Changing U.S. National Security Rules: What This Means For Mergers And Acquisitions

Investments involving Canadian companies face increasing scrutiny from Canada's security and intelligence agencies and closest allies (the U.S., the U.K., Australia and New Zealand, known as the Five Eyes). Since 2009, the Investment Canada Act has provided a process that allows the Canadian authorities to review, block or remedy foreign direct investments in Canadian businesses on national security grounds. This national security review mechanism has even been applied in M&A transactions involving Canadian businesses with only tangential connections to Canada.

Security and intelligence agencies are increasingly cooperating in their reviews of national security threats from foreign direct investments. Because of this close cooperation, developments — particularly in the U.S. — are critical for Canadian companies to monitor closely.