CANADA Trends and Developments Contributed by: Kevin West, Andrea Hill, Priya Ratti and Gabriel Potkidis, SkyLaw
The Impact of Artificial Intelligence Artificial intelligence (AI) has disrupted virtually every aspect of business and society at a speed and scale few would have predicted a short time ago. AI is being used across a rapidly expanding range of sectors and daily activities. The impact of AI has led to incredible developments in everything from education and trans - portation, to food and medicine, and even to wars. AI is reshaping Canadian mergers and acquisitions (M&A) as it is a key driver of activity. Companies are scaling up and consolidating to obtain AI capabilities, data and infrastructure. AI is also a tool that is chang - ing how deals are sourced and parties get connected for transactions. AI analysis of publicly available data can quickly produce a list of desirable acquisition opportunities. Importantly for practitioners, AI is dramatically impact - ing the way in which deals are conducted from dili - gence through negotiation and closing, in particular when it comes to issue-spotting. Clients now increas - ingly expect their advisers to be using AI, and most clients are using AI themselves to improve efficiency, keep costs down and obtain second opinions. These developments are taking place in a Canadian M&A market that saw a resurgence in value in 2025 and is broadly anticipated to sustain its momentum through 2026, especially where AI-driven demand converges with sectors such as infrastructure, energy and resources. The speed at which AI is being implemented raises serious concerns about data rights, governance, cybersecurity and intellectual property protec - tions. Governments are nervous about regulating AI, because of the need to keep up with the AI arms race while maintaining digital sovereignty. There will be heightened scrutiny of foreign investment and compe - tition for AI-related transactions because of the worry about foreign actors accessing sensitive information from a national security perspective. AI as a Driver of M&A Activity There is significant M&A activity in Canada involving AI companies. In this environment, the “build versus buy” calculus has changed dramatically. While AI
makes building much easier, the speed of change and the need to maintain market share is pushing many companies to buy the AI capabilities they need. M&A activity is also spurred by the need for AI infra - structure, including high-demand talent, proprietary data and physical data centres. The investment in data centres is one of the largest deployments of capital in history. There is also a significant push for consolidation. Many businesses in Canada are family-owned and considering succession plans. Owners may be reluc - tant to make significant new AI investments or be hesitant to scale. Larger companies are looking to consolidate supply chains, particularly in the defence industry, where the Canadian government has com - mitted to increasing its spending dramatically and is very focused on autonomous systems. AI is Changing How Acquirors Find and Evaluate Their Targets AI is making deal-execution more data‑driven. Target- screening is increasingly assisted by machine learn - ing applied to public filings, job postings, customer signals and procurement footprints, enabling buyers to identify “AI‑ready” targets earlier. Diligence is being compressed: document review, contract and data summaries, and issue-spotting are all being dramatically accelerated. Clients are requir - ing these improvements as the pressure to close deals quickly has intensified. Caution is still required to ensure confidentiality and privilege are maintained when using AI models, par - ticularly if they are third-party tools or located in other jurisdictions. Of course, AI outputs also still need to be carefully reviewed by actual humans. The risk of errors and “hallucinations” is real. As The Economist noted, AI still requires “a fat layer of humans” overseeing the work of AI models. In time, this will rapidly become a much thinner layer of humans, which is itself another major way in which AI is impacting businesses and society.
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