they look forward and knowing that they feel comfortable in terms of where their business is going to be, but also where their industry and the economy is going to be and having a good view in terms of what the potential macroeconomic outlook's going to be is driving a lot of that. And I think that's providing some strong enthusiasm, especially for the first half of ‘24. If we look at the individual markets here, and let's start with Ben in Canada. Give us some sense of what you're seeing from your clients. Ben,
Benjamin Mandell
What we're seeing in the different regions is fairly similar in terms of the trends around M&A activity and the path that we followed there. It'll be a little different, some a little ahead or some a little behind, but largely similar. And I think that a bit of a similar story around what we're seeing from a macroeconomic perspective where central banks certainly turning a bit more dovish in recent months and expectations that inflation is maybe a little bit better under control and that can help sustain things on the rate front, which as you said will be really helpful from providing certainty. I think providing a little more depth and less volatility in the financing market, which will always be helpful, but when you look at what's driving that, I mean GDP growth has been challenged and I think that's where we're seeing a bit of a difference between our regions in Canada.
We narrowly avoided a technical recession at the end of Q3 and the GDP growth has slowed quite a bit more. I think in the US, Vito and Larry, I think you're seeing a little more buoyancy helped by consumer spending, which has continued to be fairly strong and that may change in coming months, but so far the growth forecasts have been I'd say a bit anemic in terms of what our various economists are expecting for 24 and 25 even. If we think about M&A activity, I think we are starting to see improvement. I think the year played out as you said, maybe as we expected that it would be a tough first half of the year. Things have picked up a little bit, but still challenging from where volumes are against a long-term perspective. I think we're hoping and optimistic that that'll continue on the upswing as we move into the first half of 24 and beyond. I'm not sure it'll be a straight path, but I think it'll be a bit lumpy and hopefully the stability that we get on the rate front and less uncertainty around how central banks will act will help support that.
Larry Grafstein
Think Ben, there's two things that are consistent everywhere. First, we don't think we're necessarily going to see a return to the near euphoric environment that we had in 2021, and that's just fundamentally that was an outlying set of conditions. But on the other hand, secondly, I think we all agree that good deals will still get done anywhere in the globe and that you can have a very healthy deal market even with interest rates materially higher than they were for many years during the zero interest rate world. But at the same time, I think that we all also agree that that makes deals in some ways harder to do, harder to get to the end and there's a higher burden on companies to decide that a deal makes sense.
Vito Sperduto
Ben, what you just said is exactly how Michael here in the US is contemplating it, which is look, inflation is heading in the right direction, but it is going to be a bumpy ride and it's not going to be smooth. And I think there's a fair number of folks that are saying the Fed here in the US has managed it appropriately. They're not going to wait for the inflation to drop to 2% to be able to start cutting rates and certainly they're going to cut along the way and I think that's the signaling we've heard and I think putting those items to one side, I think that level of communication, that specificity has given our clients some confidence and as we look at the dialogues that are happening right now, they're starting to gain steam, they're starting to become more than a desktop exercise and I think that's a key to what we're seeing in the marketplace. I mean maybe Mark, turning to you, give us a sense of what you're seeing in the UK and across Europe. I would mention that in Europe M&A volumes are probably going to be off 25-28% year over year and so you've obviously seen some geopolitical challenges there cause a greater pause than we've seen in other parts of the globe. So maybe give us a sense of what you're seeing right now and how that's forecasting forward.
Mark Rushton
Yeah, I think that's right Vito. Look, from an outlook perspective, a growth in the European economies is expected to be broadly flat over the course of 2024, I mean at the back end of 2023 similar to North America headline inflation declined and actually market sentiment has suggested that we've reached that inflection point where interest rates have peaked and the volatility is starting to subside, although it will still be a bumpy road going forward. But given that sentiment, it does seem that there is definitely more support for M&A activity than there has been over the last 12 months or so. The RBC economists for Europe expect that the Bank of England and also the ECB will actually keep rates unchanged over the course of 2024 and there is actually still a disparity with where the market is compared to that, where actually the market is expecting cuts to start as early as Q2 in 2024 and that difference is very much derived from the ability or inability of limits to control inflation, which RBC believes actually is more persistent versus the rest of the market. From a geopolitical perspective, clearly it's been a challenging time over the last 18 months to two years in Europe and that is a risk to M&A activity, especially on the supply chain front and also on fuel costs. I think any incremental shocks will actually impact level of activity in M&A and you're seeing that sort of lag effect where we're seeing probably more green shoots of recovery in North America and that will permeate through into Europe over the course of 2024.
