There is no doubt that the Covid-19 pandemic has resulted in unprecedented social and economic ramifications, including a decline in M&A activity in Canada. The pandemic has also brought in changes to the way agreements are being drafted in light of what has become our new normal. Earlier, we reported that the pandemic has led to an increased focus on earn-out provisions in both existing and new M&A deals. A recent trend also emerged in lending transactions, where lenders are agreeing to include portability language in loan documents, which may remove an obstacle for private equity groups that are looking … Continue Reading
In many cases purchasers in an M&A deal will obtain debt financing to cover a portion of the purchase price. Fortunately, in Canada the options for acquisition financing are plentiful. Common ‘types’ include:
Senior Debt: the Bank Loan
Banks and other senior lenders can design a range of tailored solutions to purchasers’ funding needs. Broadly speaking, these loans can be classified as follows:
- Fixed Term Loan or Revolver: The fixed term loan is credit for a fixed amount to be funded, and paid back, according to a pre-determined schedule. A revolving loan allows a borrower to drawdown, pay back and
In the context of cross-border secured financing transactions involving Canada and the United States, the rules relating to perfection and priority of personal property pledged in favour of a lender or agent are similar. In the U.S., Article 9 of the Uniform Commercial Code governs while each Canadian jurisdiction has its own personal property security regime.
The PPSA is largely based on the UCC framework and the PPSAs of each common law Canadian jurisdiction are generally very similar to each other. There are however, a few key distinctions between the UCC and the PPSA, one of which will be discussed … Continue Reading
M&A activity in the financial services sector has opened with a solid start. According to a KPMG quarterly update, the Q1 2019 report is the second highest than any other quarter since 2016 by deal volume. This positive start to the year suggests that the 11 percent increase in transaction volume last year may continue to surge. For both domestic and foreign buyers, the Canadian financial services sector continues to be an attractive investment. A robust Canadian M&A market is expected for the remainder of 2019 due to low-cost debt financing and supportive debt markets. KPMG has identified these … Continue Reading
Recently, Bank of Canada governor Stephen Poloz announced an increase in the interest rate from 1.25% to 1.5%. The increase comes as the Bank of Canada predicts a continued growth in the Canadian economy from exports and business investments. However, household spending may represent a smaller percentage of future economic growth due to the effects of a higher interest rate on consumers given that variable-rate holders may be forced to put their money elsewhere.
An increase from the Bank of Canada usually comes with increased costs for consumers. If precedent holds, the rise could lead to financial institutions increasing their … Continue Reading
On March 14, 2018, the US Senate voted (67-31) to advance S. 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Bill). The Bill, which will only become law with approval from the House and Congress, marks an unprecedented, bipartisan compromise to ease banking rules enacted following the 2008-09 financial crisis. If enacted, there may soon be good reason to anticipate a spike in M&A activity among mid-sized US financial institutions, including a possible increase in cross-border M&A activity involving Canadian institutions.
Proposed changes: an overview
Under current law, financial institutions with $50 billion or more in … Continue Reading
According to a recent article published by Pitchbook, this year has already shown a positive momentum for deal-making in the U.S. banking industry – a trend worth monitoring as it is expected to surge further as the year progresses and U.S. banks (especially those that already have a Canadian presence) may be looking to acquire financial assets and operations north of the border.
Most recently, Citizens Business Bank announced that it would acquire Community Bank, pursuant to which Citizens’ total assets will increase from U.S. $878 million to U.S. $12 billion. This acquisition represents one of 19 M&A transactions that … Continue Reading
The emergence of cryptocurrencies and blockchain technology over the past several years has shaken up the financial services sector in unprecedented fashion, in a corner of the Canadian economy that has been notoriously slow to adopt and adapt to innovative change. This phenomenon has the potential to significantly re-shape many aspects of the modern economy. We have reported on this blog in the past (see here and here) on the evolution of blockchain and cryptocurrency and what it could mean for M&A activity in Canada. It looks like that impact could ramp up in the coming months.
