Canadian M&A activity stays hot, more in store

Deal Law Wire - Norton Rose FulbrightAccording to a recently published PwC report (the Report), Canadian mergers and acquisitions (M&A) activity is booming.

We recently reported that Canadian-backed equity financing activity in emerging venture capital companies is thriving. Moreover, both funding and deal volume among Canadian artificial intelligence companies have attained record heights in 2017. However, Canadian companies more broadly appear to be enjoying a particularly prosperous year as well. This momentum in the markets translates to good news for M&A activity in Canada, which is expected to pick up further steam in 2018.

Canadian M&A: by the numbers

The first three quarters in 2017 has seen significant gains in deal volume in Canada virtually across the board, but especially in the low-cap segment. According to the Report, total Canadian M&A activity between Q1 – Q3 in 2017 has reached  843 reported deals. This is up by approximately 42% when compared to total deals over the same period in 2016 (595).

The Report breaks down M&A activity into seven separate segments:

  • $1 million – $20 million: Deal volume is up 62%. 499 deals were announced in Q1 – Q3 2017 as compared to 308 over the same period in 2016.
  • $20 million – $50 million: Deal volume is up 15%. 101 deals were announced in Q1 – Q3 2017 as compared to 116 over the same period in 2016.
  • $50 million – $100 million: Deal volume is up 9%. 49 deals were announced in Q1 – Q3 2017 as compared to 45 over the same period in 2016.
  • $100 million – $500 million: Deal volume is up 48%. 130 deals were announced in Q1 – Q3 2017 as compared to 88 over the same period in 2016.
  • $500 million – $1 billion: Deal volume is up 13%. 26 deals were announced in Q1 – Q3 2017 as compared to 23 over the same period in 2016.
  • $1 billion – $5 billion: Deal volume is down 22%. 18 deals were announced in Q1 – Q3 2017 as compared to 23 over the same period in 2016.
  • $5 billion+: Deal volume is down 29%. 5 deals were announced in Q1 – Q3 2017 as compared to 7 over the same period in 2016.

Outside of deals valued at over $1 billion dollars, the number of deals is significantly higher this year as compared to 2016, in each segment. Moreover, the increase in the number of deals valued between $1 million and $20 million is particularly striking and suggests that low-cap activity is enjoying a banner year.

Canadian M&A: outlook

A widespread uptick in the worldwide markets is expected to continue. BusinessWire recently reported that the Intralinks Deal Flow Predictor (a predictor of future M&A announcements) forecasts the number of worldwide announced M&A deals in Q1 2018 to increase by approximately 2 percent when compared to Q1 2017. This has largely been attributed to a coalescence of four critical factors: gradual pickup in global economic growth; subdued inflation in both advanced and emerging economies; buoyant asset markets; and low interest rates.

The Intralinks Deal Flow Predictor’s regional prediction for M&A activity over the next six months in North America points to supportive financial conditions and a booming U.S. equity market but warns that uncertainty surrounding NAFTA negotiations and/or increasing cost of money, as interest rates rise, may detract from M&A activity in the future in the form of reduced deal-making sentiment.

The author would like to thank Peter Valente, Articling Student, for his assistance in preparing this legal update.

Stay informed on M&A developments and subscribe to our blog today.

Intent to pursue deals at an all-time high among oil and gas executives

In a recently released report, the Global Capital Confidence Barometer, EY suggests that M&A intentions in the global oil and gas sector are at an all-time high. Most notably, 69% of the oil and gas executives surveyed indicated that they intend to pursue acquisitions in the next 12 months. This is the highest figure recorded since 2009, when EY first launched the Barometer.

These figures will likely be of particular importance for the Canadian M&A market, given its heavy focus on energy.

The Report: oil & gas M&A findings  

The Barometer is a twice-yearly survey compiled of nearly 3,000 senior executives from large companies around the world and across 14 sectors, including oil and gas.

