M&A Watch: 3 Canadian Companies That Should Be on American Firms’ Buy Lists

On July 11, private equity firm Platinum Equity Advisors announced that it would acquire Héroux-Devtek (OTCMKTS:HERXF), a Quebec-based aerospace firm. The $1.35 billion deal is one of the many Canadian acquisition targets that are or should be on American firms’ buy lists. 

Why are American firms attracted to Canadian businesses? The reasons include close geometric proximity to the U.S. and similar business practices and regulatory approval protocols. 

While the Héroux-Devtek acquisition is a private-equity sponsored transaction, I can think of plenty of strategic targets for American firms to feast their eyes on. Two industries that come to mind are cannabis and clean energy. 

With that in mind, I’ll recommend three Canadian acquisition targets, all of whom trade on a U.S. stock exchange. To ensure these businesses are large enough, I’ll restrict my search to those with market capitalizations of $1 billion or more. 

According to S&P Global Market Intelligence, 85 such firms exist. Let’s examine the three that should be most attractive to strategic buyers.

Thomson Reuters (TRI)

Thomson Reuters (NYSE:TRI) is 69% owned by Woodbridge Company, a holding company for the Thomson family of Canada. Any deal would have to get the green light from Chairman David Thomson and his brother Peter, who sits on Thomson Reuters board, and is Chairman of Woodbridge.

The company provides information, technology and expertise to industry professionals in tax and accounting, news and media, and legal. It has five reporting segments. Among them are Legal Professionals (41% of 2023 revenue if $6.8 billion), Corporates (24%), Tax & Accounting Professionals (16%), Reuters News (12%) and Global Print (7%). 

Currently, Thomson Reuters has an enterprise value of $76.49 billion, 25x EBITDA. For anyone looking to buy the company, they would likely have to pay close to $100 billion or more. 

S&P Global (NYSE:SPGI) has a market cap about double Thomson Reuters. So it might be able to pull off the acquisition. Whether it would want to is another thing entirely. 

TFI International (TFII)

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TFI International (NYSE:TFII) has an enterprise value of $20.73 billion, 12.75x the transportation and logistics company’s EBITDA.

The company’s history dates back to 1957. But it was only in 1996 when a new management team led by Alain Bédard took over. Then the business really began thriving by focusing on increasing revenues and profits. Also, it strengthened its position in the North American transportation market and created a more balanced revenue mix. 

While organic growth has been generated, TFII is known for making plenty of acquisitions, both big and small. Since 1996, Bédard and his management team have made over 90 acquisitions. Many of them are in the U.S., where it generates two-thirds of its revenue. 

In 2023, it made 11 acquisitions, none of them significant to top-line revenue. However, in 2024, it’s already made one big move, acquiring Daseke, a flatbed and specialized transportation company, for $1.1 billion. 

I think TFI would be an excellent acquisition for Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B). The latter could merge it with McLane Company, the foodservice distribution business it owns.     

Docebo (DCBO)

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Docebo (NASDAQ:DCBO) has an enterprise value of $1.09 billion, making it the smallest of three Canadian companies. The company’s AI-powered learning management system (LMS) is used by over 3,800 corporate customers. In 2023, DCBO generated over $200 million in annual recurring revenue (ARR), growing its ARR by 24%.  

Founded in 2005, its customer base includes well-known brands such Thomson Reuters, Lululemon Athletica (NASDAQ:LULU) and Netflix (NASDAQ:NFLX). The average contract value has grown from $12,000 in 2017 to $52,000 in 2024.

Docebo follows the “Rule of 40” which is defined as year-over-year (YOY) revenue growth plus EBITDA margin is 40 or greater. In 2023, it had revenue of $180.8 million, 27% higher than 2022. Meanwhile, its EBITDA margin was 9.0%, for a total of 36, just shy of 40. In Q1 of fiscal year 2024, these two numbers came to 38.5, 150 basis points from becoming a Rule of 40 company.    

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.