October 22, 2012
You Can't Buy A Company In Canada
Posted by David Zaring

Unless you're Canadian.  Foreign proposals by an American company to buy the Canadian Home Depot, for heavens sake, to say nothing of the dangerously Australian bid for a potash company a couple years ago have been scotched by regulators for not being in Canada's "national interest."  Here's how those regulators make that assessment:

In reaching a decision, judgments will be made both in measuring the effects of a proposal in relation to the relevant individual factors of assessment and in measuring the aggregate net effect after offsetting the negative effects, if any, against the positive ones. An investment will be determined to be of net benefit when the aggregate net effect is positive, regardless of its extent.

Okay, then!  It's the sort of cost benefit analysis that the DC Circuit is so thrilled about - and clear, I think we can all agree, as a bell.  Basically, the Canadian approach to foreign acquisitions is one rejected by the US, which assesses foreign acquisitions only for whether they threaten "national security" or would obtain "critical infrastructure."  But American regulators do not assess whether the country's "economic security" would be affected by a purchase, as Canadians do, despite musings by Congress to that effect - I've written about it here.

Somewhere between the United States and Canada is China's approach to foreign acquisitions, which is some combination of antitrust review and whatever seems to be bothering the Chinese at the time.  It has cost Coca-Cola a soft drink bottler, and like all of these government okays, is maddeningly imprecise.  But at least it isn't explicitly directed at the "national interest," which can look quite protectionist.

American lawyers generally advise their clients considering an acquisition of a classically American company to check with the Hill, as well as to moot it with regulators.  The need for this sort of lobbying is even more apparent overseas - though you wouldn't necessarily realize it with a standard M&A syllabus.

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