Why Nuclear M&A Requires A Different Playbook

Canada’s nuclear industry is entering a period of growth that will reshape the sector for decades. With major new reactor builds underway and governments positioning nuclear power as a cornerstone of the energy transition, the industry is expanding rapidly beyond utilities and reactor operators to include a broad ecosystem of technology vendors, engineering firms, specialized manufacturers, isotope producers, private equity firms, and consulting companies. For buyers and investors, the implications are significant: mispricing risk, delayed closings, or failed transactions where nuclear-specific issues are identified too late.

Ontario sits at the centre of this shift. Ontario Power Generation’s Darlington SMR project, one of the most significant nuclear construction programs currently underway in the Western world, and plans for large-scale new nuclear development at its Wesleyville site, are expected to channel billions of dollars into the domestic supply chain and anchor a new generation of nuclear capability. The sector already supports approximately 89,000 jobs and contributes more than $22 billion annually to national GDP, with more than 245 companies represented through the Organization of Canadian Nuclear Industries.

As investment accelerates, consolidation is beginning to follow. Strategic buyers are moving quickly to secure technical capabilities, regulatory expertise, and supply chain positions that would be difficult to replicate organically. Recent transactions illustrate the momentum building across the sector.

For acquirers, the commercial rationale is clear. Nuclear projects require highly specialized suppliers with long qualification cycles, regulatory familiarity, and proven technical credibility. Acquiring established firms can provide immediate access to capabilities that would otherwise take years to develop.

But nuclear is not simply another infrastructure sector. The regulatory, national security, and liability frameworks surrounding the nuclear industry fundamentally shape how transactions must be structured, diligenced, and closed. As a result, clients are often not fully served by relying solely on traditional M&A approaches or generalist counsel without deep nuclear-sector expertise. Transactions in this space call for an integrated understanding of regulatory licensing, national security sensitivity, risk allocation, and long-tail liability exposure. These issues do not arise, or arise differently, in conventional deals.

Companies that approach nuclear supply chain acquisitions using a conventional M&A framework often encounter complexities they did not anticipate. Understanding these issues before exclusivity or signing can affect valuation, timing, and ultimately whether the transaction proceeds.

Nuclear targets present distinct regulatory risks

Many companies operating in the nuclear supply chain resemble attractive acquisition targets in other industrial sectors. They are often embedded in long-term customer relationships, protected by significant technical barriers to entry, and supported by multi-year project pipelines. These characteristics have made nuclear supply chain firms increasingly attractive to strategic buyers.

However, these businesses carry a regulatory dimension that may be less visible to traditional acquirers. Unlike reactor operators or utilities, which typically maintain dedicated regulatory affairs teams, many suppliers and service providers hold licences and certifications that may not be fully appreciated as transaction-sensitive assets. Testing laboratories, component manufacturers, engineering integrators, and isotope production companies frequently operate under licences enforced by the Canadian Nuclear Safety Commission (“CNSC”), particularly where their work intersects with safety-critical systems or nuclear materials.

For example, a core governance standard in Canada’s regulatory framework is CSA N286-12, issued by the Canadian Standards Association. Compliance with CSA N286-12 is required by the CNSC and applies to organizations responsible for nuclear facilities and activities in Canada. CSA N286-12 is a safety-oriented regulatory compliance system that integrates safety culture, proactive risk management, continuous improvement, and documentation requirements mandated by the CNSC. The practical challenge is that compliance with this framework cannot easily be verified using conventional buy-side investigations but deficiencies can have direct implications for licensing continuity, regulatory approvals, and post-closing integration.

For buyers, this means that nuclear supply chain diligence cannot stop at technical capability and customer contracts. Regulatory compliance must be assessed at the outset of a transaction. Licensing considerations can affect risk allocation, timing, closing, and ultimately value, and they are easier to address in due diligence than after a definitive agreement is in place.

Nuclear liability demands attention

Nuclear liability is often an unfamiliar concept that complicates acquisitions for new buyers in the sector and their capital providers. Canada's Nuclear Liability and Compensation Act ("NLCA") governs liability for nuclear incidents at designated facilities. Yet supply chain participants potentially face exposure to nuclear liability through other channels, including contractual indemnities, flow-down obligations, and risk allocation provisions embedded in agreements. Without the ability to distinguish between liability that is channelled to the operator under the NLCA and liability that the target has assumed contractually or otherwise, it is difficult to accurately assess the risk profile of the business being acquired.

