While 2025 was off to a shaky start following the introduction of broad US tariffs, confidence rebounded meaningfully as the year progressed, with deal‑making momentum building in the second half of the year and positioning the market well heading into 2026. Although the war in Iran has driven oil prices higher and introduced renewed macro-economic uncertainty, Canadian M&A participants have shown resilience in navigating periods of volatility.

Canadian M&A is expected to remain robust in 2026. The Canadian economy is undergoing a period of rapid transformation, driven by significant public and private investment in defence, artificial intelligence, mining, and infrastructure. Investor confidence has remained high despite ongoing uncertainty surrounding tariffs, trade, and a shifting geopolitical landscape.

These structural shifts are being reinforced by government policy. The Canadian government has articulated an ambition to double non‑US exports over the next decade, expand global trade relationships, and increase infrastructure spending. Together, these initiatives represent generational change and are likely to act as a powerful catalyst for increased M&A activity.

Key trends within Canadian M&A include:

• Deal participants are increasingly embracing creative structures, including earn‑outs, deferred payments, minority equity rollovers, and representation and warranty insurance, to bridge valuation and risk-allocation gaps.
• Investors are deploying capital more selectively, favouring fewer but larger investments. In response to market conditions, some private equity funds have postponed exits.
• Succession plans implemented by family-run businesses to transfer wealth are a key driver of M&A activity.
• Shareholder activism has remained resilient, with activists continuing to focus on shaping corporate strategy, including potential M&A activity.
• Cybersecurity and data safekeeping continues to be a top priority for Canadian companies, with a significant rise in data breaches and ransom attacks.
• The Canada-first economic agenda of the federal government will demand complex projects, making boutique, specialised firms attractive acquisition targets.
• The Canadian government updated its investment guidelines to consider explicitly transactions that undermine the nation’s economic security.
• Geopolitical instability, trade disruptions and the war in Iran are contributing to volatility across energy markets, supply chains, and trade flows.
• The Canadian government continues to diversify trade relationships to attract increased foreign investment from jurisdictions beyond the United States.

Technology, Artificial Intelligence & Digital Infrastructure

Canada is a leading developer of AI talent and technologies and is expected to foster robust M&A activity involving all players along the AI value chain.

Increased demand for technology is fuelling growth in data centres, semiconductors and critical minerals. This, in turn, is driving investment and acquisition activity in Canada to capitalise on government funding and preserve data sovereignty.

The investment by governments and AI companies in data centres will represent one of the most significant infrastructure investments in Canada’s technology sector.

For example, the Canadian government is actively exploring large-scale infrastructure projects to build commercial AI data centres in Canada and has dedicated over CAD1 billion in the next five years to AI infrastructure. Microsoft has committed to investing CAD7.5 billion to build digital and AI infrastructure in Canada with a goal of protecting the nation’s digital sovereignty. Bell Canada announced the launch of six AI data centres in British Columbia, creating a data centre supercluster which will be one of the largest compute projects in the country.

M&A activity will ramp up with the speed and scale required to meet the nation’s AI goals. In early 2025, the government finalised its investment in Toronto-based Cohere Inc’s CAD725 million project to scale AI capabilities in Canada.

Canada has access to significant hydroelectric and other clean energy sources, and its naturally colder climate reduces cooling costs. Canada is therefore uniquely positioned to meet the world’s enormous demand for data centres.

Defence

2025 and 2026 marks a generationally significant defence-sector capital investment in Canada. Defence expenditures are projected to exceed CAD1 trillion over the coming decade.

To facilitate its defence procurement plan, the federal government in the fall of 2025 inaugurated the Defence Investment Agency and announced its first eight projects.

Meeting the investment demands in this sector will require increased domestic consolidation, alongside a greater focus by defence companies on creating or acquiring dual‑use technologies with commercial and defence applications.

Mining

Approximately 40% of all publicly traded mining companies in the world are listed on a Canadian stock exchange. In October 2025, CNSC Global Markets Inc, the parent company of the Canadian Stock Exchange acquired NSX Limited (the owner of the National Securities Exchange of Australia), allowing issuers in the mining space to consider dual-listing opportunities.

The mining and metals sector continued to drive significant M&A activity in 2025. Notable transactions included First Majestic Silver Corp’s USD970-million acquisition of Gatos Silver, which closed in early 2025, as well as Dundee Precious Metals’ USD1.25-billion acquisition of Adriatic Metals, which closed in September 2025.

Sector consolidation has also continued among exploration companies, including Noble Mineral Exploration and Canada Nickel Company’s completion of the spin‑out and consolidation of their Timmins nickel assets into East Timmins Nickel Ltd in 2025, of which Canada Nickel holds an 80% interest and Noble retains 20%.

Historically high gold prices have also been a key driver of mining consolidation and capital markets activity. Canada remains one of the world’s leading gold jurisdictions, ranking as the fourth‑largest global gold producer in 2024. A notable transaction included Discovery Silver Corp’s acquisition for approximately USD425 million of the Porcupine Complex from Newmont Corporation, which closed in April 2025.

Canada is a key producer of copper, nickel, gold, cobalt, lithium, graphite and vanadium. As global demand increases for critical minerals used in batteries and other clean technology, Canada continues to look for ways to invest in, and protect, these key resources.

Oil and Gas

Canada is the world’s fourth-largest producer of crude oil and fifth-largest producer of natural gas. Canadian refineries can process nearly 1.9 million barrels of crude oil per day.

M&A in the oil and gas industry remained active throughout 2025 and looks promising going into 2026. Notable transactions included Ovintiv Inc’s proposed CAD3.8-billion acquisition of NuVista Energy Ltd, Keyera Corp’s planned CAD5.15-billion acquisition of Plains All American Pipeline’s Canadian natural gas liquids business, and Canadian Natural Resources Limited’s acquisition of Alberta liquids-rich Montney assets for approximately CAD750 million.

