The future of M&A beyond the COVID-19 pandemic remains fiercely debated and quite unclear. We’ve already seen transactions and their underlying agreements change in a number of ways, including more scrutinized structures, and more detailed negotiations regarding contractual carve-outs, such as material adverse change and force majeure clauses. As previously noted, this will undoubtedly lead to significant changes to M&A transactions in the near future. In addition, the COVID-19 pandemic has shown to have a macro-level impact on M&A transactions. Indeed, EY’s recent M&A report “Global Capital Confidence Barometer” (the Report) has analyzed COVID-19’s influence on M&A to-date, and … Continue Reading
“Acqui-hire” transactions, which are particularly prevalent in the context of start-up technology-related M&A transactions in the U.S., focus on acquiring a company primarily to obtain its employees and their skills, in addition to other possible assets (see our earlier post on acqui-hires). In these type of transactions, it is thought that the greatest perceived value in the target lies in its employee base or segment(s) thereof. If there is also perceived value in the intellectual property (IP) or other assets of the target company, an acquiror might purchase those assets and possibly license them back. In some cases, … 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
The eSports industry experienced monumental growth in 2019 and is well underway to becoming a financially lucrative market.
By the end of last year, eSports had over 433 million global viewers, more than American Football and rugby combined, and is expected to reach over 645 million viewers in 2020. For perspective, the 2019 League of Legends World Championship alone amassed a peak viewership of 3.98 million, far surpassing earlier eSports viewership records.
2019 also marked the year that eSports became a billion dollar industry. In line with its massive following, eSports drew in record revenues last year, experiencing a 26.7% … Continue Reading
If there is anything that Canadian dealmakers are all too familiar with in 2019, it’s the concept of uncertainty. Raging trade wars, geopolitical tensions, elections, and a forecasted economic downturn are all pervasive in everyday conversation. Despite this, deal flow has remained robust throughout the first three quarters of 2019, as summarized in a recent post. Fortunately, significant uncertainty in relation to trade with the U.S. and Mexico is hopefully coming to an end.
A significant consideration when considering an M&A target can be the impact that pending or threatened litigation has on the proposed transaction.
While some organizations may balk at the idea of acquiring a target that is (or is likely to be) the subject of a lawsuit, such companies are often available at significant discounts to purchasers that are able to understand and address the risks.
Each transaction will have its own unique considerations. However, an organization that is contemplating acquiring a target that is the subject of pending or threatened litigation should, among other items, address the following high-level considerations:… Continue Reading
Climate change has become a high profile issue that is expected to have significant implications for M&A transactions going forward. As public awareness and scientific understanding of climate change continues to evolve, we are more informed about the climate change-related risks that businesses must grapple with and get ahead of. As a result, businesses need to be especially diligent in their assessment of a range of factors that may be impacted by the changing climate when completing M&A transactions. While the risks that should be considered will, of course, vary between transactions, the following is a list of climate-related factors … Continue Reading
The heavy reliance on technology in today’s data-driven world means that cybersecurity threats must be taken seriously. More specifically, with respect to M&A transactions, a target’s cybersecurity mechanisms have become an important part of the due diligence consideration. Indeed, it is important to have a firm grasp on the nature and extent of a target’s cybersecurity vulnerabilities, the likelihood of a breach, and the procedure in place to remedy a breach, if necessary. These considerations have the power to significantly alter the value of a transaction, or even derail it entirely.
Crosbie & Company’s “Crosbie & Company Canadian Mergers & Acquisitions Report for Q3 2019” (the Report) reviews the minor slowdown in Canadian M&A activity in Q3 2019 following a record-breaking second quarter. While deal activity declined slightly in Q3 (776 announced transactions compared to 886 in Q2), the Canadian M&A market remained robust, posting its eleventh straight quarter (dating back to Q1 2017) with at least 700 transactions.
Highlights of the Report
- Slight decline in transaction volume: 776 transactions were announced during Q3 2019 compared to 886 in Q2 2019, representing a 12.4% decrease from the previous quarter.
The Competition Bureau (the “Bureau”) is required to review certain merger transactions that exceed various financial thresholds, based on the size of the business being acquired and the combined size of the buyer, the target business, and their affiliates. The notification thresholds under the Competition Act (the “Act”) are discussed in more detail here. The Bureau reviews transactions that exceed these thresholds (“notifiable transactions”) to assess the potential competitive effects of the deal prior to its completion, and if the Bureau concludes that a transaction is likely to substantially lessen or prevent competition, they may seek a remedy (such … Continue Reading
Canada’s burgeoning information technology (IT) sector is a standout in the Canadian mergers and acquisitions landscape. A recent report by Duff & Phelps illustrates that in the first half of 2019, IT was the third most active deal-making sector in Canada with over 104 closed transactions. Against this backdrop, three trends emerge:
- ‘Buying into’ privacy or cybersecurity risk. Buyers are becoming increasingly aware of the importance of conducting rigorous due diligence on a target company’s privacy and cybersecurity systems and practices. Marriott’s data breach in 2018, where about 383 million guest records globally were exposed to cybercriminals, highlights this.
Deal protections are an important aspect of M&A transactions. Buyers will typically negotiate with the target of the transaction to include all kinds of deal protections mechanisms, including no-shop provisions, matching rights, and break fees payable to the buyer. No-shop provisions in particular restrict the ability of the target board to solicit alternative proposals (including negotiations with third parties) and recommend alternative transactions to shareholders. Receipt of an unsolicited proposal may trigger a notice requirement. However, no-shop provisions can be limited in scope. Three common and interrelated “exceptions” to no-shop provisions are fiduciary out, go-shop, and window-shop provisions. While the … Continue Reading
Deal count reached a seven-year high in Canada last year, but there has been a loss of momentum in the first half of 2019. On-going trade conflicts and concern over a possible market correction have generated greater economic uncertainty, and the investment outlook for the second half of the year continues to be clouded by these factors.
