Canada: M&A BuildingBlocks - Introduction To The Deal

Buying and selling is a basic human activity that has been going on for thousands of years. Mergers and acquisitions – M&A – involves buying and selling at a highly sophisticated and complex level because it concerns not just the sale of a product, but of a whole business including the means of producing products and services and the infrastructure that goes with it. The most essential element of any M&A transaction is agreement on the price to be paid. But there are many other issues which must be agreed upon before a deal can be struck or a transaction completed. While each deal is unique, there is a recognizable sequence of events or process that most deals follow, at least to some extent. Key threshold issues and process points are discussed below.

Key Issues / Process Points

While the relative importance of the following matters will vary from deal to deal, all of them usually play at least some role in bringing a deal to conclusion.

1 Due Diligence

Purchasers will want to kick the tires before finalizing a price. While the outlines of a deal can sometimes advance quite far before due diligence is complete, at minimum "confirmatory due diligence" will be necessary at some point before money changes hands.

Some of the principal issues associated with due diligence include:

  • Confidentiality or non-disclosure agreements: Potential purchasers are usually required to agree to keep confidential any information disclosed to them. These agreements may include "standstill" provisions prohibiting the purchaser from buying securities of the seller, and/or provisions preventing the poaching of employees.
  • Contracts: Is the seller bound by contracts which, from a legal or business perspective, require consent before the business can be sold? Or which will have an adverse impact on the business after the sale?
  • Title: Especially with real estate and IP assets, does the seller have good ownership to its assets? Are there assets subject to security arrangements or mortgages with lenders?
  • Employees: Can the key employees be retained by the buyer? Do they have the right to leave and be paid large settlements? Are there constraints on combining the target's work force with the buyer's? Privacy laws may affect the disclosure available.
  • Environmental: Are Phase 1 or 2 reports appropriate given the nature of the assets to be acquired?
  • Litigation/Potential Liabilities: Does the seller have outstanding litigation which could lead to liability? Are there other potential liabilities for, by way of example, warranties, product liability, regulatory breaches, negligence, or accounting or financial misstatement?

2 Approvals

Transactions routinely require approvals, such as:

  • Competition Act: Pre-merger filings and approvals are required for transactions meeting certain size thresholds.
  • Investment Canada Act: Acquisitions by non-Canadians of Canadian businesses above a certain size, involving cultural industries, or raising issues of national security, require approval.
  • Regulatory: Many industries have licensing, permitting or other regulatory regimes which require approvals for a change in ownership, including companies in the financial sector, seniors housing, natural resources, communications and broadcasting, and transportation.

3 Financing

Depending on the nature of the seller's assets and the buyer's financial resources, financing can be a very significant element to a transaction. For example, if the target's existing financing arrangements are to be assumed by the purchaser, the purchaser may need to negotiate with the target's financing parties.

4 Structure

Most deals can be implemented in more than one way, but there may be many reasons, often but not always tax-related, why a particular structure is better than another. Both the buyer and the seller will have views in this regard. For friendly acquisitions involving public companies, the statutory plan of arrangement has become the method of choice to implement a deal because of its flexibility in allowing a transaction to encompass many steps designed to achieve various objectives.

5 Timetable

An M&A transaction has a number of recognizable stages. Certain stages may have more or less prominence because of the way a particular deal develops, the relationship of the parties, the financial position of the seller or any number of external factors. From a seller's perspective, the key stages might include:

  • Retaining advisors and consultants: Legal, financial, environmental, engineering/structural and/or valuation experts may be required.
  • Offering the target for sale: This could include steps such as drafting and circulating a confidential information memorandum, soliciting bids, creating a data room to allow prospective purchasers to carry out due diligence, exploratory approaches to prospective purchasers, and/or pre-transaction structuring to sever certain assets or implement tax planning.
  • Negotiating the deal: This often occurs in one or more stages, as certain basic terms might be fixed at the time of accepting a particular bid, then fleshed out in a letter of intent or term sheet, and then finally agreed upon in great detail in a definitive purchase agreement.
  • Announcement: A critical point in time for any deal is when it is announced. The parties learn what the market thinks of their deal and receive preliminary indications as to whether their shareholders are likely to approve. Employee expectations, too, must be managed.
  • Shareholder approval: The requisite target shareholder approval (and sometimes other security holder approvals) must be obtained either by way of the purchaser making a take-over bid which shareholders may accept or reject, or the target holding a shareholder meeting at which shareholders vote upon the transaction. Sometimes significant shareholders are "locked up" in advance through a commitment to tender to a bid or vote in favour of a transaction. Depending on applicable stock exchange rules, if the purchaser is issuing shares as part of the purchase consideration, the purchaser may also need its shareholders to approve the deal. In all cases, a disclosure document, either a proxy circular for a shareholder meeting, or a take-over bid circular and directors' circular, must be prepared and sent to the relevant shareholders.
  • Regulatory approvals: Regulatory approval applications are usually commenced following the announcement while the applicable shareholder approval process is underway although the regulatory approvals themselves may take much longer. Sometimes tax rulings are necessary and they, too, have a long time horizon.
  • Third party consents/financing: Also at the same time, third party consents and financing arrangements, if necessary, are secured.
  • Closing: Once everything is in place, the transaction closes and the purchase price can be paid.

As noted at the outset, M&A transactions can be complex and the timeline for a transaction is typically measured in months. A time frame of a year or more is not atypical from the time a seller begins to undertake a sale process until the time it is complete.


The above only scratches the surface of the M&A process. In coming issues, we will explore specific deal points in more depth.

About BLG

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