Larry Grafstein
I think it's fair to say that we've all been through cycles before and we all expect just given the severity of the Fed's reversal in terms of interest rate policy over the last couple of years, we all believe there will be pent up demand that will come out of the transition away from a rising interest rate environment or a rapidly rising interest rate environment to a more stable one. And I think we're already beginning to see, you mentioned green shoots and Mark, we're already beginning to see the first indications of sizable deals that may well have been a reflection of this phenomenon of pent up deals that were on hold during much of 2022 and the first part of 2023. And so I think that's, we all feel that those build on themselves that will lead to a healthier overall deal environment in 2024.
Vito Sperduto
I think as we look at ‘24 and really think about some level of certainty coming back into the market and we think about how that drives volumes, I think we're going to continue to see the corporates in my view lead the way. I do think we're going to see the sponsors get back to more traditional, but also I think going back to that level of confidence or sort of alignment in a corporate sense, it's between CEOs and boards at the sponsors as we'll talk about later. It's really between the frontline partners that are looking at transactions and managing companies and the investment committees. Mark, how are you thinking about market strength, especially in the first half of the year?
Mark Rushton
So I think from a corporate perspective, actually we expect corporate deals in Europe to be actually broadly in line with the pre covid levels that we saw over the last 18 months or so. Actually given the lack of sponsor activity, given the high cost and the volatility of the financing markets, corporates have taken market share and been much more prolific in the market versus sponsors and we expect that to continue into 2024 and that momentum to be maintained. I mean given the cost of capital environment as we've discussed, we see that PE sponsors are actually unwilling to participate in sale processes where there is actually a clear strategic angle for corporates to play. So that actually means that there is actually a lack of competition for certain assets where corporates do have that angle. Boards are very mindful of pursuing deals that those corporates with a strong balance sheet and actually high levels of cash are increasingly viewing the current environment as a real opportunity just given the sponsor activity has been lower and we are having extensive dialogue with corporates around a number of very active situations.
I mean just while we're on corporates, the other thing that we are seeing and it's a consequence of the markets as well, is just the role of activism 2023 was actually the busiest year for activism in the European market globally, approximately 50% of activist campaigns are actually relate to M&A and it's been actually a dialogue that we've been having with corporates throughout the last 12 months especially we advised Apollo on the acquisition of the restaurant growth in London and actually navigating the views and tactics of activist shareholders was a very important strategy and discussion point that we had with the client to get that deal over the line.
Benjamin Mandell
Yeah, if I think about corporate activity in Canada, there's a shift from being defensive and you can only do that for so long to starting to take action. A lot of our large corporates look for growth in a meaningful way outside of our borders. You had Enbridge doing a massive deal buying Dominion utilities, three gas utilities in the US which terrific transaction are pleased to be involved with that and I think really helps them pivot and pursue greater growth. And so I think that from a Canadian perspective, I expect we'll see that given the situation in Canada, most industries have a few major players, but you're starting to see if they really want to grow and move the needle then they're looking abroad to do that.