Nuclear facilities, and the vendors that support them, operate under environmental monitoring and regulatory compliance regimes that can extend for decades. Contamination risks, decommissioning arrangements, and ongoing regulatory obligations often do not fit neatly into the risk assessment and allocation matrices and mechanisms typically used in industrial transactions, including standard representations, warranties, and indemnities. Buyers must evaluate not only the nature and scale of potential liability exposure, but also whether the chosen transaction structure will trigger consent requirements, disrupt existing contractual relationships, or transfer obligations that have not been accounted for in the purchase price. Early identification of these risks allows the parties to develop appropriately tailored risk allocation mechanisms designed to reflect the liability profile associated with the target's operations.

Foreign investment scrutiny has intensified

Canada’s foreign investment review regime is also shifting in ways that directly affect nuclear-sector transactions. In March 2024, Parliament enacted Bill C-34, the National Security Review of Investments Modernization Act, representing the most significant overhaul of the Investment Canada Act in more than a decade. Amendments that came into force in September 2024 significantly expanded the federal government’s powers in national security reviews, including the authority for the Minister of Innovation, Science and Industry to extend reviews, impose interim conditions on investors during the review process, and accept binding undertakings to address national security concerns.

Bill C-34 also introduced a new but not yet in force pre-closing notification obligation for acquisitions by non-Canadians (including certain minority investments) in prescribed sectors. While there is no firm timeline for when this new regime will begin, as regulations must first be enacted to identify the prescribed sectors, it is anticipated that a wide range of “sensitive” business activities are likely to be in scope, including potentially nuclear-sector transactions. That said, as in other jurisdictions with similar sector-based regimes, there will likely be some ambiguity as to whether a particular transaction is captured, making it essential to obtain practical and experienced advice early in the transaction planning process.

At the same time, the government has moved to more clearly identify the technologies that it considers to be strategically sensitive. In February 2025, Canada released its first Sensitive Technology List, identifying 11 categories of technology linked to national security concerns. Advanced nuclear technologies, including small modular reactors, are explicitly included. One month later, the updated Guidelines on the National Security Review of Investments incorporated this list, signalling a greater willingness by the federal government to scrutinize transactions that could integrate strategically important Canadian companies into foreign economic or industrial ecosystems.

The implication for dealmakers is that foreign investment review is becoming a threshold issue for nuclear-sector acquisitions. In some cases, this may demand transaction timelines, conditionality, and even deal certainty mechanisms to be structured around potential national security review outcomes. Where a potential acquirer has any foreign nexus, whether a multinational strategic buyer, a foreign-backed investment fund, or a Canadian entity with significant foreign ownership, national security review considerations may shape the viability, timing, and structure of the transaction.

Structuring for success in a highly regulated sector

These challenges do not make acquisitions in the nuclear sector impractical, but they call for a different approach. Prudent acquirers should map regulatory exposure and assess licensing and liability risks early in the diligence process. In our experience, successful transactions require an in-depth understanding of the nuclear regulatory and legal landscape and carefully structured risk allocation provisions.

How Gowling WLG can help

Canada’s nuclear supply chain is approaching an important period of growth. As investment accelerates, consolidation among the downstream companies that make up the nuclear ecosystem is also increasing.

Transactions in this sector need more than conventional M&A execution. They demand a detailed understanding of the regulatory, liability, and national security considerations that are unique to nuclear. Without that sector-specific insight, key risks may be underappreciated or addressed too late in the process. Addressing these issues early, and with advisors who understand how they interact, can help avoid delays and ensure that deal structures properly reflect the regulatory environment in which nuclear supply chain companies operate.

Our nuclear team regularly advises across the full nuclear value chain, combining recognized M&A execution experience with deep familiarity with the regulatory and commercial dynamics that shape this sector. If you are evaluating a potential transaction, early engagement can be critical to identifying and managing the unique risks that arise in nuclear deals.

Read the original article on GowlingWLG.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.