Deal Law Wire


insight and perspectives on developments in mergers + acquisitions

Webinar – Norton Rose Fulbright’s M&A in 2014: poison pills

Join us on Thursday, October 2, 2014 for a webinar on poison pills.

Register now

Shareholder rights plans, more popularly known as “poison pills”, remain one of the most powerful and storied of modern anti-takeover defenses. Developed in the 1980s, poison pills have seen their popularity soar and then wane, but now may be on the verge of a renaissance as they become adapted to defend corporations from newly emerging threats.

Our speakers will provide an introduction to poison pills – how they function, their key terms and optional features – and then discuss recent developments in the design and utilization of poison pills.  Discussion topics will include Institutional Shareholder Services guidelines, the “shelf” pill, the net operating loss pill, bifurcated ownership thresholds and the use of “wolfpack” provisions to fend off shareholder activists.  Recent Delaware cases reaffirming the validity and utility of poison pills will also be reviewed.



10:00 am – 11:00 am PDT
11:00 am – 12:00 pm MDT
12:00 pm – 1:00 pm CDT
1:00 pm – 2:00 pm EDT
6:00 pm – 7:00 pm BST


Please click here to register.

Canadian Energy M&A on the rise

A recent report released by Deloitte announces that the number of Canadian deals in the energy sector has risen by 15% in the first half of 2014, compared with the same period in 2013.

The Deloitte Oil & Gas Mergers and Acquisitions Midyear 2014 Report offers an optimistic outlook for sector’s global deal activity, with Canada well positioned to benefit from the upswing.

Canada is at the centre of global deal activity

The global deal value in the energy sector has risen by 38%, to $141 billion this year, with Canada and the United States at centre of the activity, accounting for 61% of global transactions.

The Canadian Exploration & Production (E&P) deal count rose by 23%, with the focus trending towards more conventional sources, such as natural gas, and shifting away from the oil sands.

This good news comes despite the lack of positive progress on major proposed pipelines to connect Canadian producers with US and coastal markets. Canada’s oil producers have been struggling with delays in two major pipeline projects, the Keystone XL and the Northern Gateway, which would transport Albertan oil towards the southern US markets and the western coastal ports.

Deloitte suggests that the shift away from oil sands deals may also be due to rising costs and increasing environmental regulation, resulting in challenging returns.  Nevertheless, Canada remains an attractive jurisdiction for foreign investors, in part because it is free from the export restrictions present in the United States.

The global energy deal market may be on the rebound

Although companies are still focusing on the organic growth and cost containment strategies responsible for a slowdown in deal activity in 2013, second quarter 2014 data suggests they are also seeking to acquire new resources.

The temptation to sell off oil assets has largely been curtailed by the price of oil remaining high, but natural gas prices have remained stable and may continue to entice buyers who are looking to diversify their portfolios.

What’s more, private equity is continuing to eye the oil and gas sector in 2014, focusing particularly on the oilfield services and midstream sectors. With interest rates forecast to remain low, buyers may be able to access additional sources of capital through stock appreciation.

Overall, the outlook is encouraging and Deloitte projects that Canada and the United States will continue to drive investment throughout the value chain for the foreseeable future.

The author would like to thank Carole Gilbert, articling student, for her assistance in preparing this legal update.

Technology M&A in 2014: 10 issues to consider (Part I)

Deloitte recently published a report called Top 10 Issues for Technology M&A in 2014 describing 10 issues that companies in the tech sector should consider when developing their 2014 M&A strategies. This post is the first of a two-part series and will cover the first 5 issues to consider:

  1. volume and valuation;
  2. focus on growth;
  3. TMT convergence;
  4. monetizing tech trends; and
  5. cross-border M&A.

According to Deloitte, although industry trends seem to point towards greater deal volume for M&A generally in 2014 as compared to 2013, it is unclear whether this trend will be picked-up in the tech sector. What is clear, however, is that as the technologies themselves continue to expand and evolve and as the availability of internet access balloons, tech companies are regularly turning to M&A in order to respond to customer needs. Below are summaries of 5 of the top 10 issues to keep in mind when turning to tech M&A.

Volume and valuation

The tech sector saw an increase in 2013 in deal volume (3.6%) and deal value over 2012 figures. The Hardware subsector saw the largest growth in deal volume at nearly double the 2012 numbers. The Internet/E-Commerce subsector continued to thrive, with healthy increases in both deal volume and value. Meanwhile, the IT Services subsector saw a small decrease, amounting to 4.6% fewer deals in 2013.

