Canada

A court-approved plan of arrangement is the most common structure for a negotiated M&A transaction requiring the approval of public company securityholders. This is a similar process to a scheme of arrangement in the UK or Australia.

A takeover bid, which is similar to a tender offer in the United States, can be used for a hostile takeover of a public company.

Acquisitions of private businesses are typically done by way of a share purchase or asset purchase agreement.

Plan of arrangement

• A plan of arrangement is a court‑supervised structure that permits complex, multi‑step transactions, such as amalgamations, asset transfers, reorganizations, and tax‑driven elements to be implemented through a single integrated process. 
• The plan must be approved by at least 66.67% of votes cast at a special meeting of securityholders.
• The court will issue interim and final court orders governing the meeting and approving the fairness of the transaction.
• Although arrangements involve additional time and cost due to court involvement, they offer significant flexibility, execution certainty, and a clear path to 100% ownership.

Takeover bid

• A takeover bid is a public offer made directly to a target’s shareholders to acquire voting or equity securities that would result in the bidder owning 20% or more of a share class.
• An acquiror may negotiate a support agreement with a target board. Takeover bids are the default structure for hostile transactions because they bypass the target’s board and allow the bidder to deal directly with shareholders using cash, shares, or a combination of forms of consideration.
• The offeror must make adequate arrangements before the bid to ensure that the required funds are available to make full payment. In addition, takeover bids often require the bidder to achieve at least a 66.67% ownership threshold to facilitate a subsequent plan of arrangement or statutory amalgamation to acquire the remainder of the company.

Share purchase agreement

• In a share purchase transaction, where the acquiror purchases all of the target’s shares from its shareholders, the target continues to exist and its business, employees, and contractual relationships are preserved.
• Share purchase transactions are often preferable for sellers, if they can qualify for the lifetime capital gains exemption.

Asset purchase agreement

• An asset purchase agreement allows the buyer to acquire specified assets and assume identified liabilities, while leaving residual assets and liabilities with the selling company.
• This structure can give buyers greater control over risk exposure but can add complexity to ensure that all desired contracts, employees, and assets are transferred to the new owner.

Amalgamations

• A statutory amalgamation (similar to a U.S. merger agreement) can be an efficient route to acquiring a public or private company, but it lacks the flexibility afforded by a plan of arrangement.

M&A activity in Canada was buoyant in 2021 and 2022 but then cooled significantly in 2023 and 2024 as inflation and interest rates increased, among other reasons.

The year 2025 was an M&A rollercoaster. After a rocky start caused by broad U.S. tariffs, confidence has returned and the dealmaking momentum of the latter half of 2025 is expected to continue through 2026. However, the war in Iran that started February 28, 2026 is causing the price of oil to skyrocket, leading to increased costs for businesses and a potential for a recession or rapid increase in interest rates. It remains to be seen whether the resulting disruption and volatility in the stock market will cause a slowdown in dealmaking.

Key areas of M&A activity

• Mining and materials continue to dominate M&A activity in Canada, especially among gold producers as gold prices soar.
• Canada is a leading developer of AI technologies and has fostered robust M&A activity involving AI developers and AI-enabled businesses.
• There has been significant M&A activity in the biotech, life sciences, and financial services sectors.
• A major driver of M&A activity is the growing number of family-run businesses implementing their succession plans.

Deal dynamics

• The average deal value has been increasing with a number of large transactions, likely due to more favorable borrowing conditions.
• Use of creative deal structures has increased, including such mechanisms as earn-outs, deferred payments, minority equity rollovers and representation and warranty insurance.

Tariffs and trade

• Companies that are sensitive to tariff and trade disruptions may have difficulty reaching agreement on valuation. The risk of a major disruption in trade between Canada and the United States is a novel issue for M&A participants to consider at an early stage. This risk is heightened by broader geopolitical instability, including the Iran war, which has contributed to volatility in energy markets, supply chains and global trade flows.
• The United States Supreme Court’s decision to strike down certain tariffs, while leaving the treatment of previously collected duties unresolved, has given rise to subsequent litigation and lower‑court rulings requiring the United States government to refund billions of dollars, contributing to significant uncertainty and disruption in trade and market conditions.
• The Canadian government amended its foreign investment review guidelines in 2025 to include economic factors in order to address the concern of predatory acquisitions of Canadian companies negatively impacted by changing tariff and trade requirements.
• A government priority is to establish new trade relationships and attract foreign investment from countries other than the United States.

