Thresholds for notification of mergers under Canada’s Competition Act and the review of foreign investments under the Investment Canada Act have increased for 2019.
Under the Competition Act, the pre-merger notification “transaction-size” threshold for 2019 is now C$96 million, an increase from the 2018 threshold of C$92 million.
Transactions that exceed both the “party-size threshold” and the “transaction size” threshold require pre-merger notification to the Competition Bureau. These two thresholds are as follows:
Party-Size Threshold: This threshold is reached if the parties to a transaction, and their affiliates, have aggregate assets in Canada, or gross sales in, from or into Canada, in excess of C$400 million. This threshold does not change annually.
Transaction-Size Threshold: Depending on the type of transaction, this threshold is reached if the aggregate value of assets in Canada of the target, or the annual gross revenues from sales in or from Canada that are generated from those assets, exceeds C$96 million. This threshold is updated annually.
It is important to note that the Commissioner of Competition can review and challenge any merger, regardless of whether it is notifiable under the above-noted thresholds. Regardless of a transaction’s size, an assessment should be conducted regarding whether a proposed transaction gives rise to any competition issues under Canadian law.
Investment Canada Act
A direct acquisition of control of a Canadian business by a non-Canadian that exceeds certain prescribed thresholds, is subject to a pre-closing filing, review and approval requirement.
Non-State-Owned Enterprises that are WTO or Trade Agreement Investors
The 2019 review threshold to directly acquire control of a Canadian (non-cultural) business by a non-state-owned enterprise that is a “trade agreement investor” has increased to C$1.568 billion in enterprise value (up from C$1.5 billion in 2018). Trade agreement investors include entities and individuals whose country of ultimate control is party to certain prescribed trade agreements, including investors from the United States, Mexico, the European Union, Chile, Peru, Colombia, Panama, Honduras, South Korea, Japan, Singapore, New Zealand, Australia and Vietnam.
Where the non-state-owned enterprise acquirer is controlled in other WTO member states (e.g. investors from Argentina or China), the review threshold has increased to C$1.045 billion in enterprise value of the target (up from C$1 billion in 2018).
State-Owned Enterprises that are WTO Investors
The 2019 review threshold for direct acquisitions of Canadian (non-cultural) businesses by non-Canadian, state-owned, WTO investors has increased to C$416 million in gross asset value (up from C$398 million in 2018).
The approval threshold for investments by non-WTO investors not otherwise described above, as well as acquisitions of cultural businesses, remains at C$5 million for direct acquisitions and C$50 million for indirect acquisitions.
Any non-Canadian that acquires control of or establishes a Canadian business is still required to file a notification under the Investment Canada Act, even if the investment is not subject to review. Further, irrespective of the thresholds otherwise described above, any investment by a non-Canadian, whether by acquisition (including minority investments) or establishment of a business, can be reviewed under the Investment Canada Act where there are reasonable grounds to believe that it could be injurious to Canada’s national security.
To discuss Canada’s pre-merger notification regime or the foreign investment review thresholds in more detail, please contact any member of our Mergers and Acquisitions Group.
Amaan has a practice focused on mergers and acquisitions, private equity transactions, technology and privacy laws, and general corporate law. He acts for a broad range of clients from start-ups and venture financed businesses to ...
Kellan practices corporate and commercial law and has experience in a variety of transactions, including share and asset acquisitions and debt and equity financings. She regularly drafts, reviews and advises on commercial ...
Valerie (Val) is the Co-Chair of the firm's Mergers and Acquisitions practice group and Chair of the firm's Technology Law practice group; her practice is transactional (mergers and acquisitions / corporate finance) as well as ...
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