In terms of valuation, though earnings in the tech sector continue to rise, P/E continues to fall. The highest valuations are for those companies engaging in cloud-based solutions, as opposed to those providing a licenced product. Deloitte’s report suggests that the market is viewing a cloud-based model as more scalable and more predictable than one based on licence sales.

Focus on growth

After the 2008 recession, the trend in tech was towards reducing cost, often at the expense of achieving growth. Now, as revenue targets become more aggressive, cash-rich tech companies are looking to M&A in order to reach their growth objectives. However, companies should be cautious when considering cross-subsector deals; success in the hardware market does not necessarily make for a successful software company.

TMT convergence

Two trends are driving M&A activity in the Technology, Media and Telecom (TMT) space: (1) companies in one part of that space pushing into the other parts (e.g. Apple), and (2) companies that started as a mixture of all three subsets of TMT that are growing in size and influence (e.g. Google).

Additionally, as non-TMT companies find themselves increasingly integrating software into their products, they are simply acquiring the companies producing the software rather than attempting to create their own product.

Monetizing tech trends

Tech companies seeking growth through M&A should bear in mind that the market is increasingly expecting them to demonstrate and quickly extract value from a deal. Three growth areas are becoming the focus of buyers looking to monetize their acquisitions: cloud computing, mobility, and the use of big data and business analytics to generate improved performance.

Cross-border M&A

As inbound M&A continues to increase, domestic companies should likewise swivel their sights abroad in the hunt for acquisitions, especially for location-based, cloud-based, and social technologies. However, before closing a deal, buyers should ensure that they have considered both tax minimization opportunities in the target jurisdiction and the potential tax consequences in their own. To ensure that both the acquisition and later operations run smoothly, buyers should leverage legal, business and cultural experts in the target jurisdiction.

That concludes Part I. Stay tuned for the second part of this series, canvassing the remaining 5 issues to keep in mind in tech M&A.

The author would like to thank Jad Debs, articling student, for his assistance in preparing this legal update.

Understanding the basics: non-disclosure agreements

One of the first steps in an M&A transaction is the signing of a non-disclosure agreement (NDA), also referred to as a confidentiality agreement. Although NDAs can be used in many different situations, in the M&A context these agreements are an essential prerequisite to the sharing of company information and the formal due diligence process.

An NDA can be either ‘one-way’ or ‘mutual’. A one-way NDA is structured so that only one party will be disclosing information and the other party receiving it. In contrast, a mutual NDA contemplates that either party may disclose or receive information, and imposes mutual obligations of confidentiality.

There are a number of terms that should be included in an NDA, including the following essentials:

  • Parties: An NDA can be crafted to apply narrowly (e.g. to specific individuals only), or broadly (e.g. an entire company, including its employees, professional advisors and other related parties). Consider whether these additional persons or entities should also formally agree to be bound by confidentiality obligations.
  • Definition of “confidential information”: The typical approach is to define confidential information broadly, subject to exclusions (see next point). However, parties can also impose specific requirements, such as labelling documents “Confidential”.
  • Exclusions: For practical purposes, most NDAs exclude certain information from the definition of confidential information. Typical exclusions include: (1) information that was already publicly available, other than through a breach of the NDA; (2) information received from a third party who was not subject to any confidentiality obligations; and (3) information that the receiving party already had.
  • Permitted purpose:  An NDA should state for what purpose the confidential information is being shared, and restrict the use of the confidential information to that purpose. For example, in an M&A context, a company looking to attract prospective bidders would limit the use of confidential information to considering and possibly completing a transaction.
  • Non-disclosure: Similarly, an NDA should make clear that the confidential information cannot be used for any other purpose or disclosed for any reason whatsoever, unless required by law. It is typical to request that prior notice of such forced disclosure be given to the other party, if possible, so that precautionary measures can be taken.
  • Non-solicitation of employees: NDAs used in an M&A context often include a provision that restricts a potential bidder from poaching the disclosing party’s employees. This is especially important when the parties operate in the same competitive space and the employees in question are particularly experienced or otherwise valuable.  
  • Term: The obligations created by an NDA will usually last for a specified amount of time, as negotiated by the parties. A disclosing party will benefit when protective provisions last longer, while a receiving party will prefer that potentially restrictive obligations expire sooner than later.

