Introduction

The Canadian political and economic environment in 2025 is defined by geopolitical instability, shifting trade alliances and tighter regulatory oversight. Interest rates remain elevated, which raises the cost of capital, narrows debt capacity and places a premium on stable cash flows. Existing and proposed US tariffs on Canadian imports have pushed some Canadian buyers to pursue defensive acquisitions in the United States to localise production and reduce tariff exposure while other entities with Canadian operations have sought to alter their logistics chains to minimise the impacts of tariffs and the associated uncertainties. Shifting trade alliances are prompting the federal government to recalibrate economic policy and to channel public capital toward projects of national importance.

Against this backdrop, M&A activity in Canada’s energy and infrastructure sectors continues to evolve in both form and focus. Parties are cautious in the face of new compliance expectations and valuation gaps, yet inventive as the government creates various opportunities to keep deals moving.

Legislative Changes

Regulatory settings now shape outcomes in Canadian energy and infrastructure M&A as much as price and strategy. The same forces highlighted above have also influenced changes to government policy in this area. The federal response has two important parts: the application of more assertive oversight pursuant to competition and national security reviews, and the creation of new pathways for nationally significant projects. The result is a more structured process that rewards early planning, well-structured files and credible engagement with Indigenous rights holders. Transactions that ignore these realities may face longer reviews, conditional approvals and higher execution risk.

Competition Act

Changes to Canada’s Competition Act have conferred greater authority to the Competition Bureau and the Competition Tribunal to review and block mergers. Among the notable changes, the law now sets a rebuttable presumption that shifts the burden on merging parties if the Herfindahl-Hirschman Index (HHI) is likely to rise by more than 100 and either the combined firm’s share would exceed 30% or the post-merger HHI would be at least 1,800. As a result, the Competition Bureau and the merging parties are spending more time defining markets and measuring market shares.

The Bureau can also obtain automatic injunctions to block closing when they file an application with the Tribunal. This effectively gives the Bureau more time to complete its review and build a case where it intends to challenge the merger. The extended timetable means that parties need to plan for possible litigation in their closing timeline and allocate risk in the contract accordingly. Parties will need to consider whether they are prepared to litigate the initial injunction application with a view to closing or whether they will agree to offer to hold the target business separate pending the outcome of the litigation.

Amendments to the Investment Canada Act

The Canadian government continues to tighten the rules on national security reviews of foreign investments into Canada. The Minister responsible for administering the ICA now has the authority to make interim orders to prevent the parties from planning for integration if the Minister has concerns related to national security risk. Further changes are pending implementation, including prescribing investments in certain sensitive sectors that will require mandatory filing pre-closing. Today, only investments that exceed very high financial thresholds and are structured in a certain way require a pre-closing approval.

Energy and infrastructure continue to be a focus of the national security review process, and it is anticipated that investments in these sectors will be subject to pre-closing filing and approval.

Investments that face a national security process can take many months to clear. Moreover, if an investment is caught up in a national security review, the path to an approval is murky. The Canadian government has been very reluctant to approve investments subject to mitigation conditions. Parties have had more success when they can show that the transaction is not properly within the jurisdiction of the ICA. In at least one recent case, the Minister settled the litigation with the parties, and allowed closing, on the condition that the parties agree to offer an offtake into the North American market on commercial terms.

Provinces are also creating policies relating to national security. For example, Ontario’s Protect Ontario by Unleashing our Economy Act, 2025, is aimed at safeguarding the province’s strategic mineral supply chain and broader economic security. It amends the Mining Act to give the Minister of Mines broad discretion over mineral tenure and system access. Where it is desirable for the protection of the strategic national mineral supply chain, the Minister can suspend or revoke access to the Mining Lands Administration System (MLAS), refuse or terminate prospector licences, and deny or cancel mining leases and unpatented claims, often without prior notice. As a result, even with federal approval, foreign investors can face province-specific risks. This may result in heavier diligence and transaction documents that include Ontario-specific conditions precedent, bring-down certificates on MLAS status, and longer outside dates. Deals still close, but timelines are longer and conditionality is higher.

Federal Major Projects Office

Alongside tighter screening, the federal government is trying to accelerate execution for projects with national importance. The Major Projects Office (MPO), launched in August 2025 under the Building Canada Act, is intended to act as a single point of contact within the federal apparatus. Its mandate is to co-ordinate approvals across departments, streamline regulatory steps and help structure financing. The stated selection criteria align with current policy, which places priority on autonomy, resilience and security. Projects must show material economic benefits to Canada, support clean growth and climate objectives, and be ready to execute. Alignment with Indigenous interests is also a core requirement. The MPO also connects proponents with public capital, including the Canada Infrastructure Bank, the Canada Growth Fund and Indigenous loan guarantee programmes at the federal and provincial levels.

