If you're an American looking to acquire a business in Canada, the short answer is yes — there's no general legal prohibition on foreign ownership of most Canadian businesses. American buyers acquire Canadian businesses regularly, and cross-border deals are more common than most people think. But there are things you need to understand before you move forward.
Most industries in Canada are open to foreign buyers. If you're acquiring a small or mid-sized operating business — a services company, a manufacturer, a distribution business — foreign ownership is generally not an obstacle. That said, certain industries are restricted or regulated. Broadcasting, telecommunications, financial services, and transportation have Canadian ownership requirements that can limit or complicate foreign acquisition. If you're looking at a business in one of those sectors, you need to know that before you spend time and money on due diligence. For most buyers reading this, it won't be an issue. But it's worth confirming early.
If your acquisition is large enough, it may be subject to review under the Investment Canada Act. This federal legislation governs foreign investment in Canada and can require notification or review of certain transactions above prescribed thresholds. For most small and mid-sized business acquisitions, this won't be a significant hurdle. But if your deal is larger, or touches on sectors deemed sensitive — including anything related to national security or critical infrastructure — it's something your legal team needs to assess upfront.
This is where cross-border deals get complicated — and where American buyers most often get caught off guard. Canada has its own tax regime, and the structure of your acquisition has Canadian tax consequences that are independent of whatever your U.S. accountant is focused on. The choice between an asset purchase and a share purchase, how the deal is financed, whether you're acquiring through a Canadian holding company — all of these decisions have tax implications on both sides of the border. You need Canadian legal and tax advice on the Canadian side of the deal. Your U.S. advisors are essential, but they don't replace Canadian counsel — they work alongside them.
The purchase price will likely be negotiated and paid in Canadian dollars. The exchange rate is something you'll want to track as your deal progresses — it can move meaningfully over a three-to-nine month acquisition process. On the financing side, if you're planning to borrow to fund the acquisition, be aware that obtaining financing through a Canadian lender as a foreign buyer can be more involved than a domestic transaction. Not impossible — but plan for it early.
I've worked with American buyers on Canadian acquisitions, and the deals that go smoothly share a few things in common. The buyer came in understanding that Canada is a different legal and regulatory environment — not dramatically different, but different enough to matter. They engaged Canadian legal counsel early, before the letter of intent was signed. They had their U.S. and Canadian advisors talking to each other. And they didn't assume that what works in an American deal automatically applies north of the border. The deals that ran into trouble were usually the ones where the buyer tried to run the transaction primarily through their U.S. team and brought in Canadian counsel too late — or not at all.
If you're an American buyer with your eye on a Canadian business, the opportunity is real and the process is navigable. You just need the right team in place. That starts with a Canadian M&A lawyer who understands cross-border transactions and can work alongside your U.S. advisors — not someone who's learning the landscape on your file. If you're at the early stages of exploring a Canadian acquisition and you want an in-depth discussion, my 1-hour deal strategy session is a good place to start. CAD$295, no commitment for future services, and you'll leave with a clear picture of what you're walking into.
Reach out at info@tetrapolar.ca.