Expropriation is one of the most substantial powers a municipality has to achieve its public-interest objectives.1 The legislature has granted municipalities broad authority, allowing them to acquire any immovable, part of an immovable or servitude needed for “any municipal purpose” or for “industrial purposes.”2 Because municipalities have such latitude, the courts generally exercise judicial restraint and intervene only in cases of bad faith, injustice or abuse of process.3 That is why the decision in 9428-2506 Québec inc. v. Ville de Drummondville (“the Drummondville case”) is so noteworthy. The Court struck down the expropriation in the case, finding that the city administration had acted in bad faith even though it had complied with all formal requirements.4 In light of the court’s decision, this article examines the key factors that served to rebut the presumption that the city had exercised its power of expropriation in good faith. 1. Substitution for the owner The Court began by pointing out that a municipality cannot use its power of expropriation to substitute itself for an owner to pursue a project the owner already plans to develop. In the Drummondville case, the city wanted to develop an industrial park, but the plaintiff was already pursuing its own industrial project on the land in question. To justify its intervention, the city claimed that zoning restrictions prevented the land from being developed for industrial purposes. However, the Court dismissed the justification as [translation] “a pure pretext,”5 concluding that the city had unlawfully substituted itself for the plaintiff without demonstrating the necessity of acquiring the land for its own project.6 2. Expropriation as a bargaining tool The Court also reiterated that expropriation cannot be used as a pressure tactic in out-of-court settlement negotiations with a property owner. In the Drummondville case, the Court found that the city had used its expropriation power not out of genuine necessity, but as leverage to force the owner to reduce the size of its property, which constituted an unlawful use of that power.7 The Court denounced the expropriate-first-negotiate-later strategy, reiterating that [translation] “expropriation is not a bargaining tool.”8 3. Expropriation to benefit a third party Lastly, the Court stressed that the power of expropriation must always serve the public interest. A municipality cannot use expropriation for an improper collateral purpose that does not benefit the community.9 In the Drummondville case, the Court concluded that the city had provided no valid justification for disclosing a confidential expropriation plan to a third party three years before serving the notices of expropriation.10 In the Court’s view, the unwarranted disclosure of confidential information to a single party resulted in unfair treatment of other developers who lacked access to the information.11 Other facts, including the city’s disregard for its own wetland conservation studies to advance the third party’s project, further supported the finding of bad faith on the city’s part.12 Conclusion Ultimately, the Drummondville case serves as a reminder that good faith is crucial in exercising the power of expropriation and that, while good faith is presumed, the presumption can be rebutted by the circumstances surrounding the exercise of the power. Conduct revealing an improper, abusive or discriminatory purpose—as well as a municipality unwarrantedly substituting itself for an owner and resorting to expropriation as a bargaining tool—can demonstrate bad faith13. On October 2, 2026, the city appealed the decision.14 The final chapter in this case has yet to be written. For a more detailed discussion of expropriation, seeThe ABCs of Expropriation: an Overview of the Different Regimes, by Anne-Marie Asselin, Senior Associate. Cities and Towns Act, CQLR c. C-19 s. 570(1)(c); Act respecting municipal industrial immovables, CQLR c. I-0.1 s. 2(1) and s. 6(1). Pierre ISSALYS and Denis LEMIEUX, L’action gouvernementale : précis de droit des institutions administratives, 2020, Montréal, Éditions Yvon Blais, para. 3.19. 2026 QCCS 3363, para. 330. Ibid., para. 180. Ibid., paras. 201–202. Ibid., paras. 245 and 247–248. Ibid., para. 249. 9379-1242 Québec inc. v. Ville de Sept-Îles, 2024 QCCS 3611, para. 16. 2026 QCCS 3363, supra note 1, paras. 273–274. Ibid, para. 283. Ibid., paras. 309–310 and 328. Ibid., para. 330. Application for leave to appeal and notice of appeal, October 2, 2026, (C.A.) 500-09-032224-263.