With respect to oil and gas, of particular interest in this most recent instalment are that over the next 12 months:   

  • 96% of oil and gas executives see the M&A market as improving or stable
  • 25% of oil and gas executives anticipate more cross-border deal-making
  • 45% of oil and gas companies expect increased competition for assets from private equity
  • 78% of oil and gas companies review their portfolio every six months or less
  • The United States was ranked the top destination for oil and gas investment, followed by Canada, Australia, the United Kingdom, and Saudi Arabia

In explaining this confidence, EY notes the following trends among those surveyed:

  • Confidence in the overall economy
  • Optimism about corporate earnings, credit availability, and equity valuations in the oil and gas sector
  • Supportive market factors in the oil and gas industry, including healthier balance sheets, narrowing of the bid-ask spread, overall consensus on oil price outlook and private equity firms with money to spend

What does it mean for Canada?

In Canada, overall M&A activity is to a large extent tied to the health of the energy sector. According to Natural Resources Canada, approximately 6.5% of Canada’s GDP comes directly from the energy sector.

The high confidence EY reports is likely to combine with a host of other recent trends that have emerged in just the past few weeks to encourage M&A activity in Canadian oil and gas. For instance, in late November, oil prices reached their highest level in two years. The Globe and Mail also recently reported that in just the last week, Canadian companies that specialize in processing and transporting oil and natural raised financings totaling $2.7-billion, more than half of the total raised in the three months to September 30. The Globe notes that these figures suggest major oil and gas companies are starting to ramp up production.

All told, these figures are yet another data point underscoring renewed enthusiasm in the sector after the challenges of recent years.

Stay informed on M&A developments and subscribe to our blog today.

Sell-side due diligence: knowing your buyer

M&A deals aren’t easy to close. As we previously reported, due diligence typically increases the likelihood of a deal closing. Buyers often conduct extensive diligence: they analyze the financial documents, projections, contracts and other relevant information pertaining to the target company. However, due diligence completed by the seller, alternatively known as “sell-side” due diligence, is also an important step towards successfully closing a transaction.

Sell-side due diligence often entails the seller providing information on the company’s projections, its competitors and relevant current economic factors.  In turn, ensuring that the information being relayed to the buyer is accurate will have an impact on the impending deal. Additionally, sell-side due diligence involving researching potential buyers after the company has gone to market can be particularly valuable.

Sellers need to know much more about a prospective buyer than the price they are willing to pay. A recent article highlighted the following steps when completing due diligence on a buyer.

Evaluate the buyer’s offer

Often when a company goes to market, it can receive interest that has no intention of turning into a deal. An example is how some investment banks will approach a prospective seller by stating that they have an interested buyer, but will only attempt to find a buyer when the company or owner indicates that they will sell. Another sign that an offer lacks the intent of following through is when a potential buyer states that they will pay much more than what the company is worth. This could be a signal to the seller that the buyer has not done its due diligence on the company. Therefore, qualifying the bidder to assess how serious they are in buying the company is an important first step.

Understand the buyer’s deal history

Researching the buyer’s history of the deals they have closed in the past can be very informative for a seller. The buyer may have a tendency of making offers, but not closing. Understanding the past behaviour and patterns of buyers may shed light on how they will act once they make an offer.

How a buyer will finance the deal

Understanding what financing commitments a buyer has or how soon they can receive funding for the deal can be significant to the likelihood of the deal closing. The article also suggested that it is important to know what the buyer’s assumptions relating to their offer price are. Knowing this information will be helpful for sellers when negotiating with the buyer.

The buyer’s intention and ideas for the company

A seller should consider what a prospective buyer’s plans are for the company. Perhaps the buyer is intending to replace key employees or significantly alter the structure or vision of the company. Knowing whether a buyer will change the company immensely or maintain the company’s existing direction and strategy may be crucial to deciding which offer to accept.

While it was has been noted that sell-side due diligence is most useful when done before a potential buyer is in the picture, due diligence relating to a prospective buyer also has its benefits.

The author would like to thank Monica Wong, Articling Student, for her assistance in preparing this legal update.

Stay informed on M&A developments and subscribe to our blog today.