Vito Sperduto
We are certainly seeing CEOs much more prepared and ready to pursue their strategic objectives and it's become a situation where oftentimes you're helping them think about different alternatives. And I think what that's telling us is that there is going to be a premium to the folks that access the markets earlier and I think some of that's going to be that pent up demand we talked about both in terms of supply of potential assets for sale and folks that have the capital and the wherewithal to pursue transactions that haven't. If we think about it on the financing side, certainly funds have not put the amount of dollars to work that they'd like and as good transactions come up, the first ones that hit that market are going to get the advantage in terms of the available financing,
Benjamin Mandell
Here's an interesting point. We had a class of IPOs 2021 and a lot of this was in the tech space, but in Canada we had about 20 companies, tech companies that went public in that period. And so far, seven of those have been taken private and a lot of those at valuations below the IPO price. And so I think what that indicates is seller's expectations around value have started to shift and I think that that goes to your point of if you're prepared to be active and start to pursue growth and there's real opportunities for you as a buyer.
Larry Grafstein
We've seen a related phenomenon obviously in the US but there's also this phenomenon of certain sponsors who might have sold a little bit of their ownership as part of the IPO but still own a big chunk of the public company are thinking about bringing in a partner to share the ownership in a way that doesn't trigger the change of control on any debt that's been raised because obviously financing costs are higher than they were a couple of years ago. And I think that leads into a related point, which is the fact that debt will be more expensive to replace in the next few years is in a way a spur to consolidation among corporates because a combined balance sheet is often a healthier balance sheet and synergies can help offset a rising cost of debt in that particular where maybe corporates might be a little bit more active, but sponsors in addition to the type of IPO to LBO scenario you just outlined, sponsors also are available to provide capital to companies as they reconfigure themselves.
Vito Sperduto
We had John Kolz, our co-head of global ECM on the podcast recently, and John talked about the fact that if you think about the IPO market a couple of years ago, it was so active that you had a lot of companies that probably went public sooner than they should. And now with the slowdown you actually have companies waiting longer to go public. And so you've got some assets that have grown significantly in private equity portfolios and pre covid, the average private equity portfolio company was in that portfolio for about two and a half years. If you look across the whole portfolio of the main companies out there, if you look at it now, that number's gone up 3.3 years doesn't sound like a big difference, but on a percentage basis, think about that they're waiting longer, these companies are getting larger. Sometimes when they're larger there's less alternatives from an exit perspective because it's a very sizable asset that needs to be purchased. And so it's an interesting time to think about it that way, but I do think from our perspective on the M&A side, we're well positioned in terms of a number of these assets having to pursue alternatives to monetize, especially if we're seeing volatility in the IPO markets.
Benjamin Mandell
And there's been a real decline in the issuance. And so that's reduced one of the monetization options for private equity. And I think we're all optimistic that'll come back. And I'm curious, I mean we're starting to see this in Canada. Mark, I'm curious if you're seeing the same in the UK which is around this a lot more dialogue with private equity companies about starting to do some work and position portfolio companies for monetization in 2024. Now that doesn't mean it's launch in January, but a lot more conversations around preparing to evaluate a monetization in the first half.
Mark Rushton
Yeah, look, since the summer there's been a real pickup in terms of dialogue that we've been having on the sponsor side with respect to portfolio companies and their monetization plans. The key thing that we're trying to navigate, especially on the private equity side of things, is navigating the seller and buyer valuation gap. That goes a little bit to Larry's point actually, the structures that we're seeing isn't necessarily a full sale. There are minority sales so they can maintain the debt financing in place. And indeed the other thing that we've been advising clients on especially is how do you underwrite a valuation and still have the upside potential? So there's a lot of discussion around earnouts and bridging that valuation gap, and I think that will continue until confidence really starts to come back into the market.
Vito Sperduto
We all have a number of companies in the pipeline that are sponsor portfolio companies that we're assisting them in terms of doing some pre-meetings, evaluating potential options for them right now. And the reality is we're preparing to enter the market likely in the first quarter at latest, the second quarter of ‘24. I mentioned earlier that an expectation is that we get back to some traditional LBOs because right now what's happened is, I'll use it as an example. We just did a transaction for Bain and their portfolio company USLBM and we advised them on selling a 50% ownership stake to platinum equity and then Bain took the remaining 50% at that valuation and moved it to a more current fund. It was a way for them to monetize a portion, a way for them to continue an ownership and an asset that they like and that they know really well.