The cryptographic mechanisms that currently secure digital transactions, communications and signatures may become vulnerable with the advent of sufficiently powerful quantum computers. For businesses, the issue is no longer merely technological: it also affects governance, contracts, information protection and migration planning. Understanding post-quantum cryptography Imagine spending an entire week without transmitting sensitive information over the internet—no banking, no checking health records and no shopping online. Everyday transactions rely in particular on cryptographic mechanisms that: protect the confidentiality and integrity of information; authenticate individuals and systems; and secure digital signatures. However, the advent of sufficiently powerful quantum computers could compromise some of these mechanisms and consequently undermine a key pillar of our current digital security. Cryptography brings together the techniques used to protect the confidentiality and integrity of information, authenticate individuals and systems and secure digital signatures. It plays a role in particular when a browser displays a padlock icon, someone electronically signs a document or a company transmits confidential data. Many of these mechanisms rely on public-key cryptography, which uses a pair of mathematically linked keys: a public key and a private key. These keys derive their security from mathematical problems that would take conventional computers an astronomical amount of time to solve. A sufficiently powerful quantum computer, however, could solve some of these problems in virtually no time. As a result, widely used mechanisms, such as RSA and elliptic-curve cryptography, will no longer offer adequate protection. The immediate nature of the quantum threat Currently, only prototype quantum computers exist, and it is still difficult to predict exactly when they will become commercially viable or when major corporations and nation-states will use them. The Canadian Centre for Cyber Security nonetheless estimates that a quantum computer capable of posing a threat to current mechanisms could emerge as early as 2030, while acknowledging the uncertainty surrounding this timeline.1 In August 2024, the U.S. National Institute of Standards and Technology released its first three standards establishing cryptographic algorithms capable of withstanding this threat.2 For organizations, the issue is therefore not merely knowing when the threat will materialize, but determining what steps to take today to keep their information and systems secure into the future. Post-quantum cryptography refers to methods designed to resist attacks from both conventional computers and future quantum computers. From a mathematical standpoint, resistant algorithms exist, but many IT systems have yet to adopt them. The threat of “Harvest Now, Decrypt Later” The most pressing threat can be summed up by the phrase “Harvest Now, Decrypt Later.” A threat actor can intercept and store encrypted data today, then attempt to decrypt it once sufficient quantum capacity becomes available. Information that retains its value or sensitivity over several years, such as trade secrets, financial data, strategic information and privileged communications, is therefore at the greatest risk.3 The level of urgency depends on each organization's specific technological infrastructure. Key considerations include how long information must remain confidential and the time required to replace vulnerable mechanisms. According to Canadian best practices in the field, some systems have product lifetimes of 15 to 30 years, and a cryptographic migration can itself take several years.4 An organization can therefore fall behind long before a cryptographically relevant quantum computer ever reaches the market. Why businesses rely on their suppliers for the transition Most organizations do not develop replacement cryptographic solutions themselves. Instead, they rely on their software, cloud service, hardware, certificate and cybersecurity vendors. Such reliance does not make planning pointless—on the contrary. It shifts the focus toward governance, procurement and contracts. When it comes to contracts, organizations must assess these risks right now, particularly the allocation of liability between the contracting parties. Ideally, technology service contracts should specify whether the provider or the client bears the risks associated with using technologies that fall short on quantum security. Achieving balanced risk allocation requires open dialogue: Client organizations must ask the right questions and technology providers must be transparent about the limits of their systems. The federal government has begun its transition to post-quantum cryptography The federal government is no longer treating post-quantum cryptography as just a research topic. In June 2025, the Canadian Centre for Cyber Security published a roadmap to migrate the Government of Canada’s unclassified systems. Among other milestones, the document establishes an initial departmental plan and a first progress report starting in April 2026, the migration of high-priority systems by the end of 2031, and the migration of all other relevant systems by the end of 2035.5 A Security Policy Implementation Notice, which took effect in October 2025, reinforces these requirements and compels relevant federal institutions to demonstrate measurable progress.6 While these milestones do not apply directly to private businesses, they can still indirectly affect federal contractors. Since April 1, 2026, in-scope federal contracts with a digital component must incorporate clauses