Legal update: the Reducing Regulatory Costs for Business Act

On November 14, 2017 the Reducing Regulatory Costs for Business Act, 2017 received royal assent. While the Act is not yet in force, the new statute implements a number of initiatives designed to ensure that interactions with the provincial government are efficient and straightforward and to reduce the regulatory costs of doing business in Ontario.

The Act provides for:

  • Control of administrative costs – where a new regulation is proposed that imposes requirements on businesses, an analysis of the potential regulatory impacts must be published and, where the effect of the new regulation would be to create or increase the administrative costs imposed, a prescribed offset to existing costs must be made (ss. 2-3).
  • Small business compliance – where a new regulation is proposed that imposes requirements on businesses, where appropriate, less onerous requirements for small businesses must be included (s. 4).
  • International and national standards – where appropriate, recognized national and international standards should be adopted when a new regulation is proposed that imposes requirements on businesses (s. 5)
  • Electronic transmission of documents – where a business is required by regulation to submit documents to any Ontario Government Ministry it may do so electronically (s. 6).
  • Recognition of excellent compliance – every Ontario Government Ministry that administers regulatory programs must develop a plan to recognize businesses that demonstrate excellent compliance with regulatory requirements (s. 7).

The Ministry of Economic Development and Growth has also provided the details of a proposed regulation under the Act. Among other things, the proposed regulation would require the government to reduce existing costs for businesses by $1.25 for every $1 of new administrative costs imposed by a regulation. The government would have 24 months from the date the new cost comes into effect to implement the offset.

The Act is quite short (only 10 sections) and one of those sections (s. 8) provides the Crown with immunity with respect to anything done or omitted to be done under the Act. It remains to be seen whether the Act actually achieves the laudable goal of promoting greater efficiency and reducing regulatory costs for Ontario businesses.

Stay informed on M&A developments and subscribe to our blog today.

Part 3: Sandbagging in M&A – sandbagging around the world

In the past two weeks we have provided an overview of sandbagging in M&A transactions and discussed strategies that can be used when negotiating this clause. We also provided a brief overview of the consequences of remaining silent with respect to sandbagging. This week we will discuss how sandbagging clauses are used in several jurisdictions around the world.

We conducted a review of several M&A deal studies which collectively covered transactions in Australia[1], the United States[2], Canada[3] and in Austria, Belgium, Denmark, France, Finland, Germany, Italy, the Netherlands, Spain, Sweden and the UK (the European Union Countries)[4] (collectively, the Deal Point Studies). We have noted the following interesting observations in respect of the Deal Point Studies:

  • Approximately 45% of deals in Canada, Australia and the United States included a form of sandbagging provision, however, 69% of deals in the European Union Countries included a sandbagging clause.
  • Of those deals that included sandbagging provisions, deals in Australia and the European Union Countries favoured anti-sandbagging clauses, whereas deals in Canada and the United States favoured pro-sandbagging clauses.
  • Of those deals that included anti-sandbagging provisions, the knowledge of the buyer was limited to actual knowledge in 70% of Australian transactions, however, in Canada, the United States and the European Union Countries the knowledge of the buyer was typically defined more broadly to include both constructive knowledge and actual knowledge.
  • Based on the above statistics, it appears that buyers in Canada and the United States have stronger negotiating positions than sellers in the current market. Conversely, sellers in the European Union Countries currently appear to have a stronger negotiating position.
  • Australia appears to have the most balanced approach between buyers and sellers. While a majority of deals favoured anti-sandbagging provisions (advantageous to sellers), these provisions were typically qualified by a narrow scope of the buyer’s actual knowledge of the breach (advantageous to buyers).
  • In respect of trends, the Deal Point Studies indicate that sandbagging provisions are becoming more common in Australia, Canada and European Union Countries. Canada in particular has seen a marked increase in the use of sandbagging provisions over the past four years – to the point that it almost matches the use of the provision in the United States. This may be a result of an increase in cross-border transactions and the influence United States legal market trends have on the Canadian market.