And again, we've always seen our sponsor clients especially build upon businesses that they're familiar with. Interestingly enough, we've also seen a number of our sponsor clients go back to companies that were portfolio companies in the past that they sold moved on from, took public and go back and consider those again. So Ben, when you were talking about some of the class of 21 IPOs being considered for take privates, oftentimes it's that sponsor that still has a significant ownership stake. It might be 30, 40, 50% plus because they haven't really been able to sell in follow on offerings and they're looking at it and maybe they haven't wanted to sell based on the performance. And they're like, well, is there an option for me now because I know this business that maybe I'll fund buying out the remainder of it and it's better done in a private context.
Larry Grafstein
And the secondary market for limited partner interests that sponsors have as well as the flexibility that limited partners are willing to accept from sponsors in this environment around things like special purpose vehicles, as we said, shuttling assets between funds, all of that is much more developed than it was a decade ago. But that said, deal activity is still driven by fundamentals, which includes, as we've been discussing economics confidence as well as political and regulatory environment. We've heard from not just our clients but also the lawyers for our clients, a lot about the antitrust environment. And I'm just curious, mark and Ben, what you're seeing in your individual regions around competition law and the attitude of the regulators?
Benjamin Mandell
In Canada. There's certainly been more scrutiny and I'd say a bigger bark around competition. There was the Roger Shaw deal that went through last year. There was a lot of scrutiny around that.
Mark Rushton
I think from the UK it's actually been a very interesting year in that there's been a lot of focus on the UK's competition and markets authority and its stance in a number of transactions. For example, there was a lot of news in 2023 around activism blizzard deal, which caused a number of changes. It ultimately went through really the government wants to be seen as pro-growth, pro investment and structurally open for business, acknowledging that the competition market does have a job to ensure competition is healthy. And where I think a lot of the issues come about are when different regulators across the world have different stances and that can be used by companies to drive tension.
Larry Grafstein
The DOJ and the FTC and presumably competition authorities around the globe are not only trying to challenge deals in order to win cases, they're trying to challenge deals to test new legal theories that could help them enforce the laws more aggressively and also probably more importantly as a deterrent to people who don't want to go through the same process that some of the very large companies are comfortable experiencing. But I think we all agree looking forward that 2024, we don't expect any significant change in the attitude of competition and antitrust authorities anywhere in the globe. We think they'll continue try to monitor transactions, filing requirements and not hesitate to challenge deals, which is a factor that boards and management teams have to consider because of the effect on an organization while you're in limbo and also the effect on your strategy.
Vito Sperduto
Maybe let's spend a moment to talk a little bit about the different sectors where we expect activity. There's always the traditional sectors, whether it's technology and healthcare, so Cisco buying Splunk or Pfizer, CGEN being two prominent examples in those sectors. If you look over the last 12 months, healthcare technology and oil and gas account for greater than 50% of the deal activity that we've seen on a dollar volume basis. And that makes sense, right? And so we expect that those sectors going to continue to be dominant in terms of the headlines, in terms of deal activity, especially given that some of the largest players in those spaces are the folks that are most well positioned to execute transactions. But certainly we can't avoid the prominence of energy and the natural resources sector and there's been a lot of activity there. And you look at some of the larger transactions, whether it's Chevron Hess or Exxon Pioneer that are each sitting at 60 billion plus depending on how you look at the enterprise value, you see the larger deals and then you're sitting back and going, okay, now when are we going to see the trickle down to the next size of players?
Because if you're sitting there and you're a $10 billion player, a 20 billion player, and you see this large transaction happen, you're going to want to scale up as well to be more competitive. And so again, something we're starting to see, and maybe Ben, the energy sector obviously is extremely prominent in Canada. We are the top player across Canada in that regard and to be honest in North America, so maybe give us a little insight as to what you're expecting in some of the sectors, but also with a focus on energy.