that support post-quantum cryptography and cryptographic agility, among other requirements.7 Federal directives make clear that orderly migration requires governance, inventories, prioritization, financial planning, procurement policies and coordination with vendors. Moreover, the post-quantum transition is by no means confined to the federal government. In September 2026, Canada joined a call to action from the G7 Cyber Security Working Group urging public and private organizations to adopt a phased, risk-based transition. Canadian guidelines likewise recommend that organizations begin preparing before large-scale solutions are rolled out.8 Legal implications for Quebec businesses No Quebec statute expressly requires private businesses to use any specific post-quantum algorithm or complete a migration according to the federal timeline. Instead, Quebec law establishes functional and technologically neutral obligations, which require the adequacy of the selected measures to be assessed in context. Protection of personal information and reasonable security measures The Act respecting the protection of personal information in the private sector requires businesses to take reasonable security measures, taking into account, in particular, the sensitivity, purpose, quantity and distribution of the information and the medium on which it is stored. It also mandates a privacy impact assessment for projects to acquire, develop or overhaul information systems or electronic service delivery systems that process personal information.9 For an organization that retains sensitive information with a lifespan of several years, such as banking information or Social Insurance Numbers, the quantum threat may become a material factor when assessing whether existing security measures are reasonable. Document integrity and confidentiality of transmissions The Act to establish a legal framework for information technology follows the same approach, requiring in particular that the integrity of a document be maintained throughout its life cycle. For instance, where the information contained in a document is declared by law to be confidential, section 34 requires that it be protected by means appropriate to the mode of transmission.10 Documentation explaining the mode of transmission and the measures taken to protect confidentiality must also be readily available to prove compliance. Rather than mandating specific technologies, the law sets outcome-based obligations, in particular safeguarding document integrity and information confidentiality. Civil liability and the state of knowledge As Quebec legal scholars emphasize, security measures only matter in the eyes of the law if they actually work.11 Accordingly, official publications and technical standards—while not giving rise to a civil obligation on their own—can help establish the state of knowledge, the foreseeability of the risk and recognized industry practices.12 An organization’s liability regarding its data protection obligations must be assessed according to the general rules of civil liability.13Liability would turn primarily on whether the organization acted with prudence and diligence at the relevant time, taking into account: the knowledge available at the time; the sensitivity of the protected information; the lifespan of its systems; and the availability of alternative solutions. Using a cryptographic mechanism that could soon become vulnerable may constitute a civil fault in light of current knowledge. Connected devices and reasonable security expectations Similar considerations could apply to manufacturers, distributors and suppliers of connected devices. Under the Civil Code of Québec, factors include the safety that a person is normally entitled to expect and the state of knowledge at the time the item was manufactured, distributed or supplied. Given these criteria, a product’s reasonably expected capacity to receive security updates could form part of the circumstances weighed when assessing a potential safety defect.14 Practical steps for businesses to prepare now Preparing does not call for an immediate overhaul of all existing mechanisms. Rather, it requires developing cryptographic agility—the ability to identify and replace cryptographic mechanisms without having to rebuild the underlying systems from scratch. The Canadian Centre for Cyber Security recommends a number of practical measures in particular:15 Inventory cryptographic assets. The inventory should cover internal and client-facing systems, certificates, authentication mechanisms, digital signatures, network equipment and cloud services. Special attention should be paid to legacy, custom-built or hard-to-update systems. Establish priorities. Organizations should identify information that must remain confidential over the long term and systems whose modification or replacement will require several years. Engage vendors. Organizations should obtain their vendors’ post-quantum roadmaps to determine whether the transition can be completed through updates or if it will require acquiring new products. Applicable