Financing the Bid
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In Canada, unlike in the United States, it is not permissible to make a take-over bid conditional on arranging financing. Before a bidder makes a cash take-over bid, it must have made “adequate arrangements” for its financing. Typically, the bidder will have signed a binding commitment letter with a bank or other source of funds prior to launching its take-over bid. The bidder will seek to have the conditions to the availability of the financing set out in the bank commitment letter as similar as possible to the conditions in the take-over bid circular that is sent to the target company’s shareholders. The law requires that the bidder must be confident that if the conditions to the bid are satisfied, the financing will be available. This represents an important potential obstacle to a hostile bid in Canada considering the 105-day minimum bid period.