While the above is helpful for determining market trends in different jurisdictions, the most obvious conclusion is that (with the exception of the European Union Countries) most M&A deals are still silent on sandbagging. As discussed last week, this can be risky as it leaves the parties at the mercy of the governing law, which (in Canada at least) is relatively uncertain and largely out of the parties’ control.

[1] Private M&A Deal Points Study 2015, (March 2016), Norton Rose Fulbright Australia.

[2] Private Target Mergers & Acquisitions Deal Points Study (Including Transactions Completed in 2014), American Bar Association, A Project of the M&A Market Trends Subcommittee of the Mergers and Acquisitions Committee.

[3] Canadian Private Target Mergers & Acquisitions Deal Points Study, 2016 (Transactions signed in 2014 and 2015), American Bar Association, Business law Section, a Project of the Market Trends Subcommittee of the Mergers and Acquisitions Committee.

[4] European M&A Deal Points Study 2015 (deals signed or closed in 2012 or 2013), American Bar Association, Business law Section, a Project of the Market Trends Subcommittee of the Mergers and Acquisitions Committee.

Stay informed on M&A developments and subscribe to our blog today.

Due diligence and risk mitigation in cross-border deals

As discussed in an earlier post, cross-border M&A deals are on the rise. Most businesses today are looking to unlock value from technology, emerging markets are flourishing and pursuing global investment opportunities and barriers to information have diminished. These are all factors giving rise to cross-border deals.

Transaction risk in cross-border deals

Cross-border deals come with many advantages, including the ability to expedite time to market, to scale and enhance brand recognition and to mitigate competition. However, cross-border deals are also accompanied by their unique set of disadvantages, making it all the more important to manage transactional risks.

Parties’ perception of risk and due diligence processes must therefore evolve to consider factors accompanying cross-border transactions. Top risk factors in cross-border deals, according to a study conducted by Deloitte (the Study), include tax law, regulatory considerations, political stability, culture and talent as well as business risk.

How to manage transaction risk

Managing risks and successfully closing a cross-border deal starts with conducting thorough due diligence. Parties involved in a cross-border transaction should consider the following when conducting due diligence, which can be divided in the following categories:

  • Accounting and tax due diligence: Given the different accounting systems, parties would need to agree on issues such as valuation metrics, costing methods or reporting of pensions and employee benefits. An understanding of tax principles and differences informs the outcome of a deal. Currency differences may also add an additional layer of complexity to the deal. For these reasons, accounting and tax due diligence is considered one of the major sources of risk in a cross-border transaction.
  • Operational and commercial due diligence: While operational and commercial due diligence is not unique to cross-border deals, aspects such as cultural differences, communication styles and business practices may make or break a deal. Even if a deal closes, failure to conduct thorough due diligence may negatively impact post-integration processes.
  • Regulatory and legal due diligence: For a cross-border deal, it is crucial to identify any applicable foreign regulations as well as any expected developments in local legislation in a timely manner. Regulatory considerations could include foreign investment law approvals, exchange control approvals, antitrust laws as well as mandatory filings required for transferring a business or obtaining a permit. This is also another reason why it becomes important to retain counsel with extensive experience in cross-border transactions.

A certain type of due diligence may be considered more important based on the jurisdictions or the industry sectors involved in the transaction. For instance, the Study found that purchasers from the North America and Asia-Pacific regions rated commercial due diligence as the main determinant in making decisions around an acquisition. On the other hand, purchasers in financial services, insurance and manufacturing industries considered tax and accounting due diligence to be the most important,  while regulatory due diligence was more concerning to energy and environmental companies.

