Public acquisitions in Canada are a multi-step process. One of its mandatory components is obtaining approval from the holder of the securities, as well as the court.
Takeover bids are also a fairly popular way to acquire Canadian public companies. One can also change control over a company by merging two or more companies.
The table below outlines the main advantages and disadvantages that a buyer should consider when choosing a method of acquiring a public company in Canada. Each method has its pros and cons, so it is impossible to say unequivocally which of them is preferable for a private investor. The choice is yours.
Acquisition method |
Pros |
Cons |
Public transactions. A transaction that is carried out through a process established by law, previously set out in detail. An agreement is reached by negotiations between buyer and seller. |
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Acquisition proposal. Receive securities holders on the acquisition of more than 20% voting/equity securities of a certain class. |
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Merger. Two or more companies start a deal on a merger in Canada directly. |
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Considerations before purchase
A potential buyer should consider a number of issues before making his final decision about the purchase. Among those are:
- Available funding
If the remuneration for the takeover bid is cash, the buyer must have sufficient financing arrangements to make full payment for the securities.
- Purchase prior to bidding
Following the public announcement of the takeover bid, the buyer's ability to acquire additional shares in the target company in Canada outside the takeover bid is limited. Thus, buyers prefer to accumulate shares (either through purchases on the public market or by private agreement) before the announcement of the takeover bid, acquiring a "retained position" in the company. The buyer must be careful when purchasing more than 19.9% of all securities of a private company.
- Agreements to support or block voting
Before allocating significant resources to the acquisition of shares of a Canadian private company, the buyer often seeks support from one or more major holders of securities. This support is confirmed by a voting support agreement (in the case of an agreement or merger plan) or a blocking agreement (in the case of a takeover bid). Any such agreement must be submitted to the securities regulators and be available to the public.
Final word
All information contained in this publication is for informational purposes only and should not be perceived as professional advice.
If you are planning to acquire control of a private company in Canada, seek advice on structuring securities transactions in Canada from our company's seasoned specialists.