standards, support lifecycles and impacts on interoperability should also be verified. Align contracts and procurement. New agreements could include, as appropriate, terms governing security updates, end-of-support notifications, the adoption of standardized mechanisms, cooperation during migration and the allocation of associated costs. Not all organizations face the same level of exposure. However, immediate attention is warranted where a business retains sensitive information over multiple years, operates systems that are difficult to replace or relies on vendors whose migration roadmaps remain unknown. While vendors will likely deliver the technical solutions, each organization must understand its own requirements, ask the right questions and ensure it remains agile enough to adopt these solutions when the time comes. Key takeaways: The quantum threat is already here, even if quantum computers capable of breaking certain cryptographic mechanisms are not yet widely available. The primary threat is “Harvest Now, Decrypt Later.”Data encrypted today can be intercepted, stored and decrypted in the future. The most exposed organizations are those that retain sensitive information over many years, operate systems that are difficult to replace or rely on vendors whose migration strategies are uncertain. In Quebec, there is no general obligation mandating any specific post-quantum algorithm, but businesses are bound to adopt reasonable security measures, assessed in context and in light of the state of knowledge. Preparation starts with cryptographic agility: inventorying assets and uses, prioritizing critical systems, engaging vendors and adapting contracts. CANADIAN CENTRE FOR CYBER SECURITY, “Preparing your organization for the quantum threat to cryptography (ITSAP.00.017),” February 2025, online: https://www.cyber.gc.ca/en/guidance/preparing-your-organization-quantum-threat-cryptography-itsap00017 NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY, “NIST Releases First 3 Finalized Post-Quantum Encryption Standards,” August 13, 2024, online: https://www.nist.gov/news-events/news/2024/08/nist-releases-first-3-finalized-post-quantum-encryption-standards CANADIAN CENTRE FOR CYBER SECURITY, supra, note 1. CANADIAN FORUM FOR DIGITAL INFRASTRUCTURE RESILIENCE and CANADIAN NATIONAL QUANTUM READINESS WORKING GROUP, Canadian National Quantum-Readiness Best Practices and Guidelines, Version 04, July 10, 2024, pp. 3–7, online: https://ised-isde.canada.ca/site/spectrum-management-telecommunications/sites/default/files/documents/Quantum-Readiness%20Best%20Practices%20-%20v04%20-%2010%20July%202024.pdf. CANADIAN CENTRE FOR CYBER SECURITY, Roadmap for the migration to post-quantum cryptography for the Government of Canada (ITSM.40.001), June 23, 2025, p. 13, online: https://www.cyber.gc.ca/en/guidance/roadmap-migration-post-quantum-cryptography-government-canada-itsm40001. TREASURY BOARD OF CANADA SECRETARIAT, Migrating the Government of Canada to Post-Quantum Cryptography: Security Policy Implementation Notice, effective since October 9, 2025, online: https://www.canada.ca/en/government/system/digital-government/policies-standards/spin/migrating-government-canada-post-quantum-cryptography.html. TREASURY BOARD OF CANADA SECRETARIAT, supra, note 6, s. 6.3.1. CANADIAN CENTRE FOR CYBER SECURITY, “G7 Cybersecurity Working Group call to action on preparing for the post-quantum era,” September 3, 2026, online: https://www.cyber.gc.ca/en/news-events/g7-cybersecurity-working-group-call-action-preparing-post-quantum-era?; CANADIAN FORUM FOR DIGITAL INFRASTRUCTURE RESILIENCE and CANADIAN NATIONAL QUANTUM READINESS WORKING GROUP, supra, note 4, ss. 3–5.  Act respecting the protection of personal information in the private sector, CQLR c. P-39.1, ss. 3.3 and 10. Act to establish a legal framework for information technology, CQLR, c. C-1.1, ss. 6 and 34. Éric LABBÉ, “L’efficacité technique comme critère juridique ou la manière dont les lois se technicisent,” (2004) 9-2 Lex Electronica. Éric LABBÉ, “La multiplicité des normes encadrant le contrat électronique : l’influence de la technologie sur la production des normes,” (2004) 9-2 Lex Electronica; Charles-Étienne DANIEL, “Coder son propre droit : quand la machine pousse l’humain à énoncer de nouvelles normes de gouvernance,” dans Quand la société fait son droit : la gouvernance de proximité en action, 2026, EYB2026QSD19, pp. 397–432. Civil Code of Québec, CQLR, c. CCQ-1991, s. 1457; Act respecting the protection of personal information in the private sector, supra, note 9, s. 10. Civil Code of Québec, supra, note 13, arts. 1468, 1469 and 1473. CANADIAN CENTRE FOR CYBER SECURITY, supra, note 1; CANADIAN CENTRE FOR CYBER SECURITY, Guidance on becoming cryptographically agile (ITSAP.40.018), May 2022, online: https://www.cyber.gc.ca/en/guidance/guidance-becoming-cryptographically-agile-itsap40018.

