Retail, real estate, utilities and pension fund activity were not enough to fill the gap left by a dearth of deals in Canada’s oil patch and mining companies. Even life sciences chipped in with large deals in the fourth quarter, but it wasn’t enough to prevent 2013 being the slowest year since 2009, according to new report form PwC Canada. Overall in 2013, 2,500 deals worth $162 billion were announced.

Nicolas Marcoux, Canadian deals leader, PwC says, “We started 2013 with optimism since equity and debt were both available and the economic backdrop was improving.”

At the risk of appearing over-optimistic again, Marcoux indicates that 2014 appears to have the key M&A ingredients that were lacking in 2013 — higher valuations in the public markets and strong positive market sentiment.

“The S&P 500 advanced by nearly 30% in 2013 and the markets actually continued to gain after the Fed openly put parameters around the tapering out of quantitative easing, something that would have sent the market plummeting 12 months ago. This sentiment should help investors bridge the valuation gap with sellers as they start to feel more confident about the future,” says Marcoux.

In the fourth quarter, the 716 deals with an aggregate value 26% below Q4 2012 was not a great finish, but the $44 billion total was not out of line with post-crisis performance. The sector breakdown for the quarter showed utilities and energy accompanying real estate at the top of the value table, with a surprise appearance from the life sciences sector with two deals over $1 billion.

“The U.S. biotech industry has been very healthy — putting American companies in a position to pursue Canadian targets,” says Nitin Kaushal, managing director, corporate finance, PwC. “There’s a scarcity of good, revenue-producing companies in this sector, and the leading Canadian companies are attractive targets. Expect to see a surge of financing in the life sciences sector this year as investors cycle cash back into earlier-stage ventures.”

Marcoux concludes, “With the U.S. economic recovery and public company valuations far ahead of where they were a year ago, we expect the biggest push toward increased M&As in 2014 will come from sellers finally getting what they regard as a reasonable price from more confident buyers.”