Topic: Corporate finance

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Socially responsible investing: considerations for private companies

Certain consumers seeking out companies that have socially responsible products and services or that have a focus on environmental, social and corporate governance (ESG) is nothing new. Recently, however, evidence has emerged suggesting that investors, both retail and institutional, are increasingly taking these social factors into account when making decisions about how to allocate their investments.

Responsible investing

According to a recent study by the Responsible Investment Association, the Canadian market for responsible investments has grown by 49% over the past two years and has surpassed $1.5 trillion in assets under management. This suggests that Canadians are becoming … Continue Reading

Distressing prospects for distressed debt?

According to a Debtwire report released this month, the North American distressed debt market will be characterized by continued volatility throughout 2017, with the oil & gas sector presenting the most attractive opportunity for investors. Financial services, industrials and real estate were also identified in the report as being ripe for investment in the coming year.

Downward allocation trends

2016 saw a lower year-over-year asset allocation to distressed investing, with 50% of respondents stating that they had increased their allocation to distressed debt, compared to 68% of respondents in 2015. This downward trend was explained mainly by concerns over general … Continue Reading

The PE lifecycle is expanding

While private equity firms are enjoying more dry powder than ever, the overall fund lifecycle is expanding. Mergermarket interviewed private equity partners, directors and principals from across the United States and their responses point to increases in time in all three lifecycle segments of a fund: raising capital, searching for suitable targets, and exit.

Prolonged fundraising

For the majority of US GPs, the time period spent raising money from investors for their most recent fund was longer than the preceding one, 76% of the respondents needing between 9 to 18 months total. While fund lifecycles are extending, the amount of … Continue Reading

Tighter credit may turn cross-border M&A into popular growth strategy for private companies

South of the Canadian border, regulatory oversight and scrutiny continues to play a noticeable role in making it more difficult for private companies to raise capital through bank loans. In this climate, could strategic cross-border M&A become a more popular growth strategy for US companies which are unable to access traditional lenders and are unsure about resorting to non-traditional lenders?

M&A may be attractive for various reasons, many of which are common knowledge. Private companies want to grow, increase their market share, or perhaps enter a new market. At the centre of any such aspiration is the “how” question –“how … Continue Reading

Taking stock of SPACs

While the CPC program has existed for a number of years under the TSXV and Special Purpose Acquisition Companies (SPACs) have long been a feature of American capital markets, as we alerted in October of last year, SPACs are a relatively new arrival in Canada, with the first Canadian SPAC created in April 2015. The TSX has described SPACs as giving investors the ability to participate in the acquisition of private operating companies. Despite their attractions, SPACs have so far failed to meet investor expectations, both with respect to their ability to close transactions and their effect on … Continue Reading

FinTech M&A: a wave or just a ripple?

While the rapid and exponential growth of Financial Technology (FinTech) companies appear to signal an impending wave of M&A, certain impediments exist that may mitigate these projections. FinTech companies develop and market technologies that facilitate a variety of financial transactions through electronic mediums. Since 2010, over 80 FinTech companies in Canada have garnered about $1 billion in investments. For private FinTech companies worldwide, investments have increased from $1.8 billion USD in 2010 to $19 billion USD in 2015. This unprecedented growth prompted the Competition Bureau to identify FinTech companies as potential disruptors to the Financial Services … Continue Reading

Are private placements the next poison pill?

The recent amendments to Canada’s takeover bid regime may have rendered the shareholder rights plan or “poison pill” – traditionally the most powerful weapon in a board’s arsenal of defensive tactics – obsolete. The new amendments, which became effective on May 9, 2016, require a majority of shareholders to tender their shares before an unsolicited offer can be successful, thereby giving shareholders an effective veto over any hostile bid. The amendments also greatly extend the time a bid must remain open, eliminating the standard rationale for adopting a rights plan. With the poison pill out of play, could the tactical … Continue Reading

Cultural compatibility: predictor of a transaction’s potential success

We have previously reported on human capital considerations in M&A transactions; in this post we consider how corporate culture affects a deal’s possibility of success. While qualitative considerations often sit on the backburner in the lead up to a deal, compatibility of corporate cultures can be an important factor in determining whether a merger or acquisition will be successful. According to a survey by Bain & Co., executives have indicated that the number one cause for a deal’s failure to achieve promised value is due to clashes in corporate culture.