Shareholder activism

• Canada continues to see resilient shareholder activism and a key focus has been to define corporate strategy, including M&A.
• Activists have favored tactics such as public broadcast solicitations and mini tender offers (less than 5% offer) to build influence without proxy fights.

Venture capital and private equity

• Investors are making fewer, larger investments with selective deployment of capital. 
• Some private equity funds have deferred their exit plans. Continuation funds are growing in popularity.

M&A in Canada is expected to continue to be strong in 2026. The Canadian economy is rapidly evolving with significant public and private investment in defense, artificial intelligence, mining, and infrastructure. Investor confidence remains high despite the economic uncertainty around tariffs and trade, and the changing geo-political environment. These structural changes are being reinforced by government policy. For example, the Canadian government aims to double non-U.S. exports over the next decade, build new trade relationships, and invest in infrastructure. Canadian defense spending alone is expected to multiply to over CAD 1 trillion in the next decade. These are generational changes that will inevitably spur greater M&A activity.

However, the continued strength of the M&A market will depend mostly on maintaining investor confidence. Canada is burdened by productivity concerns, over-regulation, sticky internal trade barriers, and grumblings from secessionist movements in Alberta and Quebec. There is frequent talk of an AI bubble, a major global shock, and a stock market crash. It may be hard to sustain investor enthusiasm if any of these risks materialize.

Canada will continue to be an attractive destination

• Canada will continue be an attractive place for non-U.S. companies to establish their North American foothold thanks to Canada’s relatively stable immigration and regulatory environment.
• Canada is well positioned to take advantage of the global demand for critical minerals, and the federal and local governments’ focus on nation-building projects will see strategic support and the fast-tracking of projects for critical minerals, energy, advanced manufacturing, and technology.
• The macroeconomic factors are favorable for major investments as interest rates have lowered and become more stable. The weak Canadian dollar makes Canada attractive for foreign buyers.

Artificial intelligence will dominate

• Artificial intelligence is impacting every business and investment is enormous in tech and data centers.
• AI‑related transactions have gained significant upward momentum, and businesses with legacy technology may struggle to stay competitive as the market continues to accelerate.

Major data centers will be built in Canada

• While Canada has access to clean, stable power sources, the enormous demand for power for data centers will drive innovation and consolidation in the power generation industry.
• The investment by governments and AI companies in data centers is one of the largest deployments of capital in history. The speed and scale required will spur significant M&A activity.
• Canada is uniquely positioned with its geography and energy to host the world’s data centers. Our naturally cold climate reduces the cost of cooling (in the winter, just open the door) and we have plentiful access to hydroelectric and other clean energy sources.

Defense companies will consolidate

• Defense spending will soar in Canada. Companies will need to consolidate to achieve the scale required to meet the demands. 
• Defense companies will look to create or acquire more dual-use technologies (innovations with defense and commercial relevance).

Canada and the United States will continue to trade

• The Canada–United States–Mexico Agreement on trade (CUSMA) is under formal review in 2026 and could disrupt many industries. We expect agreement will be reached and the status quo maintained for the most part. However, certain industries such as auto manufacturing are unlikely to return to their former glory.
• The federal government is sensitive to opportunistic acquisitions of Canadian companies. Acquirors should engage in careful planning to navigate the foreign investment rules.

Securities regulation

• Each province and territory of Canada has its own securities laws and regulator. 
• Most of the securities laws relating to M&A activity have been harmonized in national instruments setting out the rules and disclosure requirements.

Securities filings

• The issuer under a plan of arrangement must file an information circular describing the transaction in connection with the special meeting to obtain shareholder approval. The circular will typically include a fairness opinion from a financial advisor. The issuer must also file the materials in court in connection with the fairness hearing.
• Takeover bids are governed by National Instruments 62-103 and 62-104, which set out the disclosure and timing requirements related to a bid. Early warning disclosure is required when a shareholder crosses the 10% beneficial ownership threshold on a partially diluted basis.
• Multilateral Instrument 61-101 sets out protections for minority shareholders. Certain transactions such as related party transactions, plans of arrangement and insider bids require approval of a majority of the minority shareholders (in addition to any other approval requirements) and a formal valuation, unless an exemption is available.

Corporate law

• The corporate statute in the target’s jurisdiction of incorporation sets out specific requirements for plans of arrangement, amalgamations, and asset sales.
• The statutes provide shareholder protections in M&A transactions including approval and dissent rights.

Foreign investment review

• Acquisitions of Canadian businesses by non-Canadian residents are regulated by the Investment Canada Act (ICA). Every acquisition of control of a Canadian business, and the establishment of a new Canadian business by a non‑Canadian, requires a notification under the ICA. Some acquisitions of control require pre-approval.

