Birch Hill and Brookfield Complete $2.9 Billion Acquisition of First National Financial
Birch Hill and Brookfield Complete $2.9 Billion Acquisition of First National Financial
October 2025 — In one of the largest private equity transactions in Canada's mortgage sector this year, Birch Hill Equity Partners and Brookfield Asset Management have successfully closed their acquisition of a majority stake in First National Financial Corporation for $2.9 billion. The landmark deal, which finalized on October 22, 2025, reshapes the ownership structure of one of Canada's leading non-bank mortgage lenders while preserving founder involvement in the business.
Deal Overview and Transaction Structure
The acquisition was executed through a plan of arrangement under Ontario's Business Corporations Act, with Birch Hill and Brookfield acquiring all outstanding common shares not retained by First National's founders, Stephen Smith and Moray Tawse. Each founder maintained an indirect 19% interest in the company, demonstrating their continued confidence in First National's future prospects.
The transaction was facilitated through Regal Bidco Inc., a purpose-built acquisition vehicle now operating as a subsidiary of Regal Holdings LP. Within this limited partnership structure, Birch Hill and Brookfield collectively control approximately 62% of the interests, while Smith, Tawse, and their affiliates hold their stakes after exchanging a portion of their shares for ownership interests in the holding company.
Key Transaction Details:
- Purchase price: $48 per share
- Premium: 15.2% above the 30-day average trading price
- Total equity value: Approximately $2.9 billion
- Closing date: October 22, 2025
- Founders' retained stake: 19% each (indirect, through Regal Holdings LP)
Leadership and Governance Changes
While the ownership structure has evolved significantly, First National has prioritized management continuity to maintain operational stability. The board of directors has been expanded from nine to ten members, with Moray Tawse assuming the role of chair. An 11th director, William Stone, is expected to join in the near future.
Critically, the senior management team remains intact, with CEO Jason Ellis continuing to lead day-to-day operations. This continuity is designed to preserve First National's competitive advantages and institutional knowledge while benefiting from the strategic resources that Birch Hill and Brookfield bring to the partnership.
The company's preferred shares will continue trading on the Toronto Stock Exchange, maintaining public market access for preferred shareholders, while common shares are being delisted following the privatization transaction.
Strategic Rationale and Market Position
First National Financial Corporation occupies a commanding position in Canada's mortgage landscape, with its subsidiary First National Financial LP managing approximately $160 billion in mortgages under administration. This places the company among Canada's largest non-bank mortgage originators and underwriters, serving both residential and commercial segments.
The acquisition emerged from a comprehensive strategic review process initiated by First National's board. Multiple acquisition proposals were evaluated before the Birch Hill and Brookfield joint offer was selected as delivering the highest value for shareholders.
Expected Strategic Benefits:
- Innovation acceleration: Leveraging private equity resources to enhance technology platforms and digital capabilities
- Operational optimization: Implementing best practices from Birch Hill and Brookfield's extensive portfolio experience
- Platform growth: Expanding market share in existing segments and exploring new product opportunities
- Cross-border potential: Exploring international expansion opportunities, particularly in U.S. markets
Both private equity firms bring deep expertise in Canadian financial services. Brookfield Asset Management, a global alternative asset manager with over $900 billion in assets under management, has extensive experience in real estate and infrastructure investments. Birch Hill Equity Partners specializes in middle-market Canadian companies and has a strong track record in the financial services sector.
Regulatory Approval and Competitive Considerations
The transaction successfully navigated all required regulatory hurdles, receiving approvals from shareholders, the Ontario Superior Court of Justice, and relevant regulatory authorities. Notably, the Commissioner of Competition issued a "no-action letter," indicating no competitive concerns with the ownership consolidation.
This regulatory clearance is significant given First National's market position and the growing scrutiny of consolidation in Canada's financial services sector. The approval suggests regulators view the transaction as compatible with maintaining competitive mortgage markets.
Implications for Canada's Mortgage Industry
The First National acquisition represents a significant milestone in the evolution of Canada's mortgage sector, highlighting several important trends:
Private Equity's Growing Role
The transaction underscores private equity's increasing appetite for Canadian financial services assets, particularly in the mortgage origination and servicing space. With traditional banks facing regulatory constraints and capital requirements, non-bank lenders like First National have gained market share, making them attractive targets for private equity investment.
Non-Bank Lender Consolidation
As the mortgage industry faces margin pressure from rising interest rates and increased competition, scale and operational efficiency have become critical success factors. The Birch Hill and Brookfield partnership provides First National with additional resources to compete more effectively against both traditional banks and emerging fintech competitors.
Technology and Innovation Focus
Private equity ownership typically brings a heightened focus on technology investment and operational efficiency. First National is expected to accelerate its digital transformation initiatives, enhancing its origination platforms, customer experience, and back-office operations.
Market Outlook and Future Prospects
Under new ownership, First National is positioned to pursue an ambitious growth agenda while maintaining its core strengths in mortgage origination and underwriting. The company's strong market position, combined with the financial resources and strategic expertise of Birch Hill and Brookfield, creates opportunities for expansion both organically and through potential acquisitions.
The Canadian mortgage market continues to present attractive long-term fundamentals despite near-term headwinds from elevated interest rates. Population growth, housing supply constraints, and the ongoing need for mortgage financing support continued demand for First National's products and services.
The retention of founders Smith and Tawse as significant stakeholders also provides continuity and alignment of interests, ensuring that First National's entrepreneurial culture and client-focused approach remain central to its strategy.
Conclusion
The $2.9 billion acquisition of First National Financial by Birch Hill Equity Partners and Brookfield Asset Management marks a transformative moment for one of Canada's premier mortgage companies. By combining First National's market leadership and operational excellence with the resources and expertise of two of Canada's most respected investment firms, the transaction creates a platform for sustained growth and innovation in Canada's evolving mortgage landscape.
As the mortgage industry continues to adapt to changing market conditions, regulatory requirements, and customer expectations, First National's new ownership structure positions it to compete effectively while maintaining the founder-led culture that has been central to its success.
About First National Financial Corporation
First National Financial Corporation, through its subsidiary First National Financial LP, is one of Canada's largest non-bank mortgage originators and underwriters, managing approximately $160 billion in mortgages under administration. The company originates and services both residential and commercial mortgages.
About Birch Hill Equity Partners
Birch Hill Equity Partners is a leading Canadian private equity firm focused on investing in middle-market companies. The firm has extensive experience in financial services and other sectors.
About Brookfield Asset Management
Brookfield Asset Management is a global alternative asset manager with over $900 billion in assets under management across real estate, infrastructure, renewable power, private equity, and credit strategies.