Additional considerations in cross-border M&A

In addition to conducting thorough due diligence, the following are a few factors to consider when engaging in a cross-border transaction:

  • Take advantage of the pre-signing period: The period leading up to signing of the purchase agreement is the best time to identify and resolve material cross-border issues. Deferred closings because of cross-border due diligence is also a common occurrence in such deals. Therefore, it is important to manage the risk through the purchase agreement itself.
  • Consider restrictions or deal protection methods: Given the risks associated with a cross-border transaction, it becomes increasingly important to protect the deal through the various stages of a transaction – before signing a letter of intent, between signing the letter of intent and the purchase agreement, and before the closing itself. However, consider any restrictions on methods used in deal protection such as no-shop provisions and lock-up agreements. For instance, a hard lock-up agreement combined with a ‘no-outs’ merger agreement is illegal in the United States. In Canada, deal protection devices are subject to the business judgment rule while in the United States, they are subject to enhanced scrutiny.
  • Develop a strong post-closing integration plan: Poor integration planning may lead to an unsuccessful deal, especially given the risks associated with cross-border transactions. M&A Playbooks as discussed in our earlier post and information gathered through due diligence could be useful in the planning process for post-closing integration.

The author would like to thank Shreya Tekriwal, Articling Student, for her assistance in preparing this legal update. 

Stay informed on M&A developments and subscribe to our blog today.

Deal failure: possible causes and how to prevent it

While most M&A transactions start off hopeful, not all are destined for completion. Each year, a sizable number of deals are abandoned – and that number appears to be rising. A recent study published by the M&A Research Centre at the University of London’s Cass Business School and enterprise data management firm Intralinks (the Study) undertakes a broad analysis of over 78,000 M&A transactions from the past 25 years, concluding that the deal failure rate of 7.2% in 2016 was the highest markets have seen since 1995. This number doesn’t appear to be anomalous either – the year-on-year failure rate has been steadily increasing since a near-decade low in 2013.

Contributing factors

These statistics beg the question of what might be causing deals to be abandoned and what firms can do in order to reduce the chances that their transactions meet the same fate. The Study attempts to answer this question with a data-driven approach, narrowing in on a handful of factors which appear to be the prime contributors to deal failure. The first major distinction drawn is between transactions involving public company targets and those involving private company targets. During the period reviewed by the Study, private company target transactions boasted failure rates that were on average 66% lower than those of their public company target counterparts.

For transactions involving a private company target, the major factors affecting deal failure identified by the Study are as follows (from most significant to least significant):

  1. Size of the target

As the size of the target approaches or exceeds that of the acquirer,[1] the deal is more likely to fail. Industry experts consulted in the Study cited several reasons for these results, ranging from smaller firms’ lower “headroom” for risk, to the psychological security exuded by larger firms.

Strategy: The Study suggests that firms focus on “strategic” transactions and to avoid “biting off more than you can chew”.

  1. Liquidity of the acquirer

Deals where the acquirer has a higher liquidity ratio are at greater risk of failure. The difference is significant, in that deals in which the acquirer’s liquidity ratio is 25% are over twice as likely to fail than those in which the acquirers assets equal its liabilities. Further reduction of deal failure risk does not appear to result, however, from acquirer liquidity ratios over 100%.

Strategy: The Study suggests using caution before entering into transactions with acquirers that have “weak balance sheets”.

  1. Method of payment

Particularly in recent years, where cash is offered as the only form of consideration, deals are less likely to fail. Experts quoted in the Study refer to valuation and price fluctuation risk to explain why equity or mixed cash-and-equity deals are more often abandoned.

Strategy: The Study suggests that simple, cash-based consideration is preferable.

  1. Reverse break fees

Deals featuring break/termination fees payable by the acquirer have a lower risk of failure, which the Study suggests results from increased interest alignment created by the fee. Interestingly, the Study found that target break fees did not impact deal failure rates in terms of private company target transactions.[2]

Strategy: The Study recommends that targets negotiate reverse break fees.

Additional findings and takeaway

The Study also presented several other interesting statistics, including the effects of catastrophic political, versus economic, global events on deal failure rates and the relative deal failure rates broken down by industry and country of origin – each of which provide valuable insight.

Though the Study did not ultimately conclude what was the chief cause of the recent rises in the rate of abandoned deals, it proposed a plausible explanation – growing uncertainty in the marketplace as a result of significant geopolitical events – which may be causing price misalignment between acquirers and targets. Whatever the reason for the current trend, however, the factors identified by the Study are based on long-term data and should be of interest to any firm planning a deal, target or acquirer.

[1] Measured by the Study in terms of sales volume.

