The use of exchangeable shares in Canadian M&A transactions, particularly by private equity funds, is increasing due to their tax deferral benefits and ability to bridge valuation gaps. These structures allow Canadian sellers to exchange shares for equity in foreign acquirers, deferring capital gains taxes. Anticipated changes to capital gains inclusion rates in Canada may further drive interest in such arrangements. As foreign private equity sponsors seek to invest in Canada, understanding exchangeable share structures will be crucial for competitiveness. Despite their complexity, these structures offer advantages like reduced cash consideration and alignment with management interests.