Although standard form NDAs are frequently used, parties should always consider whether the agreement fits the particular circumstances and risks. Also, as with all contract law, when drafting or negotiating an NDA remember that seemingly innocuous changes can sometimes have unintended consequences (see, for example, this blog’s recent post regarding “time is of the essence” clauses and what they really mean).

The M&A revival and other recent developments

Mergermarket just released the half-year edition of its 2014 Deal Drivers Americas (DDA) report, and it looks like a year full of clear skies and sunshine for the M&A market – in other words, the long-awaited revival is here.

Trends in private equity activity in the Americas

Looking at the DDA report, we see that North American deals in H1 2014 have seen a 26% rise in volume and an 88% rise in value over H1 2013. The numbers for H1 2014 are quite robust: 2,109 transactions with a  combined value of $749bn USD. The DDA report cites a number of factors contributing to this increase, including low interest rates, capital-laden companies and, most importantly, strong CEO and board leadership.

The DDA report also predicts a marked increase in M&A activity in Latin America, owing to energy and telecom sector reforms in Mexico, changing societal dynamics in Brazil, and growing foreign investment into Chile and fiscally-prudent Peru.

The life science M&A market in H2 2014

Deals in the life sciences, healthcare, and TMT (technology, media, and telecommunications) sectors led the pack in H1 2014.

Though large TMT deals took the top two spots, life sciences and healthcare deals snagged five of the remaining spots, with American companies making the move to more tax-friendly jurisdictions such as the UK and Ireland. All five of these life sciences and healthcare deals were structured as corporate tax inversions – a process by which a company, while merging with a company in a foreign jurisdiction, reincorporates in the target jurisdiction for tax purposes. The DDA report predicts more such deals in this sector, one which is already globally focused and therefore more likely to reach out past national borders when looking to grow through acquisitions.

Is this a true revival, or just a cyclical flash in the pan?

The DDA report is optimistic that this upsurge is no passing trend. With stock prices steadily increasing, as well as the presence of the above mentioned factors such as favorable interest rates and CEO confidence, the big picture seems be one of continued strong M&A activity. As companies continue to track down strategic and properly valued deals, the markets will likely continue to reward them, giving companies even more incentive to keep on in that same vein.

The author would like to thank Jad Debs, articling student, for his assistance in preparing this legal update.

Webinar – Norton Rose Fulbright’s M&A in 2014: tax considerations that optimize after-tax returns in acquisitive transactions

Join us on Thursday, September 4, 2014 for a webinar on tax considerations that optimize after-tax returns in acquisitive transactions.

Register now

Given that after-tax returns are critical in pricing most transactions, there is a premium on tax planning at the outset of negotiations. The goal should be to ensure tax-efficient structures in which neither the buyer nor seller learns after the fact that their targeted after-tax return was missed.

Discussion will include acquisitive corporate nontaxable reorganizations, taxable asset and stock acquisitions using Internal Revenue Code Sections 336 and Section 338(h)(10), and the unique considerations that arise when either the buyer or seller is an S corporation.

Consideration will be given to the tax sections of the primary deal documents including the seller’s tax representations and tax indemnities and the importance to the buyer of tax due diligence on the target corporation.



10:00 am – 11:00 am PDT
11:00 am – 12:00 pm MDT
12:00 pm – 1:00 pm CDT
1:00 pm – 2:00 pm EDT
6:00 pm – 7:00 pm BST


Please click here to register or, for additional information, please contact Terra Worshek by e-mail or at +1 713 651 5109.


Time is not always of the essence

While stock phrases and other boilerplate are often standard inclusions in agreements (including agreements regarding M&A transactions), the proper use and interpretation of such stock phrases are vital and can implicate the execution of a deal.

A “time is of the essence” clause is an example of one such boilerplate provision.

The purpose of a “time of the essence” provision is to make clear that any delay in performance of a contract may support an action for the inconvenienced party and relieve the non-breaching party from the performance of his her or its duties. In other words, the clause signals that the essence of the entire contract depends on the timely fulfilment of its terms.

At law, there is no general presumption that time is of the essence. A court will consider the intention of the contracting parties to establish whether time is essential to a contract. Practically, where an express statement of timeliness is included in an agreement, a court would not be required to discern intention. Alternatively, where there is no express statement, timeliness may be implied based on the nature of the property involved in the contract. Leaving said implication to the court is a transactional risk, which is best mitigated by inclusion of an express time of the essence clause.

