CANADA LAW AND PRACTICE Contributed by: Kevin West, Andrea Hill, Priya Ratti and Meryam Kellow, SkyLaw
investor confidence improved. However, risks of a global recession and the expectation of increased inflation from the tariff war have cre - ated uncertainty for businesses and deal making going forward. Key trends that are affecting M&A activity in Canada include the following: • The Canadian government updated its invest - ment guidelines to now explicitly consider investments and transactions that undermine the nation’s economic security. Canada con - tinues to take a cautious approach to foreign investments in Canada. • The Canadian government continues to invest in and take steps to protect critical minerals. • The Canadian dollar has declined relative to the US dollar, and the growing list of tariffs on Canadian imports are damaging business and consumer confidence. • Canadian retail businesses continue to face volatility – some benefitting from a surge of interest in supporting Canadian vendors, oth - ers struggling with supply chain challenges and decreasing consumer confidence. Hud - son’s Bay, Canada’s oldest retail company, ended its 355-year run by filing for creditor protection this spring. • While pipeline projects have previously faced staunch opposition, Canada is seeing a growing need to develop its infrastructure and focus on trading with friendly European nations. • Provincial governments will reduce internal trade barriers to support interprovincial trade. • The labour force will be directly impacted by new immigration policies following the upcoming federal election. A declining population and plans to decrease the number of temporary workers and permanent immi- grants will shrink the labour force. Industries
that heavily rely on temporary workers will be disproportionately affected. • Private equity firms continue to sit on high levels of cash as they delay deployment until they see the impact of tariffs on the Canadian economy. • Take-privates outnumbered IPOs in 2024 and are expected to continue into 2025. • The use of limited partnerships in Canada remains a steady trend and a new trend towards investing at the fund manager level is emerging. • Shareholder activism declined, possibly because the S&P/TSX Composite Index saw significant gains in 2023; however, it is expected to increase given the market disrup - tions. • Criticism over environmental, social and governance (ESG) policies has led companies to refuse to publish ESG information (green- hushing) and instead to focus on “conscien- tious capitalism” . • Cybersecurity and data safekeeping has become a top priority for Canadian compa - nies with the increase in ransoms paid for data. • A new digital services tax came into force in June 2024 requiring foreign and domestic large businesses to pay 3% DST on certain revenue earned from engaging with online users in Canada. • Canada launched the Federal Plastics Reg - istry in 2024, mandating certain reporting obligations on plastic, targeting businesses using “forever chemicals” . • The use of an exchangeable share struc - ture by US buyers to roll over the equity of Canadian sellers is increasing in popularity as it can provide meaningful tax deferral for sellers.
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