Canadian federal government extends foreign investment review timelines

The Globe and Mail has reported that the Canadian federal government’s decision to extend the time it can take to review foreign investments for national security issues has coincided with a shift in public opinion towards favouring Canadian protectionism amid the COVID-19 pandemic. For foreign investors, this means longer transactional timelines and more uncertainty.

The Globe piece cites a Q3 Torys Quarterly article penned by co-head of Torys’ M&A practice John Emanoilidis and co-head of the Competition and Foreign Investment Review practice Omar Wakil which looks at the impact the public trend towards a protectionist “Canada First” sentiment will have on M&A.

In their article—“Will a "Canada First" sentiment curb M&A?”—Omar and John referred to a public opinion survey conducted in May by Hill+Knowlton Strategies that found 25% of Canadians were opposed to foreign investment into the country. Reflecting on this information, Omar told the Globe and Mail that Chinese buyers will face further difficulties and scrutiny when trying to invest in Canada.

“It already is difficult for Chinese buyers to secure Investment Canada Act approval in many sectors. Growing public and political antipathy to Chinese investment will mean that marginal cases are now more likely to be rejected rather than approved,” he said.

WATCH: View a snippet of our cross-border webinar episode where partners John Emanoilidis and Omar Wakil and Hill + Knowlton Strategies Senior VP Elizabeth Roscoe discuss the change in both political and popular reaction to foreign investment in Canada.

“The current environment may deter Chinese buyers from Canadian M&A or lead to creative work-arounds, such as carving Canadian assets out of a global deal in order to avoid Investment Canada scrutiny.”

John added that the extended review times for foreign investments hadn’t acted as a deterrent for all foreign investors and that U.S. and European investors continue to show interest in Canadian assets.

“Notwithstanding recent moves from the Canadian government, Canada continues to be a favourable source of target companies for foreign buyers,” he said.

You can read more of our M&A and Competition and Foreign Investment Review insights on the practice pages.