At the … Continue Reading
Big data analytics (big data) has established a reputation as a tool useful in the financial services arena, where it has enhanced banks’ abilities to personalize data of their customers to predict trends. More recently, big data is becoming popular in the context of mergers and acquisitions in all sectors.
What is big data analytics?
Big data refers to the collection and analysis of large volumes of structured and unstructured data, in real-time to create value for companies. Big data’s opportunity to leverage unstructured data is the real value-add it provides for companies. Unstructured data refers to … Continue Reading
Non-bank lenders are increasing their market presence in both acquisition financing and the provision of financial solutions for ongoing operations, including in the asset-based lending context. The increased presence of non-bank lenders seems to be driven by both the benefits of working with providers of non-regulated alternative capital source funding and the regulatory limitations faced by traditional bank lenders.
Banks are facing increased regulation which in some cases has the effect of restricting their ability to underwrite “riskier” transactions and may require the inclusion of loan covenants which do not suit a borrower. In the event there is a change … Continue Reading
Following the financial crisis of 2008, harsher regulations governing financial institutions were implemented to mitigate future economic recessions. As discussed in an article by the Canadian Bankers Association, new financial regulations, such as Basel III, have targeted capital and liquidity because both affect a bank’s ability to “cushion the blow” of any losses and maintain its ability to meet its financial responsibilities. The international regulation, Basel III, is comprised of capital and liquidity rules, which were implemented in Canada in 2013 and 2015 respectively.
Basel III capital rules
The Basel III capital rules were introduced in Canada by national regulators … Continue Reading
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
In March 2014, this blog featured an article discussing the effect of the recent crisis in Ukraine on M&A activity. The crisis began in November 2013 when Ukrainians protested en masse after then-president Viktor Yanukovych failed to sign an association agreement with the European Union. Yanukovyvh was ousted in February 2014. During that time and following, violent protest, armed conflict between separatist forces and the Ukrainian government, and the annexation of Crimea by Russia, played a substantial role in the contraction of Ukraine’s economy by 8% in the year 2014. Since this time, Ukraine has undertaken a number … Continue Reading
Divestment is one strategy that a corporation can use to unlock funds for future growth and create long‑term shareholder value. According to a recent E&Y study, a successful divestment must meet three criteria: (i) it must create a positive impact on the valuation multiple of the remaining company; (ii) it must generate a sale price above expectations; and (iii) it must close ahead of its timing expectations. Only 19% of the companies surveyed for the study met all three criteria. Considering that divestiture activities are likely to increase in 2016 (a more detailed discussion on 2016 divestiture outlook can … Continue Reading
Mergermarket recently released its 2015 full-year edition of Deal Drivers Americas (the Review). This comprehensive review of M&A activity in the Americas confirmed that 2015 was a year of mega-deals. Transactions involving giants such as Pfizer, Time Warner Cable, and Kraft contributed to an increase of 30% in M&A value, reaching a total of US$4.28 trillion across North America. In the US alone, deal value rose 40% since 2014, hitting a record high of almost US$2 trillion.
The Review evaluated by sector and by region. Some of the sector highlights include:
- Technology, media and telecom: Technology, media and telecom
2015 was a huge year for global M&A with deal activity reaching $4.2 trillion by the middle of December. If 2016 continues at the same pace, be prepared for a big year of M&A activity. In order to be well equipped for the upcoming year, ask yourself the following two questions when contemplating an M&A transaction.
Where are the key market opportunities?
According to the publication released by Raconteur entitled M&A Outlook 2016, on a global scale, five sectors are “blazing a trail”: financial services, telecommunications, pharmaceuticals, computer manufacturing, and oil and gas.
- Financial Services – Consolidation is the
A recent article in The Secured Lender magazine titled “Avoiding Lender Liability Claims: When Words and Actions Matter” canvassed lender liability claims and the steps lenders should take to avoid being held liable in certain circumstances to a borrower, guarantor or third party. Many of the suggestions are similarly relevant to borrowers (as purchasers in an M&A transaction or otherwise) to ensure they are following best practices.