Corporate culture is multifaceted and can include behavioural … Continue Reading

Corporate residency for tax purposes

A corporation that is resident in Canada for Canadian income tax purposes is subject to Canadian income tax on its worldwide income. On the other hand, corporations that are not resident in Canada are only subject to Canadian income tax on their Canadian-source income. Accordingly, residency is an important factor in determining which Canadian income tax regime applies.

Generally, a corporation will be deemed to be a resident in Canada if it has been incorporated in Canada. Absent a deeming provision, a corporation can also be resident in Canada based on common law principles. The common law test for corporate … Continue Reading

M&A update in the global metals industry

In the past, we reported on PwC’s ongoing analysis on M&A activity in the global metals industry. PwC released its most recent report in the series, entitled “Forging Ahead: First-quarter 2016 global metals industry mergers and acquisitions analysis” which breaks down the latest trends in the global metals industry, and provides insights into what the industry may expect going forward.

The major news coming out of the report is that deal volume declined to 14 deals valued at $50 million or more in the first quarter of 2016; however, deal value increased to $8.7 billion. The report concludes … Continue Reading

Britain without the EU: how will Brexit affect dealmaking?

DLW_680x220On June 23, 2016, Britons will be heading to the polls to determine whether or not the UK should remain a member of the EU. Given the stakes involved, the referendum is likely to have an impact on M&A activity in the UK, both before and after the vote.

The referendum

This is not the first time the UK has held a referendum on this question. In 1975, the British electorate voted in favour of the UK remaining a member of the European Economic Community (the predecessor of the EU) by a majority of 67%.

However, this time the results … Continue Reading

M&A in the life sciences sector remains healthy

In December 2015, we reported on the record-setting M&A activity in the life sciences sector in 2015. In a post last month, we also reported on a recent surge in M&A deals in the pharmaceutical industry, including $40 billion worth of deals announced in one day. Now, a recent report by EY suggests that while the flurry of M&A activity may be tapering off, company expectations remain high with respect to future deals in the life sciences industry.

In particular, the report notes that 45% of life sciences executives surveyed are still expecting to pursue acquisitions over the … Continue Reading

M&A as a strategic priority in media and entertainment

EY has released the 14th edition of the Media and Entertainment (M&E) Global Capital Confidence Barometer (the Report) which concludes that M&A activity will become an important piece to value creation strategies given the current subdued economic environment. The survey canvassed a panel of more than 1,700 executives in 45 countries of which 75 respondents represented the M&E industry.

Zero percent of the respondents expect strong growth in the economy, down 23% from six months ago. In this context, M&E companies are expected to proactively explore growth options by pursuing bolder and more novel strategies such … Continue Reading

Boards with women, M&A activity and social identity theory: a call for more diversity on boards

In an earlier post we commented on the importance of improving a company’s risk profile and performance by implementing methods and practices to ensure the success of gender diversification policies. Citing an academic study on management diversity entitled “Do Women Stay Out of Trouble,” we pointed out that gender diversification has a financial benefit because, according to the study, women in management are usually more risk-averse and law abiding, thereby protecting firms from various types of lawsuits. But does this mean that all women are risk-averse, or that the presence of women ensure that boards make their decisions … Continue Reading

Growing M&A in the agrochemical sector

According to a recently published report by MarketsandMarkets Research, the global agrochemical market has grown significantly between 2000 and 2016. This growth has been matched by a flurry of M&A activity. In particular, the report highlights that:

  • the global agrochemical market grew from $28.78 billion in 2007 to $41.12 billion in 2013. This represents a growth of 43% over six years;
  • intense competition between the top players in the agrochemicals market has caused extensive consolidation over the previous decade. The top six companies now dominate more than 80% of the industry’s market share;
  • crop protection chemicals and herbicides were the
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Protecting buyers in M&A transactions: trends in the use of indemnification provisions

Allocating liability between buyers and sellers for the business and operating risks of a target company in M&A transactions is key to assessing what might be an appropriate purchase price for the transaction. As a result, the indemnification provisions in a purchase agreement are heavily negotiated with buyers seeking to limit their post-closing damages and sellers seeking to limit their liability for uncertain risks.

Recent trends in the use of indemnities are revealed in the 2016 SRS Acquiom M&A Deal Terms Study (the SRS Acquiom Study) which analyzed 735 private-target acquisitions that closed in 2012 through 2015.