In 2025, the Canadian M&A market remained resilient despite broader economic uncertainty. Trade tensions with the USA contributed to a subdued start, but activity picked up in the second half of the year as market participants adjusted to the new environment, commodity prices strengthened, and interest rates eased. Canada also reflected the global shift towards larger transactions - while the transaction count declined from 3,411 in 2024 to 3,294 in 2025, total deal value increased from USD264.16 billion to USD398.36 billion in 2025. Mid-market transactions (valued below CAD250 million) continued to represent the largest share of M&A deals in Canada by deal count, accounting for 86% of deals (down from 88% in 2024). Leverage levels for new acquisition financings were broadly consistent with prior years. Tariff uncertainty affected cross-border deal flow in 2025. Inbound activity softened in Q1 as tariff risk weighed on pricing, diligence and execution, but improved in Q2 as buyers became more accustomed to assessing and allocating that risk. Trade tensions also prompted Canadian investors to diversify into US assets and build a presence in the USA to mitigate tariff-related exposure, contributing to increased outbound deal flow throughout the course of the year. By sector, energy, utilities and mining were the most active sectors, with each recording an increase in deal value. This growth was supported in part by the infrastructure and energy demand associated with rapid AI-related investment. The wealth management sector also experienced a record year for M&A activity, driven in part by ownership succession at family-owned businesses and the resulting intergenerational transfer of wealth. Legal and regulatory developments Amendment reducing the criminal rate of interest Effective from 1 January 2025, the Criminal Code was amended to replace the former criminal-rate threshold (an effective annual rate exceeding 60%) with an annual percentage rate (APR) exceeding 35%. Given that an effective annual rate accounts for compounding whereas an APR does not, the amendments also changed the applicable method of calculation. The scope of the offence was further expanded to include offering or advertising credit at a criminal rate. These changes are not expected to materially affect most acquisition financings because the regulations provide an exemption for commercial loans where: the borrower is not a natural person; the credit is advanced for a business or commercial purpose; and the amount of credit advanced exceeds CAD500,000. Commercial loans between CAD10,000 and CAD500,000 that meet the first two conditions remain subject to a maximum rate of 48% APR. Accordingly, smaller commercial loans and certain small-ticket junior facilities may require closer scrutiny. Amendments to the Investment Canada Act and the Competition Act Recent amendments to the Investment Canada Act (ICA) and the Competition Act have increased regulatory scrutiny of transactions and, in turn, heightened closing risk and uncertainty. Amendments to the ICA and its regulations have broadened the scope of national security reviews applicable to investments by foreign investors. A national security review may be initiated if an investment by a non-Canadian could be injurious to Canada’s national security. Following the review, the transaction may be permitted to proceed, permitted subject to conditions, or blocked. The amendments also expand the authorities’ powers during the review process. These powers include extending the review period and imposing interim conditions, such as restrictions on access to or the transfer of assets or IP. In addition, economic security has been expressly recognised as a factor in the national security analysis. The analysis may therefore consider whether a Canadian business’s ties to a foreign state’s economy make the business vulnerable to leverage by that state. Given the highly discretionary nature of the ICA national security process and the fact that reviews may take months, these changes heighten uncertainty around closings, particularly with regard to timing and the ultimate ability to complete the transaction. Under the Competition Act, the Competition Bureau may review mergers and may apply to the Competition Tribunal if it considers that a merger is likely to prevent or lessen competition substantially in Canada. Amendments have introduced a rebuttable presumption that a merger substantially prevents or lessens competition where its Herfindahl-Hirschman Index (HHI), an index that measures market concentration, increases by more than 100 as a result of the merger and either: the post-merger HHI exceeds 1,800; or the parties’ combined market share exceeds 30%. Although the presumption may be rebutted with sufficient evidence that the merger is not likely to prevent or lessen competition substantially, this change creates a more demanding environment than the previous framework, under which market share and concentration evidence did not give rise to the same statutory presumption. The increased complexity of the merger review process has also contributed to longer Competition Bureau review timelines. Taken together, these amendments increase the likelihood that transactions will face more intensive and lengthier regulatory