South of the Canadian border, regulatory oversight and scrutiny
continues to play a noticeable role in making it more difficult for
private companies to raise capital through bank loans. In this
climate, could strategic cross-border M&A become a more popular
growth strategy for US companies which are unable to access
traditional lenders and are unsure about resorting to
M&A may be attractive for various reasons, many of which are
common knowledge. Private companies want to grow, increase their
market share, or perhaps enter a new market. At the centre of any
such aspiration is the "how" question –"how do
we raise the capital required to achieve the envisioned level of
growth"? Private companies don't have the benefit of the
public, ready-to go stock market, so their most popular resort is
to seek private investment (including private lending firms) or
turn to traditional lenders. However, this has become more
difficult in the past decade.
The post-2008 environment of regulatory oversight and scrutiny
has led many traditional banks to be more and more selective to
whom they lend. Even if one is an existing client, banks are equally selective when deciding
whether to make a leveraged loan. While non-traditional lenders
have offered a flexible alternative, they typically have much
higher interest rates. Consequently, even if a private company
could resort to non-traditional lenders, it has to be strategic
about the growth-strategy it adopts –and that is where a the
risk factor in M&A may, in some situations, appear to be a
better alternative to a do-it-on-our-own growth strategy.
Looking from above, private companies have good reason to
consider cross-border M&A transactions as an alternative to a
do-it-on-our-own growth strategy. With the currently deflated
Canadian dollar, and many experienced and established companies in
multiple Canadian sectors, there's a lot of substance to the
phrase "the price is right", especially north of the
border. The recent spike in equity financing in the Canadian energy
sector, is a signpost for that sector's growth, but why
limit ourselves to one sector? With proper legal advice and due
diligence, private companies may find that a cross-border M&A
to provide a better bargain for their capital in many other
The author would like to thank Blanchart Arun, summer
student, for his assistance in preparing this legal
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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.
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