Benjamin Mandell
Yeah, thanks Vito. You can't talk about Canadian M&A without addressing the energy sector. The consolidation play continues to play out in Canada. You've had for a number of years foreign firms largely exiting positions and you've got a continuing influence of what I'll call evolving government regulation in the space, and you're seeing that in Canada and abroad, but that's going to continue to have an impact in terms of the types of bets that companies are willing to place. I think the difference this year versus last year is last year a big part of our discussion involved ESG and the influence that that was having on M&A, and certainly it's still very prominent, but you mentioned these, the two $60 billion plus deals in the US and all the deals in this space, and I think there's more space being given to the concept of energy extension as a part of the energy transition that's really shifted the landscape for investors. And I think that that's going to continue to have a bit of an impact in terms of where people are willing to put their money and how they invest.
Vito Sperduto
I like that terminology, energy extension because we have a lot of relationships with the significant primes in the space and those are going to be the parties that are leading the transition, that are leading the extension of what they're doing and they have the wherewithal in the capital based on their historic growth and cashflow to invest in the new technology. So that's a great way to think about it.
Benjamin Mandell
One area I want to come back to, this is a bit of a holdover from the pandemic when countries, governments were concerned about supply chain issues and governments and regulators stepped in to help control some of that and play a role in that. And I think we're still seeing a bit of a hangover from those actions. And I think there's also been sort of a trend towards deglobalization that came out of the pandemic and I think still exists where companies are still trying to protect themselves and countries are still trying to protect themselves. I think we're still seeing that influence played out with the infrastructure space where Brookfield has just raised a record size 28 billion fund. Typically you think about infrastructure investments being around coal roads, pipelines, airports, but we've started seeing a lot more investment from Brookfield as well as from other large infrastructure buyers doing deals in fiber networks and cell towers, which I think again leverages on that trend that the world seems to be a larger place than it did before Covid.
Mark Rushton
From a European perspective. What's interesting over here, if we just take the size of transactions, there's definitely been a risk-off sentiment when it comes to the large transformational deals, the inbound M&A deals in 2023, there were around 10. On a typical year, you'd expect somewhere between 20 to 30 deals valued at 5 billion or greater. I think from a sector perspective, infrastructure transactions will continue to be very topical. I mean, I think we have a very strong infrastructure franchise in Europe and we're very active speaking to both the corporate and the infrastructure funds and especially the key sentiment from those sector participants as being the ESG angle and especially renewable wind and energy transition elements too. Going more broadly, we expect that industrials, healthcare and consumer transactions will also pick up. What's quite interesting is actually over the last quarter of 2023, around half of the UK take private situations related to consumer companies.
Now, this is a sector that's clearly been hit by the macroeconomic headwinds that we've experienced with inflation, cost of living, depressed consumer spending, and they've really been hit over the last 18 months or so. The overarching theme, especially in those consumer situations has actually been the public markets have not fully seen through the headwinds, whereas the buyers and whether they're being strategic or actually on the sponsor side are able to see through that and takeover premium, which is actually attractive to those public market shareholders. So we see that actually continuing into 2024, not only in consumer, but actually probably more broadly across the space.
Vito Sperduto
One thing I would highlight is as we look at what's happened in ‘23, and maybe it'll give us some clue as to what we're going to see in ‘24 mark, you talked about the significant activity from a public to private perspective that we saw. The reality is the performance of ‘23 has been heavily driven by the drought. On the private equity side, if you look at activity, corporate activity in ‘23 is actually going to end up being up 15 to 20% on the year. From a dollar volume perspective, it's the private equity activity, the sponsor related transactions that are off almost 40% year over year from 22 to 23. And so again, just all these statistics highlight that pent up demand. They haven't been able to sell portfolio companies that haven't been able to put dollars to work at the pace that they would like, and you would think that those would be leaders as we go forward. In closing up, and as we think about that, we've talked about the sectors that we see as being the most active going into ‘24, do you see any difference between the corporate world and the private equity world in terms of the sectors that they're focused on? Are you seeing a lot of the same in terms of just the continued themes, but maybe let's close out on a little bit of that. So Mark, do you want to start off in terms of what you're seeing in Europe?
