Mergers and Acquisitions in Canada
The Canadian business marketplace is one of the most attractive for international investors wishing to purchase a business in Canada. With Canada’s large market due to the US-Mexico-Canada trade agreement, sound and high-ranking Canadian banking institutions, historical low operating costs, and attractive Canadian tax regimes, Canada is an ideal location for foreign companies who wish to acquire a business in Canada.
Planning a private M&A transaction
When purchasing a Canadian private company, there are two common forms used to structure a merger and acquisition—either by the share purchase transaction or an asset purchase transaction.
A share purchase involves purchasing all or a majority of the issued and outstanding shares of a target corporation. A share purchase transaction is simply a transfer of the shares representing the ownership of the corporation through which the business is run.
An asset purchase transaction involves the purchase of assets, and in many cases the assumption of certain liabilities, from the seller and is typical of a transaction where only a singly property or division is of interest, or where the new owner wishes to cap liability exposure.
Both under an asset acquisition and share acquisition, the target company continues to exist as a separate entity. Under a share acquisition, the target company may become a subsidiary of the acquirer. In either case however, the businesses are often effectively combined under the control of the acquirer.
A third option involves an amalgamation, a more complicated transaction, typical in circumstances whereby target companies have a large number of shareholders or option holders. This type of M&A structure involves the merger of the acquiring corporation or a subsidiary of the acquiring corporation with the target corporation. An amalgamation is a type of merger since it involves the merging of two previously distinct entities into one.
An amalgamation must be approved by a special resolution of the shareholders of the target company, either at a shareholders meeting, or pursuant to resolutions consented to in writing by all shareholders. If the arrangement is then approved by the court (which considers the fairness of the transaction) it is binding on shareholders of the target company, including holders that may have voted in favour, or voted against.
Whatever structural form your merger and acquisition may take, they all provide owners of target companies to realize a return on their investment while allowing for purchasers to grow and expand their business. They also present challenges including due diligence, tax implications, negotiation of terms and conditions, regulatory approvals, and employment and labour matters—that need to be addressed throughout the process of pre-acquisition planning through to closing and completion.
If you are planning a merger and acquisition, a corporate commercial lawyer at Kalfa Law is ready to assist you.
-Shira Kalfa, BA, JD, Partner and Founder
Shira Kalfa is the founding partner of Kalfa Law. Shira’s practice is focused in corporate-commercial and tax law including corporate reorganizations, corporate restructuring, mergers and acquisitions, commercial financing, secured lending and transactional law. Shira graduated from York University achieving the highest academic accolade of Summa Cum Laude in 2012. She graduated from Western Law in 2015, with a specialization in business law. Shira is licensed to practice by the Law Society of Ontario. She is also a member of the Ontario Bar Association, the Canadian Tax Foundation, Women’s Law Association of Ontario, and the Toronto Jewish Law Society.
© Kalfa Law 2021
The above provides information of a general nature only. This does not constitute legal advice. All transactions or circumstances vary, and specified legal advice is required to meet your particular needs. If you have a legal question you should consult with a lawyer.