Overview
Canada, like its neighbors to the south, experienced a
record-breaking M&A environment in 2021. Transaction activity
increased across the board, with significant growth particularly in
the mid-market segment. While 2022 has seen a global cool down in
M&A activity, we believe this "break" will be short
lived. A significant amount of Canadian M&A activity continues
to be driven by non-Canadian buyers and, in particular, U.S. based
private equity purchasers. Below we explore certain considerations
relevant to acquiring a privately held Canadian business.
Deal Structure
Canadian M&A transaction structure largely depends on tax
implications and bargaining power. Similar to many other
jurisdictions, share sales generally benefit Canadian sellers since
sale proceeds receive "capital gains" treatment. Only 50%
of these amounts are taxable, and in some private transactions can
be completely tax-free (up to a limit of just less than C$1 million
per seller).
