Going for growth | KPMG | CA
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Going for growth

Going for growth

Canadian CEOs are confident about future growth and they are pulling multiple levers to achieve it.

Confidence is up in Canadian boardrooms. In fact, Canadian CEOs almost unanimously believe they can grow their business over the next three years. Ninety-four percent say, going forward, growth should be easier to achieve.

Level of confidence for growth

This level of confidence is not surprising. Most expect the Canadian economy to enjoy stable growth, fueled by immigration, rising disposable incomes and intergenerational wealth transfers. Canada's active participation in global trade agreements, combined with our proximity to the US, should create exciting opportunities for Canadian companies.

For the most part, Canadian Organizations enjoyed strong earnings and profits over the past few years. Most are now sitting on significant capital and are looking for opportunities to put their money to work catalyzing growth.

Some will clearly be investing in organic growth, attempting to drive new and sustainable growth through innovation, research and development (R&D), capital investment and increased headcount. The shift to automation, cloud services and the adoption of more sophisticated analytics (topics covered in other chapters of this report) will also help grow the bottom line.

However, most CEOs say they are looking outside of the organization for new opportunities. Indeed, 60 percent of our respondents say their growth will be driven by some form of inorganic growth – mergers and acquisitions (M&A), strategic partnerships or joint ventures (JV).

Clearly, activity in the M&A market is about to rise significantly. Eighty-two percent of Canadian CEOs say they will certainly conduct an acquisition over the next three years. More than a third of those expect the acquisition to have a 'significant impact' on their overall organization, suggesting some deals will be sizable.

They will also be transformative. Canadian CEOs said their primary motivation for conducting acquisitions is a desire to speed up the pace of business model transformation. They are also hoping to diversify the business and speed the adoption of new technologies. If successful, this should drive a new wave of growth as businesses start to uncover and then exploit new and unexpected opportunities.

The fact that Canadian CEOs are bullish about growth and looking outward for investment opportunities is promising. What will be interesting is how international investors respond. Canadian CEOs aren't the only ones that think Canada offers strong opportunities for growth. There are many strategic and financial investors seeking a foothold in Canada. Simply put, if you've been running your company well, you should expect someone else may want a piece of the action.

In order to remain competitive, Canadian CEOs should invest into organic growth and internal transformation; consider out partnerships and JVs; rethink their operating models and use of outsourced providers; and seek out M&A opportunities that help them transform their enterprise. They should also remember to keep looking over their shoulder. The next disruptor could come from anywhere.

*All statistics result from the 2018 Canadian CEO Survey.