Competition/antitrust law

• The Competition Act governs merger review and empowers the Competition Bureau to challenge mergers that may substantially prevent competition in Canada. In some transactions where notification thresholds are met, acquirors must submit filings to the Competition Bureau to close.

Stock exchange rules

• Canadian stock exchanges such as the Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV) regulate Canadian M&A transactions. When acquirors issue securities as consideration in public deals, the rules may require shareholder approval of the issuance. Public companies also must comply with specific disclosure and governance requirements during the transactions.

Consideration is typically all cash, all shares, or a mixture of cash and shares.

• If shares are offered as consideration, prospectus-level disclosure must be provided to the target shareholders.
• When issuing shares, securities laws in the jurisdiction where a target shareholder is located must be considered. An exemption is available from U.S. securities laws for the issuance of shares to U.S. shareholders under a Canadian plan of arrangement.
• If shares of a non-Canadian buyer are used, careful tax planning is required as a tax-deferred rollover is only available for shares of a Canadian issuer. An exchangeable share structure with a Canadian issuer is sometimes used by U.S. buyers.
• Consideration must be the same for all target shareholders. If a shareholder is not treated the same way as others in a plan of arrangement, they may be considered an interested party and excluded from the majority of the minority calculation.
• Adequate financing must be arranged before launching a takeover bid. The financing may be conditional at the time the bid is commenced, provided the bidder reasonably believes that the risk of being unable to pay for deposited securities is remote.

Deferred consideration

• Earn-outs are a common feature in private company transactions where a portion of the purchase price is deferred and payment is contingent on pre-agreed post-closing metrics such as revenue, Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), or operational milestones. While earn-outs can help bridge valuation gaps, they are a common source of post-transaction disputes. The purchase price can also be paid in instalments. In private company transactions, a portion of the purchase price may be subject to a holdback or escrow arrangement.

Confidentiality agreements

• Before confidential information is shared by a target, a non-disclosure agreement (NDA) is signed. The NDA will make clear the information can only be used for the purpose of evaluating a negotiated acquisition transaction (and not, for example, used for a hostile bid).
• For a public company target, there will often be a standstill agreement included in an NDA.

Diligence access

• The target typically populates an online data room with corporate minute book documents, material contracts, financial information, and all other material documents. The target may also host site visits.
• Larger buyers may only want certain personnel to have access to material non-public information. Once buyers are in possession of material non-public information, insider trading rules prohibit trades.

Legal diligence

• Corporate lawyers are involved in all aspects of the diligence review. Specialist counsel may be retained to review employment, intellectual property, real estate, environmental, tax and other specialized matters.
• A review of public disclosure documents and searches of public registers (including lien, litigation, and bankruptcy searches) will be performed at an early stage and again closer to closing.
• Diligence reports are typically not shared between parties.

Tax

• Tax advisors need to consider the structure of the transaction at an early stage. Most foreign buyers will incorporate a Canadian purchaser.
• Tax or accounting advisors conduct tax diligence.

W&I insurance policies have generally increased in popularity over the past decade in Canadian M&A transactions and both buyers and sellers are likely to consider insurance at an early stage. However, some parties remain cautious as the presence of insurance can alter the deal dynamics.

Key types of insurance

• W&I insurance protects against the risk of loss resulting from a party unknowingly having made certain misrepresentations, and the litigation or collection risk against such party.
• Specific insurance can be obtained for known risks such as active litigation.
• Other insurance could include tax policy insurance, directors’ and officers’ liability insurance, or intellectual property or environmental insurance.
• W&I insurance can be acquired by either the buyer or the seller, and the responsibility for paying the premium can be a negotiated term of the transaction.

Key drivers

• The risk of a loss is typically mitigated through diligence, representation and warranty negotiations, survival periods, indemnity baskets and caps, holdbacks or escrows, and earn-outs. Insurance can eliminate much of the time and cost required to negotiate such provisions.
• As W&I insurance is more widely used, competition among insurance providers has reduced the cost, resulting in an increase in popularity and familiarity among market participants.
• Buyers will prefer insurance where it is hard or impossible to pursue a claim against the sellers; for example, if the sellers are the shareholders of a target public company or a private equity fund that is winding up.
• Sellers will prefer insurance where they are looking for a clean break and to limit their involvement in potential claims.
• Insurance is also desirable where the buyers and sellers will work together post-closing in order to avoid the risk of litigation disrupting the relationship.