Separate indemnities

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Record insurance industry M&A benefits Canada

We reported last year that global M&A in the insurance sector was rebounding after a decline resulting from the financial crisis. Now, the OPTIS Partners’ M&A database has reported a record high for North American insurance agency M&A in Q1 2016.

OPTIS reveals that an all-time high of 107 deals involving North American agencies were announced in Q1. Many transactions are unreported, meaning that there were likely even more deals.

This comes on the heels of OPTIS’ findings that 2015 was a record year for North American M&A, with 451 transactions.

The majority of transactions were carried out by private-equity … Continue Reading

M&A trends update

Earlier this month, we reported on the slow-down of M&A activity in the first quarter of 2016. Despite this challenging start to the year, a new report from Deloitte & Touche LLP entitled “M&A Trends Report 2016” found that executives remain optimistic about M&A activity going forward. The report provides that 87 percent of the 2,300 U.S. survey respondents said that they expected their deal activity to match or exceed 2015, which was the busiest year ever for mergers and acquisitions.

Respondents in Deloitte & Touche LLP’s survey expected that technology would be the top industry for … Continue Reading

Aerospace and defense M&A reaches new heights in 2016

jetWe told you in March of last year that aerospace and defense M&A activity had rebounded after a pullback in 2013. In July, we reported that M&A activity in the aviation and aerospace sectors was strong. Now, PwC’s Mission Control report for Q4 2015 has confirmed that 2015 was a record year for aerospace and defense M&A.

Total deal value in this sector in 2015 reached $61.7 billion, more than 50% higher than the previous highest year in 2007. The most recent report by PwC for Q1 2016 indicates that deal volume is down slightly as compared to Q4 2015, … Continue Reading

Looking outward for opportunity: China’s M&A activity swells amidst economic downturn

On January 27, 2016, we posted a blog entry on China’s economic outlook. At that time, newly released figures showed that China’s GDP had fallen below the Chinese government’s target of 7% in the final two quarters of 2015. Since then, the Chinese government released its 13th Five-Year plan, which lowered the economic growth target to 6.5% of GDP. Such a downturn in economic outlook raises the question, how has M&A activity been affected?

On April 25, 2016, PwC released a report that painted a rosy picture of China’s M&A activity that minimized the doom and gloom of … Continue Reading

A buzz of M&A activity in the power industry

The power and utilities industry has seen a surge of M&A activity in the first quarter of 2016, according to a recent PWC report. The following highlights reflect an overall positive start to the year for the power and utilities sector:

  • Increase in total deal value. Total deal value for Q1 2016 hit $41.4 billion. This is up 260% from the previous quarter, where total deal value was $11.5 billion. Additionally, total deal value is up 508% compared to this time last year.
  • Increase in average deal value. The average value per deal reached $1.9 billion in Q1 2016,
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Mixed start to the year for the forest, paper and packaging industry

M&A activity in the global Forest, Paper and Packaging (FPP) industry took a dip in the first quarter of 2016 according to a recently released report (the Report) by Pricewaterhouse Cooper (PwC). PwC put the decrease of deal activity into perspective however with a press release last Wednesday, illustrating that while Q1 2016 was not as active as Q4 2015, 2015 was generally positive for the sector and PwC expects that the encouraging trends will continue this year.

The FPP industry saw an uptick of M&A activity in 2015 from 2014, with 143 deals announced … Continue Reading

Global M&A decline in Q1 2016

According to MergerMarket’s Monthly M&A Insider Report, global M&A activity declined in Q1 2016 after strong levels of activity in 2015. The first few months of 2016 resulted in a total of 3,474 deals worth an aggregate of US$605.5 billion, down from the 4,126 deals worth US$785.5 billion in Q1 2015. The top performing sector, industrial and chemicals, was responsible for 655 deals worth US$145.1 billion,  representing a 71.3% increase in value from deals in this sector in Q1 2015.

The decrease in M&A activity has been particularly noticeable in North America where Q1 2016 resulted in 1,117 deals … Continue Reading

$40 billion in deals in one day: is “big pharma” getting bigger?

In a single day last week, $40 billion worth of deals were announced in the pharmaceutical industry.  The jaw-dropping, combined value of the announced mergers and acquisitions has turned heads, and has prompted analysts to question the impetus behind these deals.

The increased activity may come as a surprise to some, as recent changes by the Obama administration have been aimed at limiting inversions – a type of merger in which a company (often American) buys a foreign counterpart, and then moves abroad to lower its taxes.  These rules put an end to what would have been the largest inversion … Continue Reading

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