Most public company acquisitions in Canada are conducted by way of:

• a takeover bid, either hostile (unsolicited) or friendly (solicited and/or negotiated); or
• a negotiated, court-approved plan of arrangement.

Companies can also be acquired by way of:

• an asset or share purchase; or
• an amalgamation or other corporate reorganisation.

M&A activity in Canada is primarily regulated by:

• the Canadian federal government, particularly where the acquiror is non-Canadian;
• provincial securities regulators; and
• stock exchanges.

Reporting issuers, including all issuers with securities listed on a Canadian stock exchange, must file continuous disclosure documents on the System for Electronic Data Analysis and Retrieval+ (SEDAR+), a web-based platform for electronic filing and public data access for Canada’s capital markets. Reporting insiders – including directors, officers and 10% beneficial owners of a class of securities of a reporting issuer – must file trade reports on the System for Electronic Disclosure by Insiders (SEDI) unless an exemption is available.

There is no single national securities regulator in Canada and multiple attempts at creating one have failed. At present, there are 13 securities regulators in Canada, across its ten provinces and three territories.

Investment Canada Act (ICA) and National Security Review

Canada welcomes foreign investment and has a reputation as an attractive and trusted destination for investors. However, under the ICA, government approval is required for high-value acquisitions by foreign investors of control of a Canadian business. In addition, if the government determines that a foreign investment raises national security concerns, it may block the transaction, impose conditions on investors or other relevant parties, or order divestiture if an investment has already been made.

The government must review and approve a proposed foreign acquisition of control to determine if it is of “net benefit to Canada” where the enterprise value of the Canadian business is above certain thresholds (for World Trade Organization (WTO) investors that are not state-owned enterprises, the threshold is an enterprise value of CAD1.452 billion, but the thresholds are lower for acquisitions of control of a “cultural business”). Where the thresholds are not met, a notification under the ICA must be filed within 30 days after commencing a new business activity or acquiring control of an existing Canadian business.

Separately, the ICA allows the government to conduct a national security review of any foreign investment (whether implemented or proposed, and including minority investments) and of any establishment of a new Canadian business by a non-Canadian, regardless of its value and whether it is subject to a net benefit review. There is no definition of “national security” in the ICA, and the government make take a variety of factors into account.

Any foreign investments in businesses involved in the Canadian critical minerals sector, defence, sensitive technology, and certain other protected industries are likely to be subject to greater scrutiny. In particular, the government has stated that:

• any investments by an entity owned or influenced by a foreign state into Canada’s critical minerals sector, and any determination that a foreign investor has ties to Russia, will support a finding that the investment could be injurious to national security; and
• acquisitions of control of Canadian firms engaged in critical minerals operations will be found to be of net benefit to Canada only in the most exceptional of circumstances.

The government is also more likely to take a closer look at predatory acquisitions which could be harmful to the Canadian economy or Canadian workers.

Minority investors may make a voluntary pre-closing filing to determine if their proposed investment would be subject to a national security review, triggering a 45-day review period for the government. If no voluntary notification is filed, the government has up to five years after the implementation of the investment to make an order for a national security review. The national security review provisions can apply to acquisitions even where there is a limited connection to Canada.

Sanctions

Canada has sanctioned countries, individuals and entities that it considers to be connected to human rights violations, corruption, or terrorist activities. Canada currently has sanctions in place against 24 countries. Sanctions can permit Canada, among other things, to impose restrictions on trade, freeze or restrain the property of officials and politicians, and require disclosure and/or divestiture of assets in sanctioned jurisdictions.

Industries with Limits on Foreign Ownership

Ownership by non-Canadians is restricted in certain sectors, including the airline, banking, telecommunications and insurance industries. The government has imposed a temporary ban (with some exceptions) on foreign ownership of Canadian non-recreational residential property, which is currently set to expire on 1 January 2027.

Foreign investments into businesses operating in certain industry sectors will be subject to heightened scrutiny under the ICA. These include firms working with technology identified on the government’s Sensitive Technology List, businesses with assets in the interactive digital media sector, and companies in the defence and critical minerals industries.

Competition Act

Foreign investment is also subject to pre-merger notification under the Competition Act if it meets both of the following thresholds:

• Size of Parties: The parties to the transaction, together with their affiliates, have combined assets in Canada or total annual gross revenues from sales in, from or into Canada with a value in excess of CAD400 million; and
• Size of Transaction: The aggregate value of the Canadian assets or annual gross revenues from sales in or from Canada of the target exceed CAD93 million.

The Competition Bureau reserves the right to review any transaction. Under the Competition Act, the Competition Bureau has up to three years post-closing for transactions that are not notifiable, and one year for notifiable transactions to determine whether it is likely to lessen or prevent competition substantially. In addition, all business activity in Canada is subject to scrutiny for anti-competitive behaviour.

Significant amendments to the Competition Act have been made in recent years. Among other things, these amendments expanded the non-exhaustive list of acts that may be considered an abuse of dominant position and increased the applicable penalties. The amendments also removed the efficiency defence for anti-competitive collaborations and in merger reviews.

In 2024, the Competition Bureau took legal action against Google for engaging in anti-competitive practices following an investigation that found that Google abused its dominant position by preventing rivals from being able to compete. In March 2026, the Competition Tribunal dismissed Google’s allegation that a constitutional right was breached, which reinforces its clear authority to order administrative monetary penalties to promote compliance and deter anti-competitive behaviour. The Competition Bureau’s case continues against Google, and the final decision rests with the Competition Tribunal.