Mark Rushton
We'll continue to see private equity taking more and more of call it the market share. So although I think as I mentioned earlier that corporates will continue to be very active in the market because they see the opportunity and they have the strong balance sheets and the cash to spend private equity will be more willing to participate given the dry powder that they have and the less volatility that we're seeing in the financing markets, and it's an easier conversation for them to get comfortable around sectors that they've done a lot of work on or have a lot of history in and where those opportunities present themselves, they're more likely and willing to place their investments.
Vito Sperduto
Ben, how about Canada? What do you say?
Benjamin Mandell
I talked a little bit earlier about we're spending more time with, I'd say I'd call it the mid-market private equity funds on really looking at portfolio companies and thinking about monetizations for the upcoming year. So I think that's a positive signal, expect that to continue. In Canada, we're so heavily influenced by the pension plans, which over a period of time will account for about a third of Canadian outbound M&A. Brookfield will account for about another third of that. So you can't ignore the impact of these large players have, and I think on the pension plan side, it feels that they're being more selective and you could probably say that about every investor right now, they will continue to be more selective in the industries that they choose to focus on certainly in the next couple of quarters. We heard Larry talk earlier about the increase in secondaries. We probably haven't seen so much conversation around continuation funds. I certainly haven't seen it in my career ever to the extent that we've seen in the last 18 months, but I think that as equity markets stabilize and the funding environment stabilize that, it just creates a greater environment for private equity to be able to monetize overall.
Vito Sperduto
Yeah, I think building on that, Ben, one of the things we've seen is that I think it's safe to say at this point, given we're so close to the end of 23, 20 23 will be the first year where the average equity contribution in private equity transactions is going to be above 50%. That is on a lower deal volume, but in a recent conversation with the head of one of our larger clients at a named brand private equity firm, they talked a fair bit about, yes, we have record levels of dry powder, but keep in mind that there's a maturity coming up on a bunch of that dry powder, and if I want to keep growing my dry powder, yes, I have to be returning capital to my LPs so that they have capital to put back into my next fund. And so I think they're seeing that pressure plus the fact that there is that pent up demand, and they specifically talked about mid-market size companies and for them mid-market size companies can be on the order of 500 million to 5 billion. That's a pretty substantial swath, and so they're seeing a lot of opportunity and they expect that 24 is going to be incredibly active and it's going to be active across the same sectors they've been active in. Historically,
Mark Rushton
Capital raising obviously has been challenging in the private equity world, and that's just caused sponsors to be very focused on making sure that they're focusing in the right transactions and doing the right deal because that in turn will help the story and return capital to their investors, and therefore the ability for them to raise capital will be a lot easier in the future if they get the right deal done.
Vito Sperduto
Great. Guys, maybe as we close out, it sounds like we all think there's a constructive environment going forward, and I think maybe I'd ask for some final thoughts, so maybe just going around the horn, Ben, any final thoughts?
Benjamin Mandell
In Canada, a lot of the M&A activities driven by confidence, so that's going to continue to be an important factor. Hopefully we see that that picks up the broader environment is constructive, and I expect we'll get more constructive as we move through the next few quarters. And so again, not sure it'll be a straight line and it'll continue to be a bit bumpy, which is just the nature of M&A, but really optimistic about what 2024 looks like.
Mark Rushton
I totally agree. I think the headwinds that we saw in 2023 have started to recede, I think 2024 that some challenges will persist, but I think the outlook is a lot rosier and the dialogue that we are having with clients, both strategic and sponsors stand in good stead for a very active market and definitely a pickup versus where we have been over the last 12 months.
Larry Grafstein
From my perspective, Vito, I think one of the themes as we talk about year end capital markets outlook for next year is still a bit of a note of caution. There are a lot of exogenous events that we experienced in the last year or two that could affect the deal environment, but there are always risks and there are always risks that are known and unknown, and the definite direction is positive, and I think prudent deal makers will have a very strong array of opportunities in 2024.
Vito Sperduto
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