12 | LEXPERT • June 2015 | www.lexpert.ca/usguide-corporate/
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PRIVATE EQUITY
AMERICAN INVESTORS, especially private-equity funds,
will probably give mixed reviews to the signifi cant changes to Investment Canada
Act (ICA) review thresholds and disclosure requirements that came into force on
April 24, 2015.
To begin with, the threshold for determining whether net benefi t review
is required for WTO private-sector investment will be C$600 million based
on "enterprise value" as opposed to the previous C$369 million based on asset
book value. e threshold will increase to C$800 million in 2017, C$1 billion in
2019, and be indexed to infl ation therea er. It's not clear, however, whether the
increased threshold will reduce the number of reviews given the new "enterprise
value" standard for calculating the thresh old.
US investors making public bids will also have to consider the timing of their
ICA fi lings. Because enterprise value will be calculated at the time the ICA fi ling
is made rather than at the closing of the transaction, investors may be able to fi le
when values are not high enough to make their transactions non-reviewable. is
may also work to the advantage of bidders who fi le fi rst, as subsequent bidders
may fi nd themselves subject to review if the enterprise value has increased in the
interim. As well, because SOE bids will be based on the C$369-million asset value
threshold, the treatment of sovereign and private-sector bids could be diff erent
from an ICA fi ling perspective.
" e ICA process is now more than ever a material risk factor for consideration,
and could certainly aff ect the valuation of targets," says Subrata Bhattacharjee of
Borden Ladner Gervais LLP in Toronto.
THE PRACTICAL IMPLICATIONS of the ICA changes are especially meaningful
for US-based private-equity investors, who have contributed signifi cantly to the
steadily strengthening Canadian market of the last few years.
INBOUND
PRIVATE EQU
NBOUND NBOUND
Q
US-based private-equity investors have contributed
signifi cantly to the steadily strengthening Canadian market
JULIUS MELNITZER
PHOTO:
SHUTTERSTOCK