Employment legislation varies by jurisdiction in Canada. Minimum statutory employment standards, such as notice requirements on termination, generally cannot be contracted out of or waived. For example, an employment agreement providing for “termination at will” would not be enforceable.

Other legislation applies to the employment relationship, including the applicable human rights code, pay equity statute and occupational health and safety legislation.

Canada supports the principles of collective bargaining. Each jurisdiction in Canada has a labour code.

Ontario prohibits non-competition provisions in employment agreements and requires that certain employers have a written policy with respect to “disconnecting from work”.

Acquirors should conduct due diligence to understand the potential severance costs associated with a target’s key employees and consider whether any future plans (for example, a return-to-office policy) could be construed as constructive dismissal requiring severance payments.

In the context of M&A transactions, while there is no requirement to engage with employees or pension trustees, target company directors in discharging their fiduciary duties are encouraged to take the interests of these stakeholders into account. If a target business is unionised or about to become unionised, a potential acquiror should also learn more about the current collective bargaining agreement and any negotiation process that is underway.

See 2.3 Restrictions on Foreign Investments.

Non-Binding Letters of Intent may Inform Contractual Interpretation

Project Freeway sold a group of companies to ABC Technologies (ABC) for cash plus an earn-out, with an acceleration clause triggered by a sale of a material portion of the business assets without its consent. After ABC subsequently completed sale-leaseback transactions without its consent, Project Freeway claimed that the full earn-out was payable. The Ontario Superior Court of Justice looked to the letter of intent for context that the financing transactions did not accelerate the earn-out and adopted a contextual interpretation of the purchase agreement.

Parties should draft earn‑outs using precise, objective threshold metrics, include carve‑outs for anticipated post‑closing transactions, and ensure consistency between the letter of intent and the definitive agreement, even where an “entire agreement” clause is included.

Negotiated MAC Triggers will be Enforced

A standstill agreement between Parkland and its largest shareholder, Simpson Oil, prohibited Simpson Oil from soliciting a sale of Parkland unless a material adverse change (MAC) occurred, an example of which included a material change in composition of senior management. The Ontario Superior Court of Justice held that the departure of eight out of ten members of Parkland’s senior management triggered a MAC and released Simpson Oil from the standstill, allowing it to advocate freely for strategic alternatives, including the sale of the company.

The decision reinforced the enforceability of negotiated agreements between sophisticated parties.

What Constitutes a Material Change Requires a Broad and Contextual Approach

After Lundin delayed its disclosure of pit-wall instability at its flagship mine and the share price fell significantly once disclosed, a shareholder sought leave to commence a statutory class action claim. Ultimately, the Supreme Court of Canada adopted a broad and contextual approach when assessing whether events constitute a “material change”.

Regulators will Strike Down Poison Pills in the Absence of Abuse

After Waterous announced its intent to acquire approximately 43% of Greenfire’s outstanding shares from non-Canadian shareholders under the private agreement exemption in the take-over regime, Greenfire adopted a retroactive poison pill to block the acquisition. The Alberta Securities Commission cease-traded the rights plan and held that in the absence of abusive conduct or harm to the market integrity, the rights plan could not be used to undermine lawful transactions.

Takeover Bid Amendments

The last significant amendments to the takeover bid rules in Canada were implemented in 2016. These amendments included:

• the extension of the minimum bid period from 35 days to 105 days (which may be shortened in certain circumstances) to allow target boards adequate time to respond to hostile bids;
• the introduction of a mandatory 50% minimum tender condition (at least 50% of the shares not already owned by the acquiror and its joint actors must be tendered before any shares can be taken up by the acquiror); and
• a mandatory ten-day extension to the bid period if, at the end of the initial deposit period, all terms and conditions of the bid have been complied with or waived, and the minimum tender requirement has been met.

Securities regulators are inclined to enforce these rules strictly in order to promote predictability in the takeover bid regime. Exemptions and variations are rare.

It is common in Canada for prospective acquirors to accumulate shares of their target prior to launching a takeover bid or change of control transaction. An acquiror may establish a “toehold” through open market purchases or private transactions with other shareholders.

Acquirors may also seek support from other shareholders through accumulation of proxies or lock-up or voting agreements in support of a transaction.

An acquiror must publicly disclose its ownership of a reporting issuer once it directly or indirectly beneficially owns, or has control or direction over, 10% or more of a class of securities (whereas in the USA, the threshold is 5%). This threshold is reduced to 5% in Canada if a takeover bid for the relevant securities is outstanding.

Beneficial ownership of securities is calculated on a partially diluted basis by class and includes:

• all securities of that class that could be acquired within 60 days upon the conversion or exercise of convertible securities; and
• all securities of that class beneficially owned by any joint actors of the acquiror.

Control or direction generally is established by the ability to vote, or direct the voting of, shares or the ability to acquire or dispose of, or direct the acquisition or disposition of, shares.

Equity-equivalent derivatives, such as equity swaps, generally are not included in determining whether the 10% ownership threshold has been crossed, although interests in these and other related financial instruments must be disclosed in reporting required once the 10% ownership threshold has been crossed.

The determination of whether parties are joint actors hinges on establishing the existence of a plan of action or a mutual understanding about how shareholders will vote their shares. Having a common goal or concern is insufficient to establish that the parties are acting jointly or in concert.

Early Warning Disclosure

Upon crossing the 10% ownership threshold, the acquiror is subject to the early warning regime and must file a press release and an early warning report (similar to a Schedule 13D in the USA). After the 10% threshold is met, an early warning report is required for the acquisition of or disposal of additional shares that results in a 2% or more change in total share ownership.

