Tariffs, Tech And Turnarounds: Canada-US Cross‑border M&A In 2025

If 2024 was a year of hesitation for Canada-US dealmaking, 2025 was a year of recalibration. Cross-border M&A did not return to pre-pandemic exuberance, but it regained momentum through disciplined execution, creative structuring and a renewed focus on certainty. 2025 marked a transition year – one in which dealmaking adapted to a more complex operating environment defined by tariff risk, geopolitical turmoil, regulatory scrutiny and accelerating technological change. Deal value rebounded meaningfully even as transaction volumes remained selective, reflecting a market that rewarded preparedness, conviction and execution discipline over opportunistic expansion.

Throughout 2025, Dentons' Canada-US cross-border M&A insight series examined how deal teams navigated these dynamics in real time. Taken together, these insights tell a coherent story: cross-border M&A did not stall in the face of uncertainty, but it did evolve. Parties did not wait for perfect conditions, but instead redesigned valuation mechanics, rewrote term sheets, recalibrated diligence, leaned into flexible capital and technology-enabled execution and reassessed risks in ways that fundamentally reshaped how Canada-US transactions were planned and executed.

This year-in-review synthesizes those developments, offering a consolidated view of how the Canada-US cross-border market behaved in 2025 and what those patterns suggest for dealmaking in 2026.

Canadian market snapshot

Canada entered 2025 facing an unusually challenging backdrop. Tariff uncertainty in the Canada-US trade relationship intersected with elevated inflation, political noise and the lowest overall deal count in nearly two decades. Early-year sentiment was cautious, particularly for transactions exposed to cross-border supply chains or touching upon politically sensitive sectors.

By mid-year, however, a clearer pattern emerged. Canadian M&A value rebounded sharply, reaching approximately CA$113.7 billion in the first half of 2025, a nearly 70% year-over-year increase, while deal volume remained mostly flat. The implication was clear: capital was available, but it was being deployed selectively into larger, more strategic transactions.

Sector activity reflected this selectivity. Energy and infrastructure transactions led by value, driven by continued interest in both traditional assets and transition-aligned investments offering stable, long-term returns. Technology led by volume, particularly in mid-market SaaS, digital infrastructure and data-driven businesses, where buyers perceived clearer paths to scalable growth and operational efficiency.

Cross-border transactions were a critical driver of Canada's rebound. Nearly half of Canadian deal activity in H1 2025 involved a cross-border component. Inbound US investment softened in the first quarter as buyers assessed tariff exposure and political risk, but confidence largely returned by the second quarter, particularly for assets with long-duration profiles, resilient demand and an ability to maintain margins through pricing, even in the face of cost and tariff pressures. At the same time, outbound Canadian activity increased, as Canadian funds and strategics pursued acquisitions in the US to achieve valuation alignment, diversify geographic exposure and, in some cases, proactively reposition operations behind an evolving tariff wall.

By the second half of 2025, macro conditions had stabilized further – interest rates moderated, financing conditions normalized and buyer-seller valuation gaps narrowed. While uncertainty did not disappear, it became more manageable – setting the stage for more decisive execution.

US market snapshot

The United States mirrors Canada's 2025 recalibration: value concentrates in higher-conviction transactions as financing stabilizes and valuation gaps narrow, rewarding bidders who combine committed capital with policy-aware execution. Current sentiment and activity point to disciplined growth: in a recent survey of 100 M&A professionals with experience in US, non-US and cross-border deals, approximately 47% report higher deal volume than a year ago, around 74% expect rising volume over the next year and roughly 82% anticipate at least one closing in the next six months-supporting a steady near-term cadence of completions.¹

Deal value in 2025 reached about US$1.6 trillion through November 30, up roughly 45% year over year, while megadeals grew with more than one-fifth linked to AI themes. These are all data points that evidence selectivity at the top end and the centrality of technology strategy.²

Financing conditions look more predictable than last year, with about 27% expecting readily available credit and a similar share expecting stable availability versus 2025, aiding underwriting and time-to-close. Private equity remains the most consistent buyer across software, healthcare, energy and services, backed by private credit and flexible structures, while strategics prioritize resiliency, focusing on supply chains, talent and IP centric growth-over scale alone.³

Policy and regulatory variables sit at the center of term sheets, with interest rates and trade conditions among the top reported macro influences on US dealmaking. Sustained cross-border activity will require more normalized financing, including interest-rate stability, consistent valuation expectations and strategies focused on supply-chain resilience, regulatory frameworks, tariff management and IP-centric growth.⁴

Market practice in the United States also continues to favor asset deals (or stock‑for‑asset tax elections) to secure a basis step‑up, broader and longer‑lasting representations and higher indemnity caps in private deals (particularly where RWI is not used) and routine deployment of poison pills in public M&A – features that, together with predictable HSR thresholds, targeted CFIUS review in sensitive sectors and stricter SEC disclosure norms, shape underwriting and execution timetables for cross‑border bidders.⁵

Who's investing: Capital sources and motivating factors

While cross-border activity rebounded in 2025, the motivations behind that activity differed meaningfully between financial sponsors and strategic acquirors, with each group approaching the Canada-US corridor through a distinct lens.

Private equity sponsors, particularly US-based funds, remained the most consistent inbound investors across sectors, deploying capital into both platform acquisitions and add-ons in software, healthcare, energy and services. Canadian private equity firms were similarly active outbound, with a particular focus on US-based businesses in energy, mining and utilities, as well as acquisitions aimed at strengthening supply chain resilience. Across both markets, sponsors were disciplined in deployment, prioritizing assets that could support operational optimization, add-on growth and defensible exit pathways rather than headline expansion.

Strategic buyers also returned to cross-border M&A in greater numbers in 2025, driven less by scale and more by targeted imperatives. Supply chain resilience, access to specialized talent and IP-focused growth featured prominently in acquisition rationales. For many strategics, cross-border deals functioned as tools to de-risk operations, secure supply and reposition business lines in response to trade friction and geopolitical uncertainty.

This divergence in motivation shaped deal processes and outcomes. Sponsors tended to emphasize financing certainty, flexible capital structures and repeatable execution. Strategics, by contrast, focused on long-term integration, operational fit and regulatory durability.

Policy rewriting term sheets: Tariffs, trade and supply chain impacts

One of the defining characteristics of 2025 cross-border M&A was the extent to which trade policy moved from the background into the heart of the deal itself. Tariffs were no longer treated as an abstract macro risk and they became a core structuring variable and the motivation behind many transactions. While growth opportunities remained important, a significant share of deal activity was driven by defensive and resilience oriented objectives rather than expansion for its own sake.

Trade policy uncertainty, evolving tariff regimes and persistent supply chain fragility prompted buyers to reassess where and how they operated. For many Canadian investors, acquiring US assets offered a way to mitigate tariff exposure, secure downstream access to customers and supply and insulate operations from future policy shifts. In this sense, outbound M&A was often less about geographic expansion and more about structural risk management.

Parties re-engineered core elements of the deal to hedge policy risk and protect enterprise value where supply chains cross the border:

• Valuation structures evolved. Parties added earnouts, holdbacks and purchase price adjustments, with these mechanisms often being calibrated to metrics directly tied to tariff exposure, such as EBITDA margins, customer retention or supply costs, particularly where supply chains crossed multiple jurisdictions or relied on tariff-sensitive goods.
• Due diligence expanded in scope and depth. Traditional financial and legal due diligence was supplemented with:
  • detailed supply-chain mapping and country-of-origin analysis;
  • review of customer and vendor contract tariff pass-through mechanisms;
  • transfer pricing resilience assessments; and
  • scenario modelling under alternative tariff regimes.