It is no secret that the Canadian dollar has been singing the
blues of late. With the loonie declining more than 30% in the
exchange rate against the United States (US)
dollar, shopping trips and vacations to our friendly neighbour to
the south are likely to become less frequent over the next little
while. The Canadian M&A market, however, may stand to benefit
from the lopsided exchange rate and it has left investors wondering
whether Canadian targets can expect a line-up of interested foreign
A recent Financial Post article by John Shmuel,
"Low loonie luring foreign buyers, but an M&A boom in
Canada may prove elusive" (the Article),
explores whether the down-and-out Canadian dollar may make for some
healthy M&A activity in the first half of this year. The
Article indicates that there certainly has been an increase in
interest from foreign buyers, in particular from American strategic
and mid-tier private equity firms. The object of their affections
are reported as being primarily outside the resource space, with
recent sizable deals announced in the home-improvement retail
sector and the waste management sector.
The exchange rate isn't the only enticing factor for foreign
buyers: the Article points out that the Canadian stock market fell
into bear territory last month and equity valuations are hovering
near multi-year lows for many Canadian firms. The Article also
indicates that it's not only foreign buyers interested in
capitalizing on the low dollar but that, according to a recent
survey done by Ernst & Young, more Canadian firms are looking
to sell non-core assets over the next two years than other
companies around the world.
With interest evident on both sides, the question remains
whether it will actually translate into deal activity here at home.
The Article indicates that an offer for many of the attractive
Canadian targets, with voting shares and being owner operated,
would have to be sugary sweet for them to consider a buy-out.
Additionally, there isn't much interest humming around
Canada's struggling energy and mining sectors. The Article
indicates that if deal activity doesn't increase in those
sectors, foreign private equity firms will likely only be sniffing
around for assets of bankrupt companies.
The Canadian government may also play a role in stemming the
flow of foreign acquisitions here as, according to the Article,
many of the big named Canadian companies attractive to investors
may be considered to be strategic assets for the government and not
on the market. Further complicating the M&A landscape is that
some economists expect that the Canadian dollar's weakness is
here to stay, meaning repatriated earnings from Canadian operations
will be worth less for foreign buyers. With the convergence of
these various factors, the M&A boom one might expect with a US
dollar heavy-exchange rate may not materialize here in Canada just
Norton Rose Fulbright Canada LLP
Norton Rose Fulbright is a global legal practice. We provide
the world's pre-eminent corporations and financial institutions
with a full business law service. We have more than 3800 lawyers
based in over 50 cities across Europe, the United States, Canada,
Latin America, Asia, Australia, Africa, the Middle East and Central
Recognized for our industry focus, we are strong across all
the key industry sectors: financial institutions; energy;
infrastructure, mining and commodities; transport; technology and
innovation; and life sciences and healthcare.
Wherever we are, we operate in accordance with our global
business principles of quality, unity and integrity. We aim to
provide the highest possible standard of legal service in each of
our offices and to maintain that level of quality at every point of
Norton Rose Fulbright LLP, Norton Rose Fulbright Australia,
Norton Rose Fulbright Canada LLP, Norton Rose Fulbright South
Africa (incorporated as Deneys Reitz Inc) and Fulbright &
Jaworski LLP, each of which is a separate legal entity, are members
('the Norton Rose Fulbright members') of Norton Rose
Fulbright Verein, a Swiss Verein. Norton Rose Fulbright Verein
helps coordinate the activities of the Norton Rose Fulbright
members but does not itself provide legal services to
The content of this article is intended to provide a
general guide to the subject matter. Specialist advice should be
sought about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).