Eligible institutional investors, which include passive financial institutions, pension funds, mutual funds, investment managers and Securities and Exchange Commission (SEC)-registered investment advisers, may file a less onerous alternative monthly report (similar to a Schedule 13G in the USA). Access to the alternative monthly report regime is contingent on, among other things, the institutional investor having no current intention of acquiring control of the reporting issuer.

Insider Reporting

Directors, officers, 10% beneficial owners and other “reporting insiders” of reporting issuers must file insider reports disclosing any change to their beneficial ownership of, or control or direction over, the reporting issuer’s securities or interest in a related financial instrument.

Unlike in the USA, structural defences to stakebuilding in constating documents or by-laws are not common in Canada because they are not required or would be ineffective under Canadian law.

Early Warning Standstill

An acquiror that is obligated to file an early warning report may not acquire any more securities of that class (or securities convertible into such securities) until the expiry of one business day after the early warning report is filed.

Takeover Bid Rules

Once an acquiror has beneficial ownership of, or control or direction over, 20% or more of the outstanding voting or equity securities of a class, any further acquisitions of outstanding securities of that class would constitute a takeover bid that requires an offer to be made to all security holders unless an exemption is available.

Rights Plans

Before the 2016 takeover bid regime amendments, the primary structural defence mechanism for an issuer in Canada was a shareholder rights plan (commonly known as a “poison pill”). Rights plans are still in use, albeit with some differences from pre-2016 plans. Typical features of a rights plan include the following:

• Upon an acquiror’s acquisition of, or announcement of its intent to acquire, beneficial ownership of (typically) 20% or more of the company’s shares, all other shareholders will be given the right to purchase shares at a significant discount to the market price, substantially diluting the acquiror.
• Rights plans may allow for a “permitted bid”, which typically now means one that is required to stay open for at least 105 days and includes a minimum tender condition.

The primary value of a tactical rights plan adopted following the emergence of a bid traditionally has been to buy time for a board and shareholders to consider an offer and (where appropriate) seek alternatives to the bid.

As takeover bid offers must remain open for at least 105 days, it is generally expected that regulators will cease-trade a rights plan after that timeframe. Even where a regulator permits a rights plan to remain in place, certain Canadian stock exchanges may refuse a plan if it does not receive shareholder approval within six months of being implemented, which often functions as a de facto termination date for tactical rights plans.

Other Hurdles to Stakebuilding

Acquisitions of shares generally cannot be made if a person is in a special relationship with an issuer and possesses inside information (information that has not been generally disclosed and could reasonably be expected to affect the market price or value of a security of the issuer significantly).

Most private companies have restrictions on share transfers in their articles or in unanimous shareholder agreements that would prevent a third party from acquiring shares without board or shareholder approval.

For reporting issuers with a public float, it would not be possible to restrict share transfers in the articles or by-laws, but individual shareholders may agree to a standstill as part of a negotiated transaction.

Dealings in derivatives are permitted in Canada.

Disclosure by 10% holders must be made of the material terms of any “related financial instrument” involving the issuer’s securities as well as any other “agreement, arrangement or understanding that has the effect of altering, directly or indirectly”, the investor’s economic exposure to the issuer’s securities. Disclosure is also required of any securities lending arrangements.

See 2.4 Antitrust Regulations for filing requirements under competition laws.

Early warning reports and alternative monthly reports require disclosure of any plans or intentions that investors and joint actors may have relating to any changes in their security ownership, voting intentions or any material transaction they may propose.

An eligible institutional investor will be disqualified from filing alternative monthly reports if the investor intends to propose a transaction that would result in it acquiring effective control.

Reporting issuers must immediately disclose all “material changes”. In the context of a proposed transaction, the threshold for a material change requiring disclosure is typically met when both parties have decided to proceed with a potential transaction and there is a substantial likelihood that the transaction will be completed. There is no bright-line test for this determination; however, the Supreme Court of Canada has recently provided some guidance. See Lundin Mining v Markowich under 3.1 Significant Court Decisions or Legal Developments.

Certain Canadian stock exchanges require disclosure of all “material information”, which includes both material changes and material facts. Confidential material change filings and trading halts may be made in certain circumstances.

The acquisition by a reporting issuer of a private company will require disclosure only if the transaction is a material change for the reporting issuer. A transaction between two private companies carries no public disclosure obligation.

Most acquisitions are announced publicly only once definitive acquisition agreements are signed. Companies tend to avoid disclosing a potential transaction at the non-binding letter of intent stage because the transaction may be tentative or uncertain and premature disclosure could unduly affect the share price or give potential competitors or stakeholders time to mobilise in opposition prior to the issuer having any deal certainty. If the transaction is announced prematurely, the target could suffer reputational harm or face questions from regulators.

Significant business combinations usually involve a thorough scope of due diligence including searches of public bankruptcy, lien and litigation registries, obtaining a corporate profile, and a review of public filings on SEDAR+, the System for Electronic Disclosure by Insiders (SEDI) and other databases.

Searches are typically run against the target company and its management and material subsidiaries; for privately held companies, they are also run against the selling shareholders.

Diligence documents, such as financial statements and material contracts, will typically be supplied by the target to the buyer and its counsel via an electronic data room.

Common factors affecting the scope of due diligence include the nature of the target’s industry, the jurisdiction where assets are located, whether the target competes with the buyer, and the access to sensitive information the target is willing to grant.

Most letters of intent and acquisition agreements include exclusivity obligations on the target. Acquirors will usually want to know that the target has ceased all negotiations and is not shopping their deal to third parties.

Most targets will want a standstill arrangement in place with the acquiror.