Canada’s current MPO files under consideration include:

• LNG Canada’s Phase 2 in Kitimat, British Columbia, which is expected to double its liquefied natural gas output;
• the Darlington New Nuclear Project in Bowmanville, Ontario, the first operational small modular reactor unit in Canada;
• the Contrecoeur Terminal Container Project near Montréal, Québec, a roughly 60% expansion of container capacity at the Port of Montreal;
• the McIlvenna Bay copper and zinc mine in east-central Saskatchewan; and
• the Red Chris copper mine expansion in northwest British Columbia.

Defence industrial strategy

The federal government is pairing these tools with a defence industrial strategy that sets longer-term demand signals and prioritises domestic capacity, secure supply chains and continental resilience. The strategy is designed to convert national security needs into predictable pathways for shipbuilding, aerospace, surveillance, cyber and munitions. Dual-use and enabling infrastructure are now higher on the policy agenda. Northern corridors, critical mineral processing and ports that support both trade and defence mobility are gaining attention.

This shift is intended to prioritise assets with redundancy and sovereignty value, not only cash flow. Transactions that bundle industrial capability with enabling infrastructure perform better in screening. Power reliability for electrified yards, hydrogen or LNG bunkering at ports, resilient grid connections at bases and secure data architecture are now part of bankability as well as policy alignment.

Indigenous consultation

Project selection and federal co-ordination are now paired with a stronger expectation of meaningful Indigenous consultation and participation. On 10 September 2025, the federal government created an Indigenous Advisory Council to guide the MPO. The Council includes eleven members from First Nations, Inuit, Métis, and Modern Treaty and Self-Governing communities. Its mandate is practical: promote equity ownership opportunities for Indigenous communities; improve consultation quality; and identify surface issues early so project conditions reflect rights and interests. The Building Canada Act already requires meaningful consultation; however, the Council supplies expertise, a shared forum and accountability.

Recent case law reinforces this direction. In Kebaowek First Nation v Canadian Nuclear Laboratories, the Federal Court held that the Canadian Nuclear Safety Commission (CNSC) must treat the United Nations Declaration on the Rights of Indigenous Peoples and the federal UN Declaration Act as interpretive tools when assessing the duty to consult and accommodate. The CNSC has authority to decide questions of law, so it must use UNDRIP as an interpretive lens. The Court held that the record fell short of the standard, notably in its handling of free, prior and informed consent. The Court further instructed that the process continue under a UNDRIP informed approach with a specific timetable. The case is a clear reminder that faster federal timetables will not rescue a thin consultation record.

Technology and AI

As artificial intelligence becomes increasingly widespread globally, its influence on Canada’s energy and infrastructure sectors is starting to become more evident. The government’s investment and research into AI are growing, but they are currently outpacing the infrastructure required to support AI. As the demand for data centres grows, there will likely be a corresponding increase in infrastructure projects related to power generation development.

Financing Conditions

Market conditions in early 2025 were pressured by the threat of tariffs, inflationary pressures, and reduced deal volumes; however, deal values remained high, reflecting greater focus on larger transactions by the market. In the public context, companies of all sizes are seeing a return to greater capital availability to execute on and, accordingly, this has led to increased deal volume, which are expected to persist into 2026 provided there are no further significant changes to the economic and political climate.

Private credit

Private credit emerged as a significant funding source in early 2025 as public markets remained volatile. Private credit offers speed and firm commitments that are attractive to borrowers particularly in the face of uncertainty. While the cost is higher than traditional bank debt, the benefits often make it a valuable short-term solution. The result is a hybrid market in which private credit provides speed and certainty, while bank capital offers liquidity and longer-term takeouts once approvals are secured. Direct lenders have participated in large, broadly syndicated transactions, and banks and private credit managers have formed joint ventures and marketing alliances to source deals and deliver combined debt solutions.

In energy and infrastructure, funding is staged against dated events. Typical triggers include permit issuance, interconnection, defined Indigenous consultation milestones and executed offtake or supply contracts. If a milestone is missed, credit facilities restrict discretionary spending or sweep excess cash to repayment until the issue is cured. This approach aligns capital deployment with execution risk and sustains projects through longer approval cycles.

Recent national security amendments and broader screening practices further increase the value of committed capital that can remain in place while approvals progress. As these regimes take hold, private credit is likely to account for a larger share of Canadian financings because it delivers certainty, staged draws, and clear accountability for conditions that matter to closing.

Equity financing

For publicly traded enterprises, the first months of 2025 saw a reduced availability of financing deal flow which affected companies of all sizes. While many issuers held off on securing additional public capital during this period due to the relatively low demand for equity financing, those that needed to secure such financing saw less favourable deal terms or comparatively disappointing returns. Financing demand and supply has largely rebounded in the latter half of 2025 and is expected to continue into 2026.