Impact on negotiations

• Overall, W&I insurance can increase the likelihood of closing, reduce the time to closing, and avoid the risk and disruption of post-closing litigation.
• Buyers should proceed cautiously because a key aspect of diligence and the negotiation of representations and warranties is to deeply understand the target company and identify risks. Buyers face a moral hazard because, with insurance, sellers are protected from the consequences of inadequate disclosure.
• Sellers should consider the cost of insurance against the risk of a potential claim. Even if the buyer offers to pay the premium, it is likely reducing the purchase price as the buyer will take the cost into account when it determines what it is willing to pay.
• The parties should also carefully consider the exclusions from the insurance policy and the amount of the deductible.

Canada generally welcomes foreign investment, but acquisitions of Canadian businesses by non-Canadians may be subject to review under the ICA.

• Any foreign acquisition of control of a Canadian business, and any commencement of new business activity in Canada by a non-Canadian, requires at least a notification under the ICA, which must be filed within 30 days after commencing a new business activity or acquiring control of an existing Canadian business.
• Transactions that exceed prescribed financial thresholds (for World Trade Organization investors that are not state-owned enterprises, the 2026 threshold is an enterprise value of CAD 1.452 billion) are subject to a pre-closing “net benefit” review in which the investor must demonstrate that the investment will be of net benefit to Canada, considering a variety of specific factors. Cultural businesses (such as those engaged in broadcasting or publishing activities) are subject to lower thresholds. 
• Separately, the Canadian government may review any acquisition by a non-Canadian on national security grounds, regardless of size or whether control is acquired. There are no monetary thresholds or statutory definition of “national security,” and accordingly the government has broad discretion to review, block, impose conditions on, or order divestiture of investments that raise national security concerns.
• In practice, investments in sensitive sectors such as critical minerals, defense, advanced technologies, and certain infrastructure, as well as investments by state-owned or state-influenced investors and opportunistic acquisitions of targets hit hard by tariffs, are more likely to attract review.
• To gain certainty about whether an investment will attract a national security review, investors can make a voluntary pre-closing filing which starts a 45-day clock for the government to either initiate such a review or confirm it will not do so. For certain non‑controlling investments, investors can make a voluntary filing that triggers an initial 45‑day period for the government to decide whether to take further steps. If no voluntary filing is made, the government’s ability to initiate a review can extend up to five years after the investment is implemented.

Disclosure of a transaction

• Reporting issuers (which generally includes all companies with shares listed on a stock exchange in Canada) are required to promptly disclose all material changes.
• In the context of a proposed transaction, disclosure is generally triggered once the parties have decided to proceed and completion is substantially likely, although there is no bright-line test. In practice, most transactions are announced upon the execution of definitive acquisition agreements.

Early warning disclosure

• Disclosure must generally be made once an investor directly or indirectly beneficially owns, or has control or direction over, 10% or more of a class of securities of a reporting issuer.
• An investor’s beneficial ownership is calculated on a partially diluted basis and includes securities acquirable within 60 days through conversion or exercise, as well as holdings of joint actors (which can arise where there is a shared plan or understanding about how shares will be voted). Control or direction generally refers to the ability to vote, or direct the voting of, or to acquire or dispose of, shares.
• Upon exceeding the 10% threshold, an acquiror must issue a press release and file an early warning report (similar to a Schedule 13D in the United States). Certain eligible institutional investors, such as pension funds and United States Securities and Exchange Commission-registered advisers, may instead use an alternative monthly reporting regime (similar to a Schedule 13G in the United States) if they have no intention of acquiring control. Subsequent filings are required on certain changes of ownership.

Insider reporting

• Directors, officers, 10% beneficial owners and other “reporting insiders” must file insider reports disclosing the securities they directly or indirectly own or control, as well as any changes to their holdings (similar to a Form 4 in the United States).

A takeover bid is used in both friendly and hostile public company transactions.

Canadian takeover bids are primarily regulated by National Instrument 62-104, which governs when a bid is required, the disclosure to be provided, timing requirements, and how bids must be conducted.

The takeover bid regime is supplemented by related instruments governing early warning disclosure, defensive tactics, interpretive guidance, minority protections, and applicable provincial securities regulatory and stock exchange requirements.

Core requirements imposed on all bids

• National Instrument 62-104 requires equal treatment of all shareholders of the class subject to the bid, identical consideration for all tendering shareholders, minimum bid periods, and full withdrawal rights prior to take-up.
• A bidder must satisfy a statutory minimum tender condition requiring more than 50% of the outstanding securities not owned by the bidder or its joint actors to be tendered before taking up shares.
• Bidders must deliver a takeover bid circular containing prescribed disclosure, including prospectus-level disclosure where share consideration is offered.