For the acquisition of a reporting issuer, it is common for exclusivity obligations to contain a “fiduciary out” clause allowing the target to terminate the agreement and accept a superior proposal if doing so would be consistent with the target board’s fiduciary duties. The acquiror would typically have a right to match the superior proposal or would be entitled to be paid a break fee (as described in 6.7 Types of Deal Security Measures) if the agreement is terminated.

A “superior proposal” will typically need to satisfy specific negotiated conditions, including that:

• it is for all the target’s shares (or in some cases substantially all assets);
• it is reasonably capable of being completed without undue delay with regard to all financial, legal, regulatory and other aspects of the competing transaction;
• it is not subject to any financing condition; and
• the target board make a determination that it is a more favourable transaction.

The existence of “hard” lock-up agreements (ie, the shareholder is not permitted to withdraw and tender its shares to, or vote in favour of, any other competing transaction) with target shareholders holding a significant percentage of shares could render an offer incapable of being a “superior proposal” because it is not reasonably capable of being completed.

The documentation used to set out the terms of a deal is determined by the nature of a transaction.

If the transaction is a takeover bid, the acquiror must publicly file a takeover bid circular that describes the terms of its offer and includes other required disclosure. If the terms of the takeover bid subsequently change, further notices must be filed. For friendly takeover bids, the acquiror would typically enter into a support agreement with the target prior to launching the bid, setting out the process of the bid, conditions and certain deal protections.

If the transaction is a plan of arrangement or other negotiated business combination, the acquiror and the target would enter into an arrangement or combination agreement. The agreement would set out the process of the transaction (including shareholder, court and other approvals), conditions and certain deal protections.

Parties typically enter into a non-binding letter of intent, setting out the proposed deal terms and providing for exclusivity, expenses and confidentiality.

Parties then conduct due diligence and negotiate a definitive acquisition agreement. The time required varies, depending on the size and nature of the target and the involvement of third parties, such as lenders.

The timeline for a friendly takeover bid generally is 50–65 days beginning from the start of preparation of the takeover bid circular to the completion of the transaction, assuming the target waives the minimum bid period of 105 days (shortening it to a period of no less than 35 days).

A hostile takeover bid must remain open for at least 105 days. The bid period may be shortened by the target or reduced to no less than 35 days if the target announces an alternative transaction, such as a plan of arrangement, requiring approval by the target’s shareholders. A mandatory ten-day extension period will apply if the bidder satisfies the minimum tender condition and is required to take up securities that were tendered under the bid. Defensive tactics used by the target may vary the timeline to complete the bid.

Typically, following a successful takeover bid, the acquiror will conduct a second-step transaction to obtain 100% of the outstanding shares.

If the target is a private company, the parties may sign the definitive documents and close the transaction on the same day. Otherwise, closing may take 30–60 days or longer depending on the extent to which shareholder, court or regulatory approvals are required.

Complex transactions often will have outside dates that may be extended to accommodate regulatory approvals.

An acquisition of outstanding voting or equity securities of a reporting issuer that would cause a shareholder, together with any joint actors, to have beneficial ownership of and/or control over 20% or more of the outstanding securities (calculated on a partially diluted basis) is prohibited, unless:

• the shareholder makes an offer to all shareholders of the same class via a takeover bid; or
• an exemption from the takeover bid rules is available.

Such exemptions include:

• certain purchases by private agreement from not more than five persons; and
• normal-course market purchases of no more than 5% of the outstanding securities in any 12-month period.

Both cash and shares of the acquiror are commonly used in Canada as consideration in M&A transactions.

The takeover bid rules require that identical consideration be provided to all target shareholders, with limited exceptions. Generally, no collateral benefits are allowed to be offered selectively to certain shareholders.

Plans of arrangement offer flexibility on consideration, as long as the arrangement overall is fair and reasonable.

In private M&A, particularly in industries with high valuation uncertainty, tools commonly used to bridge value gaps between parties include holdbacks and earn-outs.

• With a “holdback”, an acquiror will hold on to some of the purchase price until after closing in order to satisfy indemnity or breach of warranty claims. This holdback amount may be provided to an escrow agent, particularly in cases where the seller has concerns about the creditworthiness of an acquiror.
• With an “earn-out”, part of the purchase price will remain subject to performance requirements or other milestones that must be satisfied after closing and may also be used to set off indemnity or breach of warranty claims. The most common criterion is financial performance.

Sellers may also provide some or all of the financing, or reinvest proceeds in the purchaser, to facilitate the closing.

Common conditions for takeover bids include:

• There is no shareholder rights plan in effect, or the rights plan will be waived;
• Regulatory approvals (including under the Competition Act and the ICA) and third-party approvals or consents have been obtained;
• There has not been a material adverse change;
• There is no existing, pending or threatened litigation involving the target that would lead to a material adverse effect; or
• There are no laws that would prevent the bidder from taking up or paying for the securities subject to the bid and there are no laws in effect or proposed that would have an adverse effect on the target.

In takeover bids, the offeror must make adequate arrangements before the bid to ensure that the required funds are available to make full payment, as discussed in 6.6 Requirement to Obtain Financing.

All bids, even partial bids, must provide for a mandatory minimum tender condition that more than 50% of securities owned by security holders other than the bidder be tendered to the bid. This minimum tender requirement must be met before the bidder may acquire any of the securities subject to the bid.

Bids for all of the outstanding shares may include a higher minimum tender condition to ensure that the bidder, through a second-step business combination, can obtain the remaining shares that are not deposited. This condition will usually require a deposit of at least 66⅔% of the outstanding shares and sufficient shares to obtain approval of a majority of the minority shareholders for the second-step transaction. Canadian securities regulations allow securities that were obtained under a lock-up to be voted as part of the majority of the minority vote if the locked-up security holder is treated identically to all others under the offer.

