Deal Law Wire


insight and perspectives on developments in mergers + acquisitions

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

The rise of cross-border M&A

The numbers are in for the first half of 2014 and they show an M&A market dominated by cross-border deals. With the advent of globalization and a renewed confidence from businesses across the world, international M&A activity is on the rise in terms of both value and market share.

In the H1 2014 Trend Report released by MergerMarket, several statistics demonstrate how robust the cross-border category has become in the global M&A market. During the first half of the year, cross-border deals accounted for 46.1% of all M&A activity. This figure represents the highest market share held by cross-border transactions on record (MergerMarket has been tracking M&A figures since 2001). The cross-border category easily outpaced its 36.4% share in H1 2013 and its 39.8% share in H1 2012. The total value of international deals in H1 2014 was $724 billion, which is a 107.4% increase from H1 2013 and an 80.3% increase from H1 2012. Although it did not break any records, cross-border M&A had its highest half-year since H1 2007. In aggregate, international M&A has reached pre-recession levels and is growing at a much faster rate than the rest of the market.

The value of the individual deals is also growing. H1 2014 had the highest average deal size on record, due in part to the increase in large-cap international M&A transactions. Of the ten mega-deals in Q2 2014 (MergerMarket defines a “mega-deal” as a transaction worth over US $10 billion), five of the mega-deals were international in scope. In the fifth-largest cross-border M&A deal since 2001, the Minneapolis-based Meditronic acquired Irish medical supply company Covidien for US $45.9 billion.

The trend towards large-scale international M&A transactions appears to be a new business reality in the post-recession world. One of the motivating factors behinds this trend is thought to be a general increase in the confidence of dealmakers and a corresponding willingness on their part to take risks. As we emerge from the shadow of the financial crisis, the recent rise in cross-border deals may be a manifestation of this increased risk tolerance. Not surprisingly, the most frequent and prevailing motivator for cross-border M&A seems to be access to new customers, and with increased risk tolerance, newly confident and solvent businesses are keen to expand by selling their offerings to new markets.

While it is too soon to tell whether the results from the H1 2014 are an aberration or the beginning of a paradigm shift in the M&A market, the rise of cross-border deals is a trend to watch.

The author wishes to thank Markus Liik, summer law student, for his assistance in preparing this legal update.

Early-stage deals signal growth in global M&A for 2014

Intralinks publishes a Deal Flow Indicator (“DFI”) report on a quarterly basis with a view to predicting global M&A trends based on comprehensive tracking of early-stage M&A deals across the world. According to its recently released Q2 2014 DFI report, Intralinks predicts that 2014 is poised to end on a strong note for M&A activity. The report projects that 2014 will be the first year since 2010 to record a 6% – 10% increase from the previous year in worldwide M&A volume. This forecast is based on a strong 16% quarter-on-quarter (“QoQ”) uptick in early-stage deal activity during Q2 2014. The DFI report predicts that these impressive results are indicative of a sustained global deal-making recovery, which has been elusive since the onset of the recession in the late 2000s.

The DFI report cites a number of macroeconomic trends that are likely contributing to this acceleration in the M&A market. The global economy appears to be growing on the whole (up from 3% global GDP growth in 2013 to a projected 3.6% in 2014) and should continue to do so for the mid-term. IPO activity has had a robust showing in the first half of 2014 with more announced for the following two quarters, making this the strongest year for IPOs since the financial crisis struck in 2008. While traditional bank lending is improving at an uneven rate in different countries, mid-sized businesses are increasingly accessing funding from alternative sources such as credit and bond funds to finance M&A transactions.

The summer months saw increased early-stage M&A activity in North America, Latin America, and EMEA (Europe, the Middle East, and Africa). Only the Asia-Pacific region saw an overall slowdown in M&A volume, which the DFI report attributes to a maturation of the region’s economies following a prolonged period of rapid growth. The US in particular is leading this recovery with a 30% QoQ increase in M&A volume and a staggering 137% QoQ increase in value during Q2 2014. The current economic environment in the US is favourable to M&A transactions, with low interest rates, growing housing prices and shrinking unemployment.

Of the various industry sectors, pharmaceuticals contributed the most to the surge in M&A activity during Q2 2014 through a series of gargantuan transactions valued at up to US$14.2bn. The impetus behind many of the M&A transactions in this sector are the approaching patent expirations for a number of blockbuster drugs. This ‘patent cliff’ is particularly problematic for large pharmaceutical companies with only one or two such drugs driving their bottom lines.

Overall, the DFI report notes that the deal-making climate is significantly more optimistic than it has been in the past few years. All factors point to an across-the-board increase in confidence from businesses after a prolonged period of bearish attitudes since the financial downturn. The report hypothesizes that this result is not an aberration but the beginning of a sustained recovery in the M&A market.