Rising valuations have been partly attributed to favourable debt conditions. With stimulus measures like the central bank holding interest rates low, the financial environment has been conducive to growth in Canada – so why are some investors dubious? For one, the … Continue Reading
Unicorns and narwhals – what business do these creatures have in boardrooms and on stock exchanges?
“Unicorn” and “narwhal” are industry terms used to describe certain private start-up tech companies. “Unicorns” are start-ups valued by investors at $1B or more, a rare and substantial feat that has earned them their mythical nickname. “Narwhals” sit a stage below, vying for graduation to unicorn status.
The Canadian Unicorn Pipeline
The Toronto-based Impact Centre recently posted its 2019 Narwhal List (the List), which identifies nascent Canadian companies that may evolve into unicorns, as well as the financial avenues that can facilitate such … Continue Reading
The brewing industry is one of Canada’s oldest, and has undergone substantive transformations in recent decades. After a period of consolidation that culminated in the mid-1980s, only ten Canadian breweries remained, of which three controlled more than 95% of the market. As a result of further worldwide M&A activity, the industry is now dominated by three major multinational players. These control 90% of all Canadian retail sales, and account for more than 70% of industry revenue in 2018.
Although the industry has enjoyed steady growth in recent years and continues to have a positive outlook, much of this growth can … Continue Reading
Despite some cut backs in M&A activity expected over the next 12 months, the results reported in Ernst & Young’s (E&Y) 19th edition of the Global Capital Confidence Barometer (the “Report”) make clear that Canadian executives remain optimistic about Canadian and global M&A markets. Canadian executives are traditionally thought to be very bullish on the Canadian and global economy, and it is suspected that the decline in deals since the last Report is a temporary and strategic step back for companies to “digest recent acquisitions and assess the changing global geopolitical landscape.” The current state of … Continue Reading
Thomson Reuters recently released a report on global mergers and acquisitions in the first nine months of 2018. According to the report, global M&A volume fell 32% in Q3 2018 compared to Q2 2018. The number of deals – 35,543 – in the first nine months of 2018 dropped 9% compared to the same period of 2017. Overall, however, global M&A activity has remained strong in 2018: in the first nine months of 2018, M&A activity reached a new record of nearly US$3.3 trillion. This represents a 37% increase compared to the same period of 2017.
Increase in mega deals… Continue Reading
2018 is on pace to be a year with one of the highest total values of blocked or cancelled M&A deals in the past two decades. While this data, which was compiled by Thomson Reuters and reported by the Financial Times, is based on public M&A transactions, the reasons and insights behind it can nonetheless be applied to the private M&A context.
One of the main ways that deals have been blocked is through foreign investment laws. These laws take different forms in different countries but examples include the Investment Canada Act or the Committee on Foreign Investment in … Continue Reading
Global M&A activity has been off to a record start this year. The overall volume has reached nearly $2 trillion as of May 21. While some may view this increasing trend with optimism, certain investors are skeptical of its longevity.
It has not gone unnoticed that the last couple of times global M&A volume reached similar levels was in 2000 and 2007 – periods where the market cycle peaked and was followed by a crash shortly thereafter. Business Insider recently noted a consistent factor between these periods is the “overexuberance being exhibited by investors.” The market activity experienced in the … Continue Reading
The outlook for the Canadian Hotel segment is looking ripe for investment according to a recently released report from the CBRE. The CBRE Canada’s 2018 Hotels Outlook Report showed that there was strong operational performance which is expected to continue in this year.
The report indicated that hotel-investment volume reached $3.4 billion in 2017 and $4.1 billion in 2016. These years were marked by a higher volume of merger and acquisition deals which had not been a trend in this industry for quite some time. The healthy state of Canada’s hospitality segment is positively influenced by low-interest rates, lower … Continue Reading
A retrospective look at 2017
In Canada, 2017 had the highest number of mergers and acquisitions (M&A) deals in the past five years. There were a total number of 2,274 deals carried out in 2017, compared to 1,956 in 2016. The number of “mega deals”, however, did not see an increase in 2017. “Mega deals” are categorized as deals that have a value of US $5 billion or more. The number of these types of transactions went down from seven in 2016, to two in 2017.
For 2017, PwC noted the following three common M&A trends:
1) Increased… Continue Reading
Overall merger and acquisition deal value involving Canadian companies totalled $216.3 billion in 2017, which was approximately 14% lower than the $251.88 billion seen in 2016, which was a decade-high level. The fall in overall value was primarily caused by a 25% decline in energy deals, according to a report in Bloomberg, which resulted in the first year-over-year decline in total deal value since 2012-2013. Despite this decline, 2017 stands as one only five years since 1995 when deal value exceeded $200 billion, according to a report in the Wall Street Journal.
Outward bound M&A activity was down … Continue Reading
Over the last 18 months there has been substantial global, geopolitical uncertainty, including the run-up to, and the eventual election of President Trump in the US presidential elections, the fall-out from the UK’s “Brexit” referendum, the elections across Europe and the North Korean crisis in Asia. These events have had global implications but somewhat surprisingly global M&A has, on the whole, withstood these turbulent times.
Norton Rose Fulbright’s corporate practice has published an article on global M&A trends and forecasts. Please check it out!
According 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 … Continue Reading