Anonymised, illustrative composite. A fund’s counsel ran the Competition Act numbers on the target alone, found nothing close to the thresholds, and nearly filed the closing checklist without a pre-merger notification.
At a glance
A private equity fund's portfolio company — a specialty distribution platform generating roughly $355 million of revenue from sales in Canada — had identified a private add-on target with gross revenues from sales in, from or into Canada of about $150 million. The fund's investment committee approved a $92 million offer, and the deal team began drafting a share purchase agreement on a 45-day outside date, the timeline the platform's prior three add-ons had all closed inside.
Junior deal counsel ran a standard notifiability check before signing. Looking only at the target — $150 million of Canadian revenue, a private company with no debt overhang — counsel measured that one figure against the $400 million party-size limit in the Competition Act, found it well short, and treated the transaction as non-notifiable.
The check was testing the wrong unit. Competition Act s.109(1) — marginal note General limit relating to parties — provides that Part IX does not apply “unless the parties thereto, together with their affiliates,” have assets in Canada, or gross revenues from sales in, from or into Canada, exceeding four hundred million dollars. Two things follow that the memo missed. First, s.109(2)(a) defines the parties to a proposed share acquisition as both the person acquiring the shares and the corporation whose shares are to be acquired — this is not a buy-side test, it aggregates both sides. Second, a fund's portfolio companies under common control are affiliates for this purpose. Added as the section requires, the platform's $355 million and the target's $150 million come to $505 million, comfortably over the limit.
Both limbs of s.110(3) (Acquisition of shares) were also satisfied — and this is where the memo's second error would have sat. Limb (a) is a size-of-target test, not a size-of-deal test: it asks whether the assets in Canada owned by the target and the entities it controls, or the gross revenues from sales in, from or into Canada generated from those assets, exceed the amount set by s.110(7) or (8). The target's $150 million of Canadian revenue is what is measured there. The $92 million purchase price is not measured anywhere — unlike the United States, Canada has no notification test keyed to transaction value, and reading s.110(7)'s dollar figure as a price threshold is the standard way this analysis goes wrong. Limb (b) is the share test: acquiring 100% of a private company's voting shares is past the 35% figure in s.110(3)(b)(ii), which applies where none of the corporation's voting shares are publicly traded (the 20% figure in (b)(i) is for publicly traded shares). The s.110(7) amount was enacted at $70,000,000; s.110(8) re-determines it each year on a nominal-GDP formula and s.110(9) requires the Minister to publish it in the Canada Gazette — a mechanism, not a fixed number, and this file does not quote a current-year figure for it.
$355,000,000 (the platform's Canadian revenue) + $150,000,000 (the target's) = $505,000,000 — over the $400,000,000 party-size limit in s.109(1), which aggregates both parties and their affiliates. The target's own $150,000,000 of gross revenue from sales in, from or into Canada is over the size-of-target amount referred to in s.110(3)(a)(ii), enacted at $70,000,000 by s.110(7) and re-determined annually under s.110(8). A share acquisition of 100% of a private company is over the 35% figure in s.110(3)(b)(ii). The $92,000,000 price appears in none of those calculations. Section 109(1) and both limbs of s.110(3) being satisfied together is what makes notification under s.114(1) mandatory before closing.
Once notification was confirmed as mandatory, the timeline ran on the Competition Act's own clock, not the parties'. Under s.123(1) (Time when transaction may not proceed), a proposed transaction shall not be completed before the end of 30 days after the day the Commissioner receives the information required under s.114(1) — unless, within that same 30-day period, the Commissioner requires additional information under s.114(2) (Additional information), a Supplementary Information Request (SIR). Where an SIR issues, s.123(1)(b) substitutes a fresh period running 30 days from the day the Commissioner receives the s.114(2) information — not from the SIR itself, and not from the original filing.
That is what happened here. Filing went in on day 0. The Commissioner issued an SIR on day 25, inside the original 30-day window. The parties compiled and delivered a compliant response 35 days later, on day 60. The second 30-day clock then ran from day 60, expiring on day 90. Total pre-closing regulatory timeline: 25 + 35 + 30 = 90 days from the original filing — not the 30 the deal team had assumed, and not the 45 the outside date allowed for.
The immediate cost was a renegotiation, not a penalty: the parties amended the share purchase agreement to extend the outside date to 100 days, giving a 10-day buffer past the s.123(1)(b) expiry. Renegotiating an outside date from a position of discovered non-compliance is a weaker one than negotiating it correctly the first time — the seller used the amendment to extract a modest increase in the deposit that became non-refundable on signing.
Had the mistake surfaced later — after signing, close to the original 45-day outside date, with financing committed and integration planning under way — the fund would have faced a harder choice: seek the seller's cooperation to extend on worse terms, or risk missing the outside date entirely and losing the platform-fit thesis the whole process had been built around. Catching the affiliate-aggregation error during drafting, rather than during the countdown to closing, is what kept the cost to a deposit adjustment.
The tell was in the notifiability memo itself: it tested the target's own financials and stopped there. Any notifiability analysis that does not explicitly state the acquirer's affiliated group's Canadian assets and revenue — not just the target's — has not actually applied s.109(1). For a platform doing repeat add-ons, that number changes with every prior acquisition and should be re-run, not assumed carried over from the last deal.
A 30-minute call is enough to tell you whether a structuring or diligence gap like this one is sitting in your pipeline.