A liability claim often arises where a borrower believes a lender failed to honour an agreement to lend under a commitment letter or an oral commitment to extend credit. This can be particularly … Continue Reading
Gone are the days when the focus areas for banks were largely M&A and growth. In addition to ever increasing regulatory and compliance obligations, banks are grappling with new technologies and innovations that affect the way in which banks interact with consumers.
Payment technologies continue to advance, with improvements in the security of contactless payments and increasing adoption of electronic peer-to-peer payments. Partially as a result, banks have access to more information about their customers’ behaviour, yielding data and analytics that can be exploited across all banking functions. Of course, the collection and use of “big data” dovetails directly into … Continue Reading
Similarly to American M&A in the first half of 2015, the first half of 2015 was remarkably active on the global mergers and acquisitions front. According to a recent Mergermarket report, total deal value topped US$1.7 trillion. This represents an increase of 15.2% over the first six months of 2014, and only 15.4% behind the record-setting first half of 2007, when US$2.1 trillion worth of deals were completed. With 7,136 transactions, it is interesting to note that total deal volume actually decreased by 15.7% compared to the same time period last year, but higher valuations explained the market’s … Continue Reading
Crosbie & Company’s quarterly Canadian M&A Report has indicated an overall decline in activity for the first quarter of 2015, with total deal volume down 7% and total value down 46% from the previous quarter.
Accounting for the decrease in deal value is the fact that the majority of transactions this quarter took place in the mid-market segment. While mid-market deals (under $250 million) represented 90% of all transactions this quarter, they accounted for only $9 billion, or 20% of total deal value. Mega-deals (over $1 billion), on the other hand, accounted for $26 billion in value, with … Continue Reading
Deal-making in the Middle East is on the rise. Consumer confidence is improving, credit is more readily available, and capital markets are maturing. However, the region still faces several challenges as investors remain cautious, looking for increased due diligence and post-closing protection.
According to speakers at the Megatrends in Mergers & Acquisitions conference in October, 2014, private M&A in the Middle East has been dominated by family businesses looking to divest core assets and private equity looking for growth. Outbound activity is limited because investors see growth prospects within the region. Global private equity players are becoming … Continue Reading
The end of last month saw the signing of the Canada-Korea Free Trade Agreement (CKFTA) following nearly ten years of negotiations. It marks Canada’s first major free trade deal in the Pacific Asia region.
The Canadian Department of Foreign Affairs, Trade and Development has highlighted benefits including job creation, increased access to Asian markets and the creation of a level playing field for Canadian businesses competing with other trade and investment partners of the South Korean peninsula. Specifically, the CKFTA will foster increased M&A activity across the Pacific by establishing and reinforcing rules that secure a transparent and … Continue Reading
2013 started off slowly with a downturn in Q1, and Q4 brought the year to a close with mixed results. M&A activity in Canada resulted in 567 deals valued at US $71.8 billion. The year was the slowest by deal value since 2004 (US $42.3 billion); by contrast, deal count was the highest it has been on Mergermarket record since 2001.
What brought about these mixed results?
Transactions valued over US $250 million were scarce. 42 large-cap transactions, worth US $54.4 billion, were completed in 2013. However, this number represented the lowest (in deals and in value) since 2004, when … Continue Reading
Join us on Thursday, October 17, 2013, for a webinar on investment banking engagement letters.
This program will review key elements of an M&A investment banking engagement letter and provide practical advice and guidance for drafting and negotiating these engagement letters.
Topics will include:
- transactions covered by the engagement
- scope of services
- advisor compensation
- term and termination
- tail periods
- Mara H. Rogers – Norton Rose Fulbright (New York office)
- Mark A. Robertson – Norton Rose Fulbright (New York office)
The dial-in/log-in information will be e-mailed to you a day prior to the Web seminar.… Continue Reading