MONTREAL — Over the last two years, Lightspeed, the Montreal point-of-sale software company founded in 2005 by noted Vancouver transplant Dax Dasilva, has spent US$1.89 billion buying American companies. Three Metro stops to the west, electronic payment-processing company Nuvei has spent more than US$371 million acquiring stateside companies during the same period, while over the bridge, in the suburb of Longueuil, MDF Commerce has put its mitts on about US$265 million in Yankee booty since the cold days of January 2020.

These deals underscore a burgeoning trend: American tech is for sale, and Canada is buying. Year-over-year mergers and acquisitions activity in the country is up 269 per cent, with deals worth US$101 billion, according to Refinitiv Deals Intelligence.

This runs counter to an abiding Canada tech cliché: that America gobbles up our companies once they reach a certain size. The torrent of M&A is being fed by a mix of cheap money and nervous U.S. tech-firm owners, as well as another cliché-destroying reality. Unlike a decade or even five years ago, there is a host of Canadian companies with the means to buy what the Americans are selling.

First, about that supply. This spring, as part of his plan to pay for his then-US$2-trillion infrastructure bill, President Joe Biden proposed increasing the U.S. capital-gains tax to 39.6 per cent for individuals earning US$1 million or more—a near-doubling of the 20 per cent base rate set during the Obama years. Biden has also proposed limiting the qualified small business stock (QSBS) tax exemption, which, under the previous Trump administration, allowed individuals to exclude 100 per cent of the sale of QSBS stock from their gross income once it is held for five years.

Matthew Barbieri, a partner in New Jersey-based accounting firm Wiss & Company, told me that this tidy bit of legalese effectively allows some of his clients to shield their first US$10 million tranche of income from Uncle Sam. “To use a technical term, I’ve had a shitload of clients take advantage of QSBS over the years,” Barbieri told me in his delightful Jersey twang. “It is purely benefiting the U.S. tech community.”

The threat of a clawback, coupled with the spectre of higher capital-gains taxes and the likely imposition of an alternative minimum tax, has turned many U.S. founders into suddenly motivated sellers. “It’s on fire,” Barbieri said of the flurry of M&A activity. “For the first time in my career, we are turning away work. We have national big firms unable to process deals. We have valuation firms fully booked. There’s a lot of money sitting on the street that’s got to be put to use.”

Those sellers are finding a ready market on this side of the border. “We have multiple opportunities. For every one we say ‘yes’ to, we say ‘no’ to three,” Adrian Schauer, CEO of Montreal-based medtech AlayaCare, told me. (AlayaCare acquired New York-based Arrow Solutions in February 2020, and Schauer told me the company is closing another U.S. acquisition in the next month.)

This proliferation of For Sale signs in the U.S. comes at a fortuitous time for Canadian tech. I’ve spoken to myriad tech owners in Quebec and beyond, and their concerns often mirror those of the academic community. Canadians, modest to a fault, tend to be easily flattered and in awe of U.S. attention. Over the years, that’s meant many early-stage selloffs to deeper-pocketed U.S. firms—and an exodus of Canuck brains to Silicon Valley.

That brain drain isn’t over by any means. If anything, the pandemic has shown U.S. companies how easy it is to poach Canadian talent when it’s sitting in a basement on Zoom. But today, Canadian tech firms are far better placed than ever before to stay put rather than sell out—and to launch their own shopping sprees.

Last week, The Globe and Mail cited Refinitiv data showing that 427 Canadian companies had raised a total $10.92 billion in venture funding so far in 2021, surpassing the inflation-adjusted full-year record set in 2000, at the height of the dot-com bubble. The average size of a funding round has nearly doubled this year compared to 2019, and Canadian companies have closed 34 fundraising rounds of more than $100 million each, compared to just 12 in all of 2019. Combined with record–setting IPOs, the result is an unprecedented number of Canadian companies with bulging war chests.

“Ten years ago, we didn’t have as many companies that had the wherewithal to do acquisitions. Now we do,” Chad Bayne, a partner at Osler, told me. “I think that’s just a testament to the evolution of the ecosystem in Canada over the last number of years. You’re actually seeing companies achieve scale where they can be the acquirer rather than being acquired.” Case in point: that Lightspeed got big despite its almost stubborn insistence on remaining in Montreal “proves that you can grow, go public and acquire companies,” as its president JP Chauvet told me last week.

Those U.S. companies aren’t exactly selling for bon marché prices, however. On the whole, both big and small tech companies have seen their valuations flourish during the pandemic, and it seems those looming tax-code changes haven’t dampened sale prices. Barbieri twice described the tech firms’ valuations as “crazy,” and said there are plenty of people lining up to buy. “Unfortunately, there are many willing buyers,” Schauer said.

As for Lightspeed, a prominent New York-based short seller recently alleged that far from being a sign of its brawn, the company’s recent acquisitions were actually an attempt to fudge its faltering bottom line. In a rather scathing 125-page report, Spruce Point said Lightspeed has a tendency to “wildly overpay” for acquisitions that “have been plagued by growth issues, were expensive to acquire, and we believe used as means to paper over [Lightspeed’s] organic-growth challenges.” (In a statement, the company said the Spruce Point report “contains numerous important inaccuracies and mischaracterizations which Lightspeed believes are misleading and clearly intended to benefit Spruce Point.” Chauvet declined to provide further comment on the matter.)

A couple of things could stop the Canuckian acquisition binge. It is predicated in large part on low interest rates, which many see as an endangered species these days thanks to rising inflation. The Biden administration could do as it did with its infrastructure bill and water down its tax-the-rich plans to appease jittery House Democrats.

For now, though, expect it to continue. Like the Americans, we finally have the means to overpay for assets in a seller’s market.