A court will typically implicate timeliness when the property being sold in a particular transaction is of fluctuating value. According to the Supreme Court of Canada, this is because a buyer faces the possibility of prejudice if the seller does not deliver in the specified time. The sale of goods is treated differently than the sale of fixed assets, such as land. Goods generally fluctuate more in value than land. On this basis, a private acquisition of goods is more likely to imply time being of the essence than an acquisition of land.

Similarly, variability in the value of shares creates reason for timeliness in a share purchase deal. This type of transaction involves the purchase of the shares of a target, subjecting a buyer to a risk of price fluctuations of the target’s shares. Absent an express time of the essence clause, this risk would be absorbed by the contracting parties, ultimately affecting the purchase price.

In the case of an asset purchase deal, an implication of timeliness by a court depends on the market variability of the goods. If the purchased assets are generally not subject to resale (e.g., land), there is less essentiality of timeliness and an implication thereof. That being said, best practice would be to include an express “time is of the essence” clause to avoid the risks associated with reliance on the court to imply timeliness and any resulting effect on the purchase price.

It is noteworthy that the inclusion of a timeliness provision is sometimes inconsistent with the terms of an agreement. Typically parties may agree that time is not of the essence where there is expected variability in the execution of the contract.

In few circumstances, intention may prevail over an express “time of the essence” clause. This is the case where other terms of an agreement show the true intention of the parties as being otherwise. However, typically when time is expressly made essential to a contract, a breach of any term of which time is limited may entitle the non-breaching party to rescind. As a result, including a “time of the essence” clause as a formality without an understanding of its consequences may create substantial implications for the contracting parties.

The author wishes to thank Lauren Day, summer student, for her assistance in preparing this legal update.

M&A activity continues to rise in Q2 2014

Recent reports by Mergermarket and Pricewaterhouse Coopers (PwC) have confirmed the positive forecasts for M&A transactions in Q2 2014.  Globally, deal volume has reached its highest level since 2007.  North America, in particular, has seen a strong amount of activity with a number of megadeals listed in the top 10 deals in the world.

North American M&A Review

Mergermarket recently published its Monthly M&A Analysis Insider detailing the robust increase in deal value in Q2 2014.  In North America, there was a 40.6% increase over Q1 2014 in M&A value.  In total, there were 1,291 transactions worth US$430.1 billion.

The report highlights upward movement in key sectors in North America:

  • Pharma, Medical & Biotech: This sector accounted for the largest share of the North American M&A market by volume with 125 deals valued at $106.8 billion. This is a 20% increase by value and a 28% increase by volume from Q2 2013.
  • Telecommunications: This sector saw just 12 deals cumulate a value of $81.3 billion. This is a huge increase over last year when deals totalled $732 million.  These telecommunication transactions represent a remarkable 11,005% increase over Q2 2013  deal volume.
  • Energy, Mining & Utilities: In this sector, there were 179 deals worth $383.2 billion.  This represents an uptick over this time last year.  There was a 189% increase by value and a 58% increase by volume in this sector over Q2 2013.
  • Consumer: In Q2 2014, there were 105 Consumer sector deals worth $20 billion.  The value and number of deals has remained consistent over this time last year.  Q2 2014 represented a 2% increase in volume and a 5% decrease in value from Q2 2013.

M&A Activity in Canada

PwC reports in its Capital Markets Flash that a strong equity market, cheap financing, and healthy cash balances have created a ripe market for Canadian M&A activity.  Q2 2014 represented an increase of 10% over Q1 2014 deal volume and value.  Recent transactions have been driven by demand for cash-rich balance sheets.

Q2 2014 is notable for the increase in volume and value of big deals (deals of over $1 billion). They have increased 10% by number and 39% by value in Q2 2014. Accordingly, domestic deals have declined 28% since last quarter.

Commodities and energy are the sectors that are leading the Canadian M&A market.  Continuing the momentum from Q1 2014, the largest deal announced in Q2 was in the pharmaceutical sector.  The pharmaceutical industry lends itself to high volume deals because of the great value locked in intellectual property acquisitions.  Activity in this sector is likely to continue thanks to the availability of cheap financing for cross-border purchases.

Despite the upward trend in M&A activity, a handful of potential deals in the telecommunications and consumer sectors turned sour in early August.  Whether these failed deals are the heralds for a decrease in M&A activity remains to be seen.