[2] The results were opposite for public company target transactions, wherein a target break fee reduced deal failure risk and reverse break fees had no impact.

Stay informed on M&A developments and subscribe to our blog today.

Part 2: Sandbagging in M&A – is silence truly golden?

Last week we provided an overview of sandbagging in M&A transactions and outlined how buyers can mitigate their risk when an anti-sandbagging clause is included in the purchase and sale agreement. In a majority of deals, however, buyers and sellers exclude a sandbagging clause altogether, likely because they are not able to find a mutually agreeable middle ground. This week we will discuss the implications of remaining silent.

Judicial consideration of sandbagging

Unlike express sandbagging provisions, which courts in both Canada and the United States will generally enforce, there is no clear answer in Canadian case law if sandbagging is, or is not, permitted when it is not directly addressed in the agreement. The US does not provide much additional guidance, as the case law in each state varies. For example, New York takes a general anti-sandbagging position, while Delaware takes a general pro-sandbagging position. In further comparison, UK courts have historically taken an anti-sandbagging approach.

Presumption in favour of pro-sandbagging?

Case law in Canada is varied. The 2001 case Eagle Resources Ltd. v. MacDonald, 2001 ABCA 264, for example, decided in favour of the buyer and allowed a presumption of pro-sandbagging on the basis that a buyer should not be barred from enforcing a contract even if the buyer had reasons to be sceptical about the seller’s ability to perform as warranted (at para 17).

Eagle Resources was briefly referenced in the 2002 case Transamerica Life Canada v. ING Canada Inc., 2002 CanLII 22800 (ON SC), in which the motions judge struck the defendant’s pleadings, which argued a duty of good faith should prevent the plaintiff from sandbagging. In its decision, the court stated that the “enforcement of a warranty does not depend on the purchaser’s belief as to the truthfulness of the warranted facts” (at para 16). The motions judge concluded there was no overarching implied duty of good faith that would prevent a buyer from seeking indemnification for a breach of a representation that it knew about prior to closing a deal.

On appeal (Transamerica Life Canada Inc. v. ING Canada Inc. [2003] 68 OR (3d) 457), however, the pleadings struck by the motions judge were reinstated on the basis that there was a lack of jurisprudence in Canada with respect to the duty of good faith in performing contracts. As a result, the Court of Appeal held that this was an issue that had to be determined at trial, not in a pleadings motion. Unfortunately, we do not receive a conclusion for these cases as the final outcome of the Transamerica Life lawsuit is not reported, and consequently the intersection of sandbagging and the obligation of good faith between these parties was not established.

Presumption in favour of anti-sandbagging?

The recent Supreme Court of Canada case of Bhasin v. Hrynew 2014 SCC 71 may offer more clarity. This case confirmed there is in fact a duty to act in good faith and perform contractual obligations honestly. In the Court’s decision, Cromwell J. stated “parties must not knowingly mislead each other about matters directly linked to the performance of the contract” (at para 73).


In situations where the parties are not able to agree on a sandbagging provision, silence on the subject may be the only way to finalize the agreement. However, this leaves the parties at the mercy of the governing law, which may be difficult to discern, or worse, unfavourable to the circumstance, and largely out of the parties’ control. As a result, if at all possible, it is better to clarify the parties’ expectations in the agreement with respect to sandbagging where there is an opportunity to control the terms. This is especially true for buyers, as it appears that the duty to act in good faith as set out in Bhasin v. Hrynew could be used to argue that the parties to an M&A transaction have an implied anti-sandbagging obligation.

Stay informed on M&A developments and subscribe to our blog today.

Maintaining your minute books

It seems that every other week, I come across another case of minute books put together by a private corporation that have been completed with an attitude of “this will be good enough.” Nine times out of ten, the estimate of what is good enough is off the mark, sometimes wildly. Usually, unfortunately, the point where we are finding out about minute book deficiencies is also the point where fixing them is expensive and time-consuming.

I want to focus on one aspect of proper minute book maintenance today (in part because it is the one that has bitten one of my clients most recently), which is the maintenance of the share register. The share register in itself is a simple document. Quite simply, it tracks who owns what shares in the company. The making of a share register, however, is a more complicated affair.