Procedure of a takeover bid

• A bid is initiated by delivering a takeover bid circular to shareholders and regulators, after which the target board must issue a directors’ circular with its recommendation or reasons for not making one.
• During the bid period, shareholders retain withdrawal rights, bidders may vary or extend the bid subject to notice and timing requirements, and all regulatory approvals and bid conditions must be satisfied before expiry.
• Canadian securities law permits competing bids at any time provided they comply with National Instrument 62-104, and no bidder is granted exclusivity under the regulatory regime.
• Where a competing bid is launched, the target must update its directors’ circular and bidders may respond by varying consideration or terms, subject to notice of variation and minimum extension requirements.

Defensive mechanisms

• Target boards may adopt defensive tactics in response to unsolicited bids, but such actions are constrained by National Policy 62-202, which prioritizes shareholder choice and equal opportunity to tender.
• Defensive measures may be reviewed by regulators to assess whether they are being used to seek improved alternatives or improperly prevent shareholders from deciding whether to accept a compliant bid.
• Defensive tactics include a white knight transaction, in which a target seeks a more favorable bidder, provided the board’s actions remain consistent with its fiduciary duties and do not frustrate shareholder choice.
• Defensive transactions such as implementing shareholder rights plans or other structural actions may be permitted, but regulators may intervene where their primary effect is to deny shareholders the opportunity to tender.

Deal protection measures

• Support agreements are commonly used in friendly bids to set out the target’s support, “fiduciary out” provisions, and conditions under which superior proposals may be considered, thereby enhancing deal certainty while preserving board duties.
• Support agreements often include break fees and exclusivity or no-shop provisions designed to compensate bidders for deal risk while allowing fiduciary exceptions for superior proposals.
• Lock-up agreements secure commitments from key shareholders to tender into a bid without giving rise to beneficial ownership or joint actor status, unless the shareholder is otherwise strategically involved.

Second-step transactions and minority shareholder rights

• Where less than 90% ownership is achieved, a bidder may complete a second-step transaction such as an arrangement or amalgamation to acquire remaining shares, subject to shareholder approval requirements.
• Where a takeover bid or second-step transaction constitutes a going-private or special transaction, Multilateral Instrument 61‑101 may require minority approval and, in some cases, a formal valuation.
• If a bidder acquires 90% or more of the outstanding shares following a bid and mandatory extension period, corporate statutes permit compulsory acquisition of the remaining securities at the bid price, subject to appraisal rights.
• Dissenting shareholders are entitled to statutory appraisal rights allowing them to argue for a different fair value of their securities in court.

• Typically, in a private transaction, parties will name, or agree to name (based on a broad description), an independent accounting firm acting as an expert or an arbitrator, to resolve the financial elements of a purchase price or earn-out dispute.
• An increasing number of agreements in the past several years included alternative dispute resolution provisions with arbitration as a preferred forum. A majority of transactions referred to provincial arbitration acts. Arbitration provides the benefit of privacy and can be quicker than litigating disputes in court.

Artificial intelligence

• AI is driving M&A activity as noted above.
• AI is also used to find acquisition targets and efficiently conduct diligence, and is increasingly used to prepare transaction documents.

Technology resources

• The demand for technology is increasing demand for data centers, chips, critical minerals, and other resources required to scale up.
• There are incentives to build or acquire businesses in Canada in order to take advantage of significant government funding and protect the sovereignty of data.

Technology risks

• Buyers are continuing to focus carefully on technology risk such as cybersecurity, privacy and data governance, and intellectual property rights.
• Canada has a Sensitive Technology List as part of its guidelines under the ICA and relevant transactions are likely to attract greater government security.

There are certain jurisdiction-specific considerations in Canada that may be material for deal participants. For example:

• Canadian courts have rejected the notion that a target board’s fiduciary duty is solely to maximize shareholder value and instead Canadian law requires the board to consider the best interests of the corporation, which permits the board to consider a variety of stakeholders including employees and the environment.
• Canadian courts also focus on the factual matrix at the time an agreement is entered into and may take into account the position parties have taken in a non-binding letter of intent.
• The Supreme Court of Canada has confirmed a broad and contextual interpretation of what constitutes a “material change,” increasing the scrutiny on the operational and business developments which a publicly listed issuer must immediately disclose.

Engaging experienced M&A counsel early in the negotiation process is typically beneficial for any transaction.