If a bidder is only seeking control, it may include a minimum tender requirement of, for example, 51% of the outstanding shares instead. Parties may apply to Canadian securities regulators to waive or vary the minimum tender condition, although regulators will allow such a waiver only in rare cases.

In an arrangement, amalgamation and other business combinations, there is no regulatory requirement or restriction on financing conditions. However, the target will generally require that the acquiror show evidence that it will be able to fund the cash consideration.

For takeover bids that offer cash consideration, the bidder must have adequate financing arrangements in place before commencing the bid to ensure that the required funds are available to make full payment. The financing itself may be conditional at the time the bid is commenced, if the bidder reasonably believes that the possibility is remote that it will not be able to pay for securities deposited under the bid.

Acquirors may seek a wide variety of deal protection measures, examples of which are described as follows.

Support Agreements and Lock-Ups

In a friendly takeover, before launching the bid, the bidder and the target may enter into a support agreement whereby the target agrees to recommend that its shareholders tender to the bid and the bidder agrees to launch the bid on terms specified in the support agreement, subject to conditions such as a fiduciary out.

The directors, officers or significant shareholders of a target may also enter into lock-up or voting agreements with the acquiror to deposit their shares to the bid or vote their shares in favour of an arrangement. These agreements may be “hard” or “soft” (see 6.11 Irrevocable Commitments).

Stock exchange rules may require that disinterested security holders approve of voting agreements requiring shareholders to vote their shares in accordance with management recommendations. Negative voting agreements (those requiring a shareholder not to vote against management’s recommendations), however, are not required to be approved by disinterested security holders.

Break/Termination Fees

A common deal-protection measure in Canada is a break fee which may be paid by the target to the acquiror if an arrangement or other business combination is not completed. These types of fees usually range from 1% to 5% of the target’s equity value.

Reverse break fees requiring a payment by the acquiror to the target if the acquiror breaches the acquisition agreement, or is not able to complete the sale, may also be used.

No-Shop/Go-Shop Clauses

No-shop clauses prohibit a target from soliciting other takeover offers or providing information to other third parties that might be used to make an offer. These provisions will typically include a “fiduciary out” (see 5.4 Standstills or Exclusivity).

Go-shop clauses, in contrast, allow a target to negotiate or “shop” a transaction with third parties for a specific amount of time after the execution of the agreement. Go-shops are less common but may be desirable if the acquiror wants to announce the deal publicly before the target tests the market.

Matching Rights

The acquiror may be provided the right to match a superior proposal and complete the transaction.

Managing Risk During the Interim Period

Once a definitive acquisition agreement is signed or a takeover bid launched, the acquiror is bound to complete the transaction unless one of the expressly stated conditions is not satisfied.

Definitive acquisition agreements now contain specific pandemic or epidemic provisions, including representations about the impact of public health measures on the business and the extent to which government support has been relied on. Material adverse effect and ordinary course of business provisions have garnered greater attention in recent years, in part due to the COVID-19 pandemic’s impact and current global trade uncertainty.

If an acquiror is not seeking 100% ownership of a target, it may negotiate for additional governance rights with respect to a target outside its shareholdings, including the right to:

• nominate individuals to the target’s board and/or to sit on board committees;
• be a board observer;
• participate in, or require, a public offering of the target’s equity securities; and
• approve of change of control transactions, issuances of shares and other major decisions.

Shareholders are permitted to vote by proxy in Canada.

If an acquiror wishes to obtain 100% of the shares of a target and is not able to do so through the bid process, there are two other methods that can be used to acquire the remaining shares, depending on the holdings of the acquiror after the bid is complete.

Second-Step Business Combination/Going-Private Transaction

A second-step business combination or a going-private transaction can be implemented if the bidder holds between 66⅔% and 90% of the outstanding shares after the bid is complete. Following the bid, the bidder will be able to take the company private through an amalgamation or a plan of arrangement.

Such a business combination will need to be approved by a special majority of the shareholders at a shareholder meeting and will be subject to certain minority shareholder protections. (For instance, a majority of the minority of the shareholders will be required to approve of the business combination.) However, as the majority shareholder, the bidder can participate and vote the shares that were acquired under the takeover bid. Thus, if the bidder acquires 66⅔% of the outstanding shares, in most cases, it will have sufficient votes to obtain the majority of the minority approval.

Compulsory Acquisition

Under corporate law, if a bidder obtains 90% of the outstanding shares subject to the bid within 120 days of the commencement of the bid, it can acquire all of the shares that remain outstanding for the same price as was offered under the bid. This compulsory acquisition procedure does not require a shareholder vote.

Shareholders that did not tender to the bid are provided with dissent rights that allow them to apply to a court to fix the fair value of their shares.

Before launching a bid, it is common for the bidder to enter into lock-up agreements with major target shareholders whereby the shareholders agree that they will tender to the bid. A “soft” lock-up allows a shareholder the right to withdraw and accept a higher offer, while a “hard” or irrevocable lock-up does not. Hard lock-ups are less common and are generally time-limited.

A takeover bid in Canada is launched by:

• mailing the bid materials to the target shareholders directly; or
• placing an advertisement in at least one daily newspaper in each applicable province in Canada and, concurrently with or prior to that publication, filing the bid documents and delivering them to the target.

The advertisement method is typically used in hostile bids when the acquiror does not have access to the shareholder lists to complete the mailing itself and does not want to request the list in advance for fear of tipping off the target. Once the advertisement is placed, the acquiror must request the shareholder list from the target and mail the circular to target shareholders.

In the context of an amalgamation, arrangement or other business combination, public companies in Canada are required to disclose material changes, which may include the decision to implement these kinds of transactions at the board level or by senior management if they believe board approval is probable.