review. Obtaining regulatory clearance or otherwise resolving the review may take months. This may delay closings and increase the risk that a transaction will not be completed. From an acquisition finance perspective, prolonged regulatory reviews may lengthen the period between signing and closing and require financing commitments to remain available for longer periods. Commitment expiry dates, extension mechanics, and the alignment of financing commitments with transaction long-stop dates therefore require particular attention. Bank debt Bank debt has traditionally represented - and continues to represent - the largest source of acquisition financing in Canada, reflecting the dominance of Canada’s “Big Six” banks (the six largest banks in Canada). While these banks remain relatively conservative in their underwriting standards, their extensive relationships and early visibility into financing opportunities continue to position them at the forefront of the lending market. Banks will typically provide senior secured facilities comprising the majority of the debt financing required for an acquisition. Subject to the transaction structure, applicable law, and agreed security principles, the security package will generally cover all or substantially all of the assets of the borrower and guarantors and may include security over the shares of the target. Target-level guarantees and security may be implemented at or following closing. Direct lending Direct lending, whereby a non-bank private lender provides a loan directly to a borrower, has gained traction in Canada and become increasingly established since the 2008 global financial crisis. Increased bank regulation following the crisis tightened bank underwriting for certain borrowers and transactions, thereby creating gaps in the market. At the same time, compliance costs rose for banks. Private credit lenders are generally not subject to the same bank capital and liquidity requirements, which has helped them expand to meet growing demand. Market conditions from 2022 onwards further supported private credit activity. Interest rate increases implemented in response to elevated inflation following the COVID-19 pandemic and Russia’s invasion of Ukraine increased returns on many private credit loans, given their floating-rate structure. Higher rates also tightened bank lending and, in turn, allowed private credit to expand to fill the larger gap. In those market conditions, private lenders with longer-term committed capital were often able to continue deploying funds - although funding structures vary among lenders.  In 2025, economic uncertainty in Canada supported further growth in private credit. In volatile market conditions, borrowers placed particular value on private credit’s potential to provide speed, structural flexibility, and execution certainty and were often willing to pay a premium for those attributes. In parallel, private equity firms entered 2025 with significant levels of dry powder (committed but undeployed capital), which supported sponsor-backed acquisition activity. Regulatory developments may further reinforce direct lending’s role in transactions involving extended closing periods. As amendments to the foreign investment and competition law regimes come into effect, more transactions may be subject to governmental review, and review timelines may lengthen for affected deals. Where governmental review extends the period between signing and closing, parties may require committed financing that remains available throughout that period. Direct lenders’ ability to offer flexible commitment periods and execution terms may therefore be attractive in affected transactions. Although direct lending may be the sole source of acquisition financing, it is commonly used to bridge the gap between the borrower’s funding needs and the amounts banks are willing to provide. In such a hybrid debt financing structure, banks may provide senior debt, while private credit may provide junior debt or mezzanine financing. Unitranche financing, where senior and subordinated debt are combined into a single facility with one interest rate and one set of covenants, also gained popularity in the Canadian market in 2025. Such a structure can reduce the need for the borrower to negotiate with multiple lender groups, thereby facilitating faster execution - a particularly valuable advantage in volatile market conditions. Despite making significant headway in recent years, private credit remains smaller and less mature in Canada than in the USA or Europe, and its growth has been more modest. Canada’s “Big Six” banks continue to dominate the lending market. Furthermore, some of the factors that have driven the development of private credit in the USA and Europe - particularly bank retrenchment in response to prudential regulatory constraints - have not materialised to the same extent in Canada. In the near term, private credit will therefore likely remain primarily complementary to bank debt - although it may compete directly with banks in certain transactions. The global growth of private credit has attracted increased attention from Canadian policymakers, who have identified potential vulnerabilities, including limited transparency and interconnectedness with the banking sector. At the same time, policymakers in Canada have acknowledged private credit’s role in filling funding gaps and supporting new investments.  