The author wishes to thank Denise Gan, articling student, for her assistance in preparing this legal update.

Webinar – Norton Rose Fulbright’s M&A in 2014: Recent M&A cases

Join us on Thursday, August 21, 2014 for a webinar on recent cases in M&A.

Register now

Virtually every public company transaction is subject to shareholder litigation.  While historically many such suits were resolved through disclosure-only settlements, courts are increasingly likely to scrutinize and, in some cases, reject such settlements.  Further, the Delaware courts have awarded significant damages and attorneys’ fees in several recent high-profile cases, and claims involving certain conflicts of interest, and specifically financial adviser conflicts, appear to be gaining traction.

Our speakers will discuss recent developments in M&A cases and offer practical tips on reducing legal risk in public company transactions. Discussion topics will include recent deal characteristics that are garnering scrutiny from the Delaware courts, the success of mandatory venue provisions in company bylaws and charters, and the trend for significant financial investors to bring post-closing appraisal claims.



10:00 am – 11:00 am PDT
11:00 am – 12:00 pm MDT
12:00 pm – 1:00 pm CDT
1:00 pm – 2:00 pm EDT
6:00 pm – 7:00 pm BST


For additional information, please contact Terra Worshek by e-mail or at +1 713 651 5109.

Seminar: Norton Rose Fulbright’s 7th Annual Mergers & Acquisitions School

On Wednesday, September 10, 2014 to Wednesday, October 22, 2014 from 6:30 pm – 8:30 pm (US/Central), Norton Rose Fulbright  will be presenting its 7th Annual Mergers & Acquisitions School for corporate, in-house legal, investment banking and private equity professionals in Houston, Texas.

This comprehensive program is designed for participants that desire to develop a thorough understanding of the M&A process and agreements from a legal perspective. Invited organizations will have the exclusive opportunity to enroll up to two professionals.

Class Syllabus

Wednesday, September 10, 2014

  • Confidentiality, Non-Solicitation and Non-Circumvention Agreements • Legal Structures of Transactions – Asset Acquisitions, Stock/Equity Acquisitions, Tax-Free Reorganizations • Corporations vs. Partnerships and Limited Liability Companies • Carried Interests

Wednesday, September 17, 2014

  • Letters of Intent • Acquisition Agreement Overview • Legal Due Diligence

Tuesday, September 23, 2014

  • Purchase Price – Form of Consideration, Pre- and Post-Closing Adjustments and Earn-Outs • Representations and Warranties

Wednesday, October 1, 2014

  • Pre- and Post-Closing Covenants and Conditions to Closing • Non-Competition and Non-Solicitation Agreements • Employment Agreements

Wednesday, October 8, 2014

  • Regulatory Matters, Including Environmental and Hart-Scott-Rodino • Indemnities

Wednesday, October 15, 2014

  • Termination Provisions and Break-Up Fees; Dispute Resolution – Arbitration • Promissory Notes and Administrative Services Agreements • Closing the Transaction

Wednesday, October 22, 2014

  • This evening is designed to allow participants to explore two additional topics related to mergers and acquisitions which are of the most interest to them • Session topics may include: Antitrust – HSR, Dispute Resolution, Employment & Labor, Energy, Environmental, Legal Ethics, International, IP, Restructuring and Tax


The classes will be conducted by a team of Norton Rose Fulbright lawyers led by Edward Rhyne, Partner, Fulbright & Jaworski LLP.


Seven Weekly Sessions

  • September 10, 2014 6:30 pm – 8:30 pm
  • September 17, 2014 6:30 pm – 8:30 pm
  • September 23, 2014 6:30 pm – 8:30 pm
  • October 1, 2014 6:30 pm – 8:30 pm
  • October 8, 2014 6:30 pm – 8:30 pm
  • October 15, 2014 6:30 pm – 8:30 pm
  • October 22, 2014 6:30 pm – 8:30 pm

We will apply for Minimum Continuing Legal Education credit with the State Bar of Texas Committee on MCLE in the amount of 1.75 hours for each session.

The Mergers and Acquisitions School is free and restricted to invited guests only.  For additional information, please contact Terra Worshek by e-mail or at +1 713 651 5109.

Click here to Register Now.


Norton Rose Fulbright Auditorium
1301 McKinney Street, Mezzanine Level
Houston, TX , 77010