PRINT THIS PAGE US leveraged buyouts of Canadian targets: Effective structuring isn't just for billion-dollar deals21/09/2005. Source: Torys LLP. Corrado Cardarelli and Stephen Donovan
Non-Canadian residents have acquired Canadian corporations by incorporating a Canadian acquisition corporation (CanAcquireco) in a Canadian jurisdiction and funding it by way of interest-bearing debt and equity on a 2:1 basis to comply with Canadian thin capital rules, say Corrado Cardarelli and Stephen Donovan from Torys LLP. CanAcquireco purchases all the shares of the Canadian target corporation (CanTarget). CanAcquireco and CanTarget typically then amalgamate (forming CanAmalco). The "internal" debt used in this structure and the other structures described in this article normally takes the form of subordinated unsecured debt carrying a higher rate of interest than senior secured debt.
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Corrado Cardarelli is a partner in the Tax Department of Torys LLP in Toronto. His practice largely involves corporate taxation, including reorganizations, mergers, divestitures, joint ventures, acquisitions, restructurings of financially troubled corporations and corporate finance. He can be reached by email at ccardarelli@torys.com.
Stephen Donovan, co-head of the firm's Private Equity Group, is a corporate/commercial lawyer whose practice includes mergers and acquisitions work and has acted in several management buyouts and leveraged buyouts of private and public companies. He can be reached by email at sdonovan@torys.com.
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