Nearly every Canadian company acquired by foreign buyers saw their leadership and top decision-making roles leave the country after the takeover, according to a new report by the Council of Canadian Innovators (CCI). 

The report draws on interviews with 31 founders from 30 Canadian-founded companies that were acquired by foreign buyers. At 93 per cent of the companies surveyed, leadership and strategic decision-makers all moved abroad after the deals closed. Seven per cent of the acquired firms had leadership split between Canada and another country, while none retained fully Canadian leadership. 

The findings, published Tuesday, are part of a broader study that shows the difficulties Canadian companies face as they scale. “Canada can build viable companies,” the report claims. “The challenge lies in sustaining their growth at the point where scaling becomes capital-intensive, time-sensitive and operationally complex.” 

The CCI found that economic activity didn’t all leave the country as leadership shifted abroad. Of the 30 companies studied, 63 per cent maintained a substantial operational presence in Canada after being sold, and another 30 per cent retained a partial presence. Just seven per cent left the country entirely. Engineering, product development and, in some cases, manufacturing often stayed in Canada, while decisions over how the companies carried out that work moved elsewhere. 

Companies interviewed for the report spanned technology, life sciences, industrial and service-based sectors. Most were past the startup phase, with only two classified as early-stage when they were acquired. Eleven had more than 50 employees, including five with more than 200. 

Two-thirds of buyers were American, while eight were European and two were from the Asia-Pacific region. 

The findings point to difficulty turning early success into big business, according to the CCI. While the report found Canada is relatively good at supporting research and early company formation, it also noted a lack of capital, customers and experienced talent that companies need to grow. Founders described difficulty raising large enough rounds in Canada, making sense of fragmented government support programs and hiring experienced executives. “This report finds that Canadian firms are not failing to scale,” the report states, “rather, they are being acquired by foreign buyers at precisely the moment when scaling becomes more complex and capital-intensive.”  

They also repeatedly pointed to Canadian procurement as an obstacle. Emerging companies were sometimes asked to show they had already landed major contracts elsewhere before they could secure government business in Canada. Some founders said winning U.S. customers provided the validation that subsequently opened doors in Canada. 

Being acquired by a foreign company did not always result in Canadian business growing. Just 30 per cent of companies surveyed said they expanded after acquisitions, through things like increased hiring, investment, market reach or product development. Half of the companies had a mix of growth and cutbacks, while 13 per cent saw their Canadian operations reduced or hollowed out. 

The CCI, which advocates for scaling Canadian companies, called for changes to procurement that would make it easier for emerging businesses to land early customers, including through pilot and limited contracts. It also recommended better co-ordination among government programs, investors and lenders, and faster funding decisions, and suggested measures to improve companies’ access to experienced talent, including chief financial officers, senior operators, and sales and marketing leaders.