The author wishes to thank Markus Liik, summer student, for his assistance in preparing this legal update.

International business report says M&A market set to enter busy phase

Grant Thornton LLP recently published its annual International Business Report (the Report). The Report, which aims to chart appetite for M&A around the world, is based on interviews with more than 12,500 chief executive officers, managing directors, chairmen and other senior decision-makers across all sectors. The Report’s findings, while varied, all point to the importance of M&A activity as a driving force for growth, as there was a clear acknowledgement from those surveyed that acquisitions are needed if business hope to grow.

The Report displayed stronger numbers in comparison to the previous year’s findings. Canada’s numbers were especially strong in comparison to the global average, suggesting the country’s businesses are poised to experience growth via M&A activities in the near future. While 31% of businesses globally stated that they had plans to look at M&A opportunities over the next three years, 40% of Canadian businesses signaled their intentions to seek out M&A during the same period.

The Report’s results suggested several key industry sectors to watch for M&A activity, including: (i) mining, (ii) technology, (iii) financial services, and (iv) healthcare.

While the mining industry has been quiet over the last couple of years due to slower global economic growth and depressed commodity prices,  M&A in the mining industry is expected to pick up in the near term, with 45% of companies stating they intended to look for M&A opportunities.  More buying opportunities are being presented to sector participants able to fund acquisitions, and companies willing and able to grow are expected to increase their M&A activity.

With ever increasing digitalization and globalization, companies in the technology sector are likely to benefit from vertical and horizontal integration. 45% of surveyed businesses indicated that they were eager to pursue M&A as a strategy for growth; a 5% increase from the previous year. We should therefore expect to see a healthy amount of M&A activity flowing from the technology industry.

The financial services industry continues to have a cautionary attitude towards M&A, however, the Report says the effects of increasing regulatory demands and more stringent monitoring of capital have left some firms with capital which could be used for M&A. Improved market conditions, paired with an increased availability of financing options may therefore have a positive effect on the financial services industry’s willingness to re-enter the M&A market. 43% of businesses in the financial services industry signaled their intention to seek out M&A opportunities; that number is up 12% from the previous year’s results.

Finally, the Report discusses M&A activity in the healthcare industry. The Report points to healthcare services, especially in ASEAN countries,  where a large and increasingly aging population is encouraging healthcare consolidation. Expect to see increased M&A in this industry, with 37% of surveyed businesses signaling their intention to engage in M&A activity.

The results of the Report suggest that we are going to be entering a busy phase for the M&A market: businesses around the world and in varying industries are increasingly embracing acquisitions and seeing M&A as a vital strategic tool.

A global M&A technology boom

The global volume of M&A transactions in the technology sector is on the rise – from North America to Asia, M&A numbers in the tech industry are reaching heights not seen since 2001.

In both its M&A Trend Report: Q1 2014 and Global Technology, Media & Telecommunications Trend Report: H1 2014, Mergermarket reported that Global Technology, Media and Telecommunications M&A volume was up 55% in Q1 2014 compared to Q1 2013. The Q2 outstripped the Q1 results in 2014, with the value of deals tripling from Q2 2013. A significant portion of this growth is originating from North America, with 5 of the top 10 deals in H1 2014 being US-based.

M&A is a multi-faceted business strategy in the technology sector, a way to acquire talent and innovation, both valuable commodities in an industry that is always looking for the next big idea. There are likely a number of reasons for why this trend is emerging in the technology sector, but there are three key factors.

  1. M&A is not just a strategy limited to young and fast growing companies, but also something established technology veterans are incorporating into their business strategies. For example, Meg Whitman, CEO of Hewlett-Packard commented on HP’s turnaround plan in late 2013 and noted that “acquisitions will be part of our future…we have our eyes on a number of areas. I don’t want to do it to just buy growth, I want to do it to further the strategic position in the marketplace for HP.”
  2. The technology industry is also likely engaging heavily in M&A because of the significant amounts of cash these types of companies are known to carry on their balance sheets today.
  3. Some have described a practice known as the “acqui-hire” trend in the technology sector whereby a company will acquire a young start-up primarily with the intention of hiring its employees. The technology industry is generally start-up friendly, with low capital contribution required at the start and a variety of avenues available to obtain seed funding. What this means is that the industry sees young, gifted entrepreneurs continuously entering the market and M&A is a way to manage competition and acquire innovative, entrepreneurial talent and ideas.

As we look forward, the US market has been a significant driver of growth in global technology M&A transactions in H1 2014 but we can also expect to see significant growth out of the Asian market in the coming quarters. Chinese technology companies in particular are proving to be competitive, well capitalized and strategic in seeking global growth through acquisition. Ultimately, it appears that the global volume of technology M&A will continue to rise.

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