Co-investment by domestic institutions

Co-investment has moved from optional to standard on larger transactions. Federal policy is steering pension funds and insurers toward domestic assets through incentives and process clarity rather than quotas. On 7 March 2025, Transport Canada issued a policy statement that expands the tools airport authorities can use to attract private investment and signals openness to longer lease horizons, as well as the use of the MPO to co-ordinate approvals on nationally significant projects. The objective is to reduce approval risk and provide investable pipelines for long-duration capital.

These signals are shaping syndicate design. Sponsors reserve larger Canadian sleeves in equity syndicates and set staged equity calls against dated milestones such as permit issuance, grid interconnection and commercial operations. This approach reduces syndication risk, matches investment duration to asset life and embeds regulatory undertakings into shareholder and financing documents, which institutional investors require. Commentary across 2025 emphasises that the government’s emphasis on incentives, co-investment programmes and targeted process reforms is meant to “unlock” more Canadian patient capital for infrastructure and energy without imposing allocation mandates.

Canada Growth Fund (the “Fund”)

After a slower ramp-up, the Fund has shifted from policy signal to execution by anchoring priority projects. By late 2025, new commitments in 2025 alone exceeded the cumulative total from launch through 2024, confirming a marked acceleration in deployment. In October 2025, the Fund announced an investment of up to CAD2 billion to finance the Small Modular Reactors project to be constructed at the Darlington New Nuclear Project which will be majority owned and operated by Ontario Power Generation Inc. The project carries a risk profile that traditional financing would not support, yet its expected impact is significant, with the creation of up to 18,000 Canadian jobs annually during construction and an estimated CAD38.5 billion added to the GDP over 65 years. The transaction illustrates how public risk sharing can unlock private and Indigenous investment in energy and infrastructure during a period of uncertainty.

The Fund makes cash flows more predictable through tools like carbon price backstops, which helps lenders fund at better levels. It also acts as a credible anchor investor that closes financing gaps and signals policy support that draws in pensions, insurers and private credit, producing larger equity syndicates and firm debt commitments. Its support fits cleanly with milestone-based funding, so deals keep moving while reviews run. Combined with the MPO, the Fund reduces timetable risk and lowers the overall cost of capital for projects that matter to Canada.

Indigenous Loan Guarantee Program

The federal government launched the Indigenous Loan Guarantee Program this year. The government started with CAD5 billion and doubled it to CAD10 billion in March 2025. The Canada Indigenous Loan Guarantee Corporation can back loans from about CAD20 million to CAD1 billion for Indigenous groups so they can finance equity ownership in major projects. The goal is to accelerate Indigenous ownership in projects that are being built in Canada. 

In practice, the guarantees allow Indigenous partners to finance larger equity positions with guaranteed senior debt at materially lower interest rates than alternatives. That reduces the weighted average cost of capital at the project level. It also stabilises governance because guaranteed loans come with clear reporting and covenant packages that map cleanly into project finance documents.

On 15 May 2025, the programme announced its first deal. A partnership of 36 First Nations agreed to acquire a 12.5% interest in Enbridge’s Westcoast natural gas pipeline system. The Canada Indigenous Loan Guarantee Corporation supported the transaction with a CAD400 million guarantee. The total Indigenous equity investment was about CAD715 million. This file demonstrates the model at work in core energy infrastructure.

Provinces are building complementary programmes, which let sponsors braid federal support with provincial tools and commercial debt:

• Alberta increased the Alberta Indigenous Opportunities Corporation capacity to CAD3 billion.
• British Columbia adopted a First Nations Equity Financing Framework with a CAD1 billion provincial limit.
• Ontario tripled its Indigenous Opportunities Financing Program to CAD3 billion and broadened eligible sectors to energy, pipelines, mining and critical minerals.
• Saskatchewan’s Indigenous Investment Finance Corporation provides guarantees with minimum sizes of CAD5 million and has backed recent renewables transactions.
• Manitoba launched a CAD300 million programme in Budget 2025 and has linked it to energy development through procurement.

Conclusion

In summary, Canadian M&A activity is adapting rather than pausing. Deal design now aims to place a greater emphasis on deal certainty with additional or new closing conditions or more restrictive terms. In a market shaped by shifting trade rules and tighter screening, outcomes favour planning, evidence and disciplined execution.

At the same time, recent developments are attempting to help accelerate transactions. For major projects, the MPO can shorten timelines and remove uncertainty, which may lead to larger-scale projects moving forward. Some parties are even using AI tools in the process to accelerate document review, financial analysis and due diligence.

Financing has adjusted to the same conditions. Capital availability has largely returned in the latter half of 2025 and is expected to persist into 2026. Public financing programmes are scaling to advance projects of national importance, while private credit fills timing gaps and holds acquisitions together through longer approvals.

As the geopolitical environment continues to evolve, Canadian M&A will likely tilt further toward nationally focused, policy-aligned transactions that strengthen domestic supply chains and critical infrastructure. More deals will feature Canadian co-investment, larger Indigenous ownership stakes and financing structures built around dated milestones and public programmes.