If the consideration for a bid is to be shares or partly shares, the bidder must provide prospectus-level disclosure.

The target must publicly file a directors’ circular, prepared by its board, which includes the board’s recommendations regarding the bid and other information.

An acquiror providing share consideration must provide its audited financial statements for the past three years, interim financial statements if available, and pro forma financial statements that give effect to the acquisition.

The financials must include a statement of the financial position of the issuer as at the beginning of the earliest comparative period for which financial statements that are included comply with the International Financial Reporting Standards (IFRS) in certain cases. If the statements are the first IFRS financial statements prepared by the issuer, the issuer must include the opening IFRS statement of financial position at the date of transition to the IFRS.

The pro forma financial statements must be those that would be required in a prospectus, assuming that the likelihood of the acquisition is high and that the acquisition is a significant acquisition for the acquiror.

If the acquiror is a reporting issuer, it may incorporate by reference its existing continuous disclosure.

Securities laws in Canada require that annual and quarterly financial statements of reporting issuers be prepared in accordance with Canadian generally accepted accounting principles (GAAP) applicable to publicly accountable enterprises and disclose, in the case of annual financial statements, an unreserved statement of compliance with the IFRS. GAAP, in the context of Canadian securities regulation, must be determined in accordance with the Handbook of the Canadian Institute of Chartered Accountants.

In a takeover bid, the following transaction documents are required to be disclosed in full:

• the takeover bid circular and any documents incorporated by reference;
• the directors’ circular;
• any lock-up agreements; and
• any support agreement.

In a plan of arrangement or other business combination, the following documents are required to be disclosed in full:

• the management information circular delivered with the meeting materials and any documents incorporated by reference;
• any support agreements; and
• the arrangement or business combination agreement.

Reporting issuers are required to meet certain continuous disclosure obligations and file material contracts on the SEDAR+.

Directors’ duties in Canada include the following:

• to act honestly and in good faith, with a view to the best interests of the corporation; and
• to exercise the care, diligence and skill of a reasonably prudent person in comparable circumstances.

In discharging their fiduciary duties, directors must exercise their powers for the benefit of the corporation and not for an improper purpose.

These duties are owed to the corporation even in the context of a business combination or a hostile bid. However, the Supreme Court of Canada has confirmed that directors are permitted to consider the interests of a variety of stakeholders in fulfilling their responsibilities. This stakeholder-friendly corporate governance model has been codified in the Canadian federal corporate statute.

The common law provides guidance as to which stakeholders’ interests may be considered, but does not provide guidance on whose interests, if any, should be prioritised. Although directors do not owe a fiduciary duty to shareholders and the “Revlon duty” (ie, when a break-up or change of control transaction is inevitable, the board’s fiduciary duty is to maximise shareholder value) has not been upheld by Canadian courts, directors are not prohibited from taking steps to maximise shareholder value or prioritise shareholders over other stakeholders.

Special committees comprised of target directors who are independent of a proposed transaction are often established to evaluate the terms of the transaction. They may also:

• consider strategic alternatives;
• negotiate the proposed transaction;
• provide recommendations to the board about the proposed transaction; and
• if applicable, supervise a valuation or fairness opinion.

It is common for target boards to establish special committees in business combinations involving a related party. Special committees are required by Multilateral Instrument 61-101 (MI 61-101) in certain circumstances when one or more directors have a conflict of interest. Members of the special committee must be free of real or perceived conflicts.

Courts will often consider whether and at what time in the process of a transaction a special committee was formed and the procedures it followed in evaluating the transaction. Establishing a special committee as soon as possible and before the material terms of a transaction are in place is a way to show that directors’ decisions have been made without conflicts.

Directors are provided a high level of deference at common law. Canadian courts have recognised the “business judgement rule”, which sets out that a court should not substitute its own decisions for those decisions made by directors, and deference should be accorded to business decisions of directors provided they are taken in good faith and within a range of reasonableness in the performance of the functions the directors were elected to perform by the shareholders.

If directors act independently, in good faith and on an informed basis in a way that they reasonably believe is in the best interests of the corporation, courts generally will defer to their judgement. Directors should take reasonable steps to show that they made their decision on an informed basis, for example by retaining outside experts or by learning about relevant issues such as the impact of AI on the business.

Independent outside advice is commonly given to directors in a business combination from:

• investment bankers;
• outside legal counsel;
• financial and tax advisers;
• public relations firms; and
• proxy solicitation firms.

Under Canadian corporate law, if a director is a party to a transaction with the corporation, is a director or officer of a party to the transaction or has a material interest in a party to the transaction, the director must disclose the nature and extent of this interest and may be required to refrain from voting on the matter.

Under Canadian securities law, the Multilateral Instrument 61-101 (MI 61-101) regulates transactions with potential conflicts of interest. This instrument provides procedural protections for minority shareholders. Depending on the type of transaction, the following may be required:

• a formal valuation by an independent valuer supervised by a special committee;
• a majority of the minority shareholder approval; and
• enhanced disclosure, including disclosure of prior valuations prepared for, and offers received by, the target in the past two years.

MI 61-101 encourages, but does not require, targets to form special committees and encourages the formation of a special committee in any transaction to which MI 61-101 applies.

Conflicts of interest of directors, managers, shareholders or advisers have been the subject of judicial and regulatory scrutiny as well. Securities regulators in Canada have, in particular, examined the question of whether a party is a joint actor with the acquiror. This is a factual analysis, and its finding may have an impact on whether the transaction is an insider bid or related party transaction and hence subject to the additional requirements under MI 61-101 previously set forth.

Hostile takeover bids are permitted in Canada but are not very common, as the takeover bid regime is relatively target-friendly.