Here is a quick list of the things you might want to ask yourself about your share register and its associated pieces:

  • Do I have an original of every share certificate? If not, do I have a copy with a note indicating who has the original?

If not, you might find yourself or your shareholders filling out declarations of lost share certificates and indemnities for those shares.

  • Do I have subscription agreements for all of the shares that were issued? Do I have a joinder to my USA signed by the subscriber at the time of subscription?

If not, you may be tracking down signatures to your USA or confirming the terms on which the shares were actually issued.

  • Are all of the supporting documents for the share register actually properly filled out? Are all the shares dated? Did we write in the number of shares for each share certificate?

If not, you may be explaining to investors that these shares were issued “sometime in 2012” or getting your shareholders to sign off on a restated capitalization table.

  • Have I accounted for all instruments capable of becoming shares in my company? Do I have warrants outstanding? An employee stock option plan? Convertible debentures? SAFEs?

If not, you may struggle to offer a percentage of your company to interested investors on a fully-diluted basis.

If you find yourself reading this list and trying in vain to re-assure yourself that you have all of these items covered, you may want to call up your legal counsel and ask when the last review of your minute books was conducted. If there are missing documents, they can be tracked down or re-executed as necessary now instead of the week (or day) before you are trying to close a major investment.

Minute books don’t have to be scary, and they don’t have to be expensive, but the key to keeping down costs and complexity is regular maintenance. I know far too many talented clerks at our firm who find themselves stuck from time to time when it comes to minute book reviews because whole years are missing from the records. Sadly, at that point, there is very little magic we can work except to set you up with a whitewash resolution and hope no one complains. Being a little more proactive about your minute books can save significant amounts of time and money.

Stay informed on M&A developments and subscribe to our blog today.

Post-M&A rebranding trends

The decision whether to re-brand following an M&A transaction can be a difficult one for companies to make. In order to maximize the value from the acquired brand, companies need to decide whether transitioning the asset to a new brand is the appropriate strategy, how to go about rebranding the acquired asset, and the appropriate timeline for completing the rebranding process. A recently published study by Landor of post-M&A rebranding trends offers insight into industry trends and timelines that can be useful for those considering if, when and how to rebrand after completing a transaction.

The study focused on rebranding trends of S&P Global 100 companies over the last 10 years. While more than half of all acquired assets were rebranded in the first three years, some industries rebranded faster and at a much higher percentage than others. Energy and utilities sector companies were the fastest to rebrand post-acquisition, with 60% of acquired companies transitioning to a new brand within the first 12 months. Healthcare, IT and financial services companies also showed a high rate of post-M&A rebranding but over a longer time frame, with 60% of acquired companies being rebranded within the first year and 76% changing brands within 7 years after the acquisition. Consumer companies showed the lowest likelihood of rebranding post acquisition, with only 56% of acquired brands being transitioned in the 7 years following the transaction.

The data generated by the Landor provides key insight into the post-M&A strategy that companies need to consider when going through the M&A process.  When designing a post-acquisition strategy, consumer companies need to consider not only the financial aspects of the acquisition but also how to integrate the culture and image of the company being acquired so as not to destroy the equity of the brand that has been built up over the years. When Unilever acquired Ben & Jerry’s, there was a very conscious effort by Unilever to preserve the culture and of the ice cream company. One of the main draws for Ben and Jerry’s consumers was the brand’s socially responsible image and philanthropic efforts and Unilever’s integration of the brand that left that corporate identity intact ensured that consumers did not switch brands post-acquisition. Energy and utilities industry trend to rebrand the acquired asset quickly indicates that companies may be able to spend less time considering how to integrate a brand and whether rebranding should be done post acquisition than consumer companies, focusing instead on how to rebrand the acquired asset quickly following the completion of the M&A transaction.

The author would like to thank Olga Lenova, Articling Student, for her assistance in preparing this legal update.

Stay informed on M&A developments and subscribe to our blog today.