As private credit continues to evolve in Canada, its implications for acquisition financing will need to be monitored. Deal structuring In a year marked by volatility, misalignment of valuation expectations between buyers and sellers led parties to adopt more flexible purchase-price structures. Many acquisitions incorporated purchase-price mechanisms that reduced the amount of cash payable at closing and, consequently, the amount of immediate external funding required - although some of these mechanisms may create future payment obligations. The following mechanisms were used in 2025 to bridge the valuation gap and complete transactions. Seller financing Seller financing continued to gain momentum in 2025, following several years of increased use. Seller financing is an arrangement whereby the seller agrees to defer a portion of the purchase price to a future date, typically with interest – effectively becoming a lender to the buyer. The growth of seller financing reflects - among other factors - a more conservative approach to underwriting by banks, as well as the growing prevalence of independent sponsors and search funds, which may seek more flexible financing instruments. Beyond providing funding, seller financing may keep the seller economically exposed to the success of the business, aligning the seller’s interests with the acquirer’s. Earn-outs Earn-outs are contractual provisions included in M&A deals that defer a portion of the purchase price and make payment conditional on the achievement of certain post-closing performance targets. This mechanism is used to reduce the buyer’s risk of overpaying if the target company does not perform as expected. However, the use of earn-outs remains selective, particularly in deals where performance can be measured using clearly defined metrics that are less susceptible to post-closing manipulation; EBITDA-based targets remain among the most common. In 2025, earn-outs were also used to address increased risks related to businesses potentially exposed to tariffs. By linking a portion of the purchase price to a company’s future performance, the buyer shares part of that risk with the seller. If trade policy adversely affected the acquired company, the agreed-upon performance targets could become harder to reach and the purchase price could be reduced. In 2025, earn-outs were frequently considered in Canada–USA cross-border transactions involving businesses with material tariff exposure. Earn-outs, however, can create significant post-closing complexity. The increased use of earn-outs in recent years has also led to more frequent disputes and litigation. Payouts may be lower than sellers expect, while disputes concerning post-closing performance and the calculation of contingent consideration can create substantial costs and uncertainty for both parties. Rollovers Rollovers involve a seller receiving a portion of the purchase price in the equity of the post-closing entity or the buyer instead of receiving full payment in cash. The seller thus typically receives a combination of cash and shares. Rollovers continued to be used in 2025, particularly in cross-border transactions where they can help bridge valuation gaps. Although many rollovers involve management teams, they may also involve other shareholders to support continuity and alignment following closing. By reducing the cash consideration payable at closing, rollovers can also reduce the amount of external financing required. Outlook Tariff uncertainty that weighed on the Canadian M&A market in 2025 has continued into 2026, but market participants have become increasingly accustomed to pricing and allocating that risk. In the near term, public policy will likely be a driver of deal activity. Deal activity could therefore increase in sectors aligned with the Canadian government’s priorities - most notably, in defence and energy. As uncertainty persists and private equity dry powder remains substantial, direct lending will likely continue to grow and fill funding gaps. At the same time, private credit is attracting increased regulatory and policy scrutiny, which may affect the pace and form of its continued growth. Its interaction with the Canadian banking industry will remain an important development to monitor. 1. The case for Canadian private credit : A differentiated opportunity for institutional investors 2. CAASA-Private-Credit-in-the-2020s-FINAL.pdf  3. Non-bank financial intermediation in Canada: a pulse check - Bank of Canada 4. globalriskinstitute.org/mp-files/pdf-the-rise-of-private-credit-fueling-growth-or-brewing-risk.pdf/  5. Rapid growth in private credit has created vulnerabilities - Bank of Canada; New players, old risks: Financial stability in a changing landscape - Bank of Canada