Canadian securities laws allow directors to use measures to defend against hostile takeovers. Regulators may intervene when defensive measures are likely to deny or severely limit the ability of shareholders to respond to a takeover bid.

Shareholder Rights Plans

Shareholder rights plans or poison pills are often used by target companies to defend against hostile bids. Rights plans will not block hostile bids entirely but are instead a way to encourage the fair treatment of shareholders in connection with a bid and to allow the target board and shareholders to respond to and consider the bid. They also allow time for the target board to seek available alternatives and prevent creeping takeovers. See 4.3 Hurdles to Stakebuilding.

Crown Jewel/Scorched Earth

A target may attempt to restructure or recapitalise so as to provide shareholders with cash value, for instance, by selling a significant asset in order to become less attractive to a bidder. The directors must undertake a “crown jewel” transaction with a view to the best interests of the corporation, and the sale must have a demonstrable business purpose. The board of a target may also decide to increase long-term debt substantially and concurrently declare special dividends to distribute cash to its shareholders.

Defensive Private Placements

Private placements that have the effect of blocking a bid have been recognised by Canadian securities regulators as a possible defensive tactic, but they could be found to be inappropriate if they are abusive or frustrate the ability of shareholders to respond to a bid or competing bids.

Golden Parachutes

Golden parachutes for key employees may be triggered if those employees are terminated after a third-party acquisition.

White Knight

Targets may seek an alternative transaction with a friendly party or a “white knight” that might offer more value (or in some cases more preferential terms or deal certainty) to its shareholders than the original bidder.

Issuer Bid

If a target is unable to find a white knight, it may offer to repurchase its outstanding shares itself.

Pac-Man

A target might flip the script and make a bid for the shares of the hostile bidder.

Advance Notice By-Law

A target’s by-laws or other constating documents may be amended to require advance notice of shareholder nominations for members to the board of directors, thereby giving the target the time to respond strategically to a proxy fight in the context of a hostile bid.

Canadian directors owe the same duties when they are enacting defensive measures as in any other context. Boards in Canada owe a fiduciary duty to the corporation, not to the shareholders, and are not required to conduct an auction once a company is “in play”.

This principle is especially important for nominee directors, who should be careful to manage conflicts of interest and only share information with their nominating shareholder with the consent of the company.

Canadian courts have held that the conduct of directors will be analysed on an objective standard of what a reasonably prudent person would do in comparable circumstances. See 8.3 Business Judgement Rule.

Target boards in Canada cannot “just say no” in the same way that this strategy is understood in the USA. Canadian directors of public companies, while they may implement defensive measures, are not able to prevent a bid from being presented to the shareholders indefinitely.

M&A litigation in Canada is not as prevalent as in other jurisdictions such as the USA. Class action securities litigation is relatively new in Canada. Parties involved in private acquisitions will often choose arbitration over litigation to provide them with greater efficiency and confidentiality.

Notably, there has been a rise in the use of representation and warranty insurance, which serves as the primary recourse for a breach of representations by the company or its security holders in instances where a policy has been put in place as part of closing.

Litigation can occur at any stage of a transaction. A plan of arrangement requires court approval, which provides a forum for aggrieved stakeholders.

Other remedial avenues for stakeholders include a cease-trade order or other relief preventing the consummation of a takeover bid from a securities regulator.

Courts will typically uphold agreements in the M&A context and only in exceptional circumstances will they find an agreement unenforceable or allow parties to walk away from an agreement. 

See 3.1 Significant Court Decisions or Legal Developments.

Canada is often viewed as an activist‑friendly jurisdiction.

After two exceptionally active years, overall activism in Canada moderated somewhat in 2025, though activity levels remained above long‑term averages and are expected to remain elevated. A significant portion of activist work in 2025 focused on mergers and acquisitions and broader corporate strategy, reflecting a strengthening M&A environment and continued shareholder scrutiny of board‑supported transactions.

Activist campaigns in Canada typically begin with a confidential approach to the board, in which the activist outlines its concerns and demands, often accompanied by an implicit or explicit threat of public escalation if engagement does not produce the desired outcome. If discussions fail, activism can take a variety of public forms.

Board‑focused activism and proxy contests remain a prominent feature of the Canadian landscape, with activists seeking board representation through dissident slates, requisitioned meetings, or vote‑withhold and vote‑against campaigns. While annual success rates can fluctuate, activists have continued to achieve meaningful outcomes over time, frequently securing partial or full board representation through settlements or shareholder votes. In 2025, activists achieved full or partial success in about two thirds of campaigns, outperforming results from the previous two years.

Although shareholder proposals addressing matters within the board’s discretion are generally advisory and non‑binding, they remain an important activist tool, as the publicity they attract can create pressure for change.

Transactional activists often focus on strategic alternatives and capital allocation. Common demands include strategic reviews, asset divestitures, company sales, share buy‑backs, or increased dividends. Activists may oppose board‑supported transactions, requisition shareholder meetings, conduct public-media or social‑media campaigns, or, in some cases, launch competing tender offers. In certain situations, the objective is to advance an alternative transaction; in others, the goal is to improve the terms of an existing deal.

In transactional shareholder activism, announced transactions are frequently a target for campaigns. In some notable examples, shareholders issued open letters advocating for higher values for their shares and engaged securities regulators to address claims of unequal treatment, called on a board to launch strategic reviews of fossil-fuel assets, and requisitioned a shareholder meeting in response to a Real Estate Investment Trust’s plan to sell off some real estate assets.

However, courts may interfere with such activism to help secure the required shareholder vote. Recently, the British Columbia court permitted the option holders of Fission Uranium to exercise their options such that they become part of the shareholder vote, thereby overcoming the opposition and approving a plan of arrangement.