Canada: Cross-Border Private M&A In Canada: 10 Tips For Foreign Acquirers

Canadian private M&A slowed somewhat in 2015 and early 2016, owing to the depressed market for commodities, but deal flow is roaring back in the latter half of 2016. While Canadian M&A takes many cues from the United States and Europe, it is unique in many ways. A successful foreign acquirer advised by Canadian legal counsel will be armed with knowledge about these differences.

1. The Canadian Market Has Matured

Gone are the days of foreign private equity firms finding founder-operated businesses to acquire in Canada at a low multiple. The majority of sellers and buyers in reported private M&A transactions in Canada are strategic corporations or financial players rather than founders. Canadian M&A deals are increasingly done with the assistance of representation and warranty insurance. On the vendor side of multinational auction transactions, Canadian law firms have started providing vendor due diligence reports to bidders on a non-reliance basis.

2. What is Market?

Typical material deal terms in Canada are not just carbon copies of the U.S. or European practice. For example, as compared to the U.S., buyers of Canadian companies have been able to insist on higher caps to indemnification exposure in Canada. Survival periods tend to be longer in Canada. Anti-sandbagging provisions are often handled differently in Canadian transactions. Legal opinions have become much less common in private deals other than in the financial services and venture capital sectors.

3. Canadian Foreign Investment Review

Canada regulates all foreign investments under the Investment Canada Act. Transactions over a certain dollar-value threshold or in sensitive industries (e.g., cultural) are subject to review by the federal government, in which case a pre-closing waiting period will apply. All other foreign acquisitions of Canadian businesses are subject to post-closing notification. Reviewable investments made by state-owned enterprises (SOEs) are subject to other additional considerations.

4. Anti-Trust Regime and a Uniquely Canadian Defence

The anti-trust and competition regime established under the Competition Act (Canada) requires pre-notification merger filings when transaction and party-size thresholds are exceeded. Pre-closing waiting periods may apply. All acquisitions, whether pre-notifiable or not, are subject to possible competition review for one year following closing. The buyer can obtain an advance ruling certificate or no-action letter to foreclose the risk associated with a review. Canada now has a unique efficiencies defence to an otherwise anti-competitive merger.

5. Forget Everything You Know About Employment

Unlike the U.S., there is no "at-will" employment in Canada. Absent valid contractual provisions limiting the employee's severance entitlements, employees are entitled to "reasonable notice" of termination or payment in lieu of such notice. This means that, on an asset transaction, employment of non-unionized employees does not transfer automatically; employees must be offered employment by the acquiror. Severance entitlements for employees tend to be much higher in Canada than in other jurisdictions. The defined-benefit and defined-contribution pension plans that are used by many Canadian employers to supplement the federal Canada Pension Plan are subject to a web of federal and provincial legislation. Relevant to the acquisition of a Canadian business, these rules govern such things as recognition of an employee's past service and transfers of plan assets.

6. Regulated Commerce

Regulatory regimes in Canada are often more robust than in other jurisdictions. For example, federal and provincial restrictions on the collection, use and disclosure of personal information in Canada must be observed during and after transactions. Canadian privacy legislation requires knowledgeable consent to, and not merely notice of, intended purposes. Canada has enacted its own comprehensive corruption legislation that prohibits bribery of foreign public officials, among other things, by criminal sanction with no limitation period.

7. Canadian Intellectual Property Protection

Unlike other jurisdictions, Canada follows a "first-to-file" system for patents. Canadian trade-mark law elevates the importance of licences, requiring licences even for wholly owned subsidiaries. Canada has not adopted the International Patent Classification system, providing distinct cost advantages for applicants. Also, registrants can renew trade-marks without requirement of proof of use. The copyright "bundle" of rights is different than in the U.S., with no right to prepare "derivative works." A "work made for hire" is limited to the employment context and transfers of ownership must otherwise be in writing. Moral rights are protected more extensively and apply to all types of works. IP licences that are silent as to assignability or sublicenseability are generally not assignable or sublicenseable without the licensor's consent.

8. Death and Taxes

Normally, foreign buyers of Canadian shares will want to incorporate a Canadian acquisition company, which allows for the pushdown of any acquisition financing and the Canadian tax-efficient repatriation of funds up to the purchase price from Canada without Canadian withholding tax. Canada does not have entities similar to American LLCs to use as acquisition vehicles. Canadian unlimited liability companies afford the opportunity for flow-through tax treatment, but must be used with caution given the anti-hybrid rules in the Canada-U.S. tax treaty. Transactions in Canada involving the sale of "taxable Canadian property" (generally, Canadian real property interests) can require clearance from the Canada Revenue Agency or a partial holdback of the purchase price. Canadian thin capitalization rules require that debt owing to related non-resident parties not exceed 1.5 times equity. In asset deals, it is also important to consider sales taxes and whether exemptions are available.

9. To Sue or Not to Sue

While litigation costs in Canada tend to be lower than in the U.S. due to streamlined rules of civil procedure, frivolous litigation is not common in Canada. This may in part be a result of Canada's loser pay system. The successful party in Canadian litigation is generally awarded at least part of their costs and damage awards tend to be lower than in the U.S. Also, punitive damages are extremely rare. Jury trials are extremely rare in Canadian civil matters, except for certain limited types of litigation, for example, libel or personal injury. In Ontario, commercial disputes are heard at a special division of the courts by judges with specialized commercial knowledge. Judges are appointed, not elected. While Canada allows contingency fees, the practice is not widespread and, generally speaking, the contingency payments are not as large as in the U.S. Most provinces require pre-trial mediation, which tends to encourage pre-trial settlement.

10. Quebec is Distinct

The province of Quebec, unlike all other Canadian jurisdictions, is governed by a civil law system derived from the Napoleonic Code. Its laws can differ dramatically from the rest of Canada and need to be taken into account when acquiring or selling a business with assets or employees there. In addition, Quebec has legislation that protects the use of the French language.

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

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
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).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions