2020 thresholds in effect for Canadian merger reviews

New thresholds for mergers and acquisitions under the Competition Act and Investment Canada Act are now in effect.

What you need to know

  • The size-of-transaction threshold for merger notification under the Competition Act remains at $96 million for 2020.
  • The 2020 thresholds for reviews of direct investments in Canadian businesses by foreign investors under the Investment Canada Act have increased from:
    • $1.568 billion to $1.613 billion in enterprise value of the Canadian business for trade agreement investors, which includes investors from the U.S., EU and Japan, among others;
    • $1.045 billion to $1.075 billion in enterprise value of the Canadian business for other investors from countries that are members of the World Trade Organization (WTO); and
    • $416 million to $428 million in asset value of the Canadian business for state-owned or influenced enterprises.
  • Companies should consider strategy when involved in transactions that exceed reporting thresholds.
    • Under the Competition Act, notifiable transactions require pre-closing approval, and reviews involving transactions between competitors can be long and complex.
    • Where Investment Canada Act approval is required, parties should consider developing a legal, commercial and political due diligence plan, and the potential need for government and public relations strategies.

The details

Competition Act thresholds

Pre-merger notification under Canada’s Competition Act is generally required for transactions where the target has assets in Canada or revenues in or from Canada generated from those assets of $96 million or more, and where the parties to the transaction have assets in Canada or revenues from sales in, from or into Canada of $400 million or more. In some cases, additional share or partnership interest ownership levels must also be satisfied.

Investment Canada Act thresholds

The Investment Canada Act generally requires a non-Canadian investor proposing to acquire direct control of a Canadian business receive approval that the investment is of “net benefit” if enterprise value of the Canadian business exceeds at least $1.075 billion or $1.613 billion in the case of “trade agreement investors”. A lower threshold of $428 million, based on the book value assets of the Canadian business, applies to acquisitions by state-owned or influenced enterprises. Lower thresholds of $5 million (for direct acquisitions) and $50 million (for indirect acquisitions) apply in connection with the acquisition of Canadian “cultural businesses”, which includes businesses involved in the production or distribution of books, music, film and other media such as video games. Any investment in part or in whole in, or the establishment of, a Canadian business by a non-Canadian investor could be reviewed if there are reasonable grounds to believe that the investment could be injurious to national security, regardless of whether the relevant financial thresholds are met.

To discuss these issues, please contact the author(s).

This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

For permission to republish this or any other publication, contact Janelle Weed.

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