Tag archives: M&A

A healthy dose of deal-making: M&A trends in the US and Canadian healthcare sector

In the first quarter of 2018, M&A activity across the world hit a 17 year record high according to Mergermarket’s Q1 2018 Global M&A Report. This is an 18 percent increase in value compared to the first quarter of 2017. This increase was affected by the surge in deal-making seen at the end of 2017 which carried over into 2018 as the US experienced mega US healthcare deals. In fact, US M&A activity during Q1 2018 was reported to represent 44.2% of the total global share. According to data from Bloomberg, the healthcare sector has already reported $156 billion … Continue Reading

What considerations should be made when buying a franchise business?

The acquisition of a franchise business from a franchisor carries with it risks unique to the nature of the business. The aim of this post is to shed light on some of those risks and to highlight mechanisms, the existence of which can comfort a potential buyer that those risks have been mitigated.

Risk of non-compliance with applicable franchise legislation

The provinces of Ontario, Alberta, British Columbia, Manitoba, New Brunswick and Prince Edward Island each have their own franchise regulatory regime. A staple of the franchise regulatory regime is the requirement that, subject to certain exemptions, prospective franchisees receive a … Continue Reading

Competition Act Merger Filing Fees Increases to $72,000

Effective May 1, 2018, merging parties will need to dig deeper to cover the fee that must be paid when filing a pre-merger notification or seeking an advance ruling certificate under the Competition Act. The fee is jumping from $50,000 to $72,000.

In justifying the increase, the Competition Bureau argues that the fee has not increased since 2003, and had the fee been adjusted annual for inflation, it would currently be approximately $65,500. They also suggested that additional funds are required given the increase in the number of transactions considered “complex” and the considerable resources that are required to … Continue Reading

M&A or joint venture: key considerations for choosing your path to growth

Choosing to grow your business through an M&A transaction or through a strategic partnership or joint venture can be a difficult decision to make. M&A transactions and partnerships can both drive growth and bring access to new markets or product and service offerings, but they also come with unique challenges. While an acquisition allows the acquirer to gain control over the target, M&A transactions can be costly and the acquirer not only obtains the target’s business but also its liabilities, which can be significant.

Strategic partnerships, on the other hand, do not provide the same degree of control but may … Continue Reading

Look to the future: a tip for analyzing corporate culture in an era of evolving shareholder activism

2018 promises to be a year in which corporate culture will likely become an even more important focal point for investors and activists.

There’s no denying that social media has drastically altered the dynamic for public companies. Today, shareholders are increasingly calling upon corporations to take public stances on various social (and sometimes political) issues, some of which may be wholly unrelated to the corporation’s purpose. In a climate where shareholders are increasingly judging corporations based on non-traditional criteria, public companies can no longer spout platitudes about corporate governance and social values without risking being singled out. More than ever, … Continue Reading

Enforcement of restrictive covenants in commercial transactions

Restrictive covenants are often a key mechanism by way of which the buyer of a business is able to protect the value of their purchase. Indeed, in a 2017 review of legal trends in Canadian private M&A, Thomson Reuters has reported that non-competition covenants were found in 52% of the closing conditions of share acquisition transactions.

While such covenants are common, their enforcement has remained an ongoing concern due to the strict reasonableness requirements imposed by the Supreme Court of Canada in JG Collins Insurance Agencies Ltd. v Elsley, [1978] 2 SCR 916 in order to balance the parties’ … Continue Reading

Are megadeals coming back?

The year of 2017 witnessed a worldwide slowdown in the number of megadeals[1]. According to a recent Mergermarket Report (the Report), the global total for the number of deals worth US$4 billion or more decreased from a peak of 158 in 2015 and 133 in 2016 to 129 in 2017.  In Canada, the number of deals valued CAD$500 million or more decreased from 74 in 2016 to 55 in 2017, as reported by Duff & Phelps. However, there have been recent hints suggesting that the spring for megadeals is just around the corner.

After polling the … Continue Reading

The tech takeover: disruptive technology as a driver of M&A

A relentless parade of new technologies is unfolding on many fronts – one of which includes the M&A scene. While not every emerging technology will alter a business’ landscape, certain technologies have the potential to disrupt the status quo, alter the way companies operate and rearrange value pools. These “disruptive technologies” can quickly displace established systems and set new industry standards.

As an example, earlier this year, Toronto-Dominion Bank made headlines for its acquisition of “Layer 6 AI”, a start-up company which uses artificial intelligence to analyze various forms of data and anticipate an individual customer’s needs. This announcement came … Continue Reading

Mining M&A forecast in 2018

While global economic growth has increased in the past few years, mining M&A activity has not seen a similar increase. However, a report published by KPMG on mining M&A activity during the second half of 2017 shows that business conditions appear to have improved for the mining sector. KPMG believes that mining companies’ focus on correcting their balance sheets and winning back investors have had a positive impact on their cash accounts and have given mining companies some flexibility to become more active in acquisitions. Comparing M&A activity from July to December 2017 to that of the first half of … Continue Reading

Regulatory reform signals potential spike in M&A activity involving US financial institutions

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

The risks of sealing the deal with a personal guarantee

The purchase and sale of a business can involve a plethora of financial risks – one of which is often mitigated by requiring a personal guarantee. In the private M&A context, personal guarantees can have important implications for the buyer, who is signing the guarantee, and the seller, who requires the guarantee. These implications become further complicated when the transaction spans multiple jurisdictions and will require careful legal analysis.

Background

Typically, the sale of a business will require financing. The person or entity financing the purchase may be the seller (in which case, the seller also becomes the lender) or … Continue Reading

U.S. banking M&A on the rise and may extend to Canadian financial market

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

Offer of continued employment with buyer does not absolve seller from liability in M&A transactions

A recent decision of the Ontario Superior Court of Justice, Dussault v Imperial Oil Limited, 2018 ONSC 1168 (Dussault), provides a cautionary tale to selling parties in an M&A transaction who intend to limit liability for wrongful dismissal by negotiating for its employees’ continued employment with the buyer. The Dussault decision illustrates that even when continued employment is offered, the seller may still be liable if the employees are reasonable in failing to mitigate their damages by not accepting employment with the buyer.

Background

As part of an asset purchase agreement between Imperial Oil Limited (ImperialContinue Reading

Better, faster, stronger: revamping the M&A due diligence process with Artificial Intelligence platforms

Voluminous information in M&A transactions

M&A transactions can be time-intensive, often involving contract discovery and analysis, due diligence, data room preparation, verification of representations and warranties, privacy issues and multijurisdictional privacy legislation and intellectual property protection, among other important aspects. As deals become larger in value and scope, the review and analysis of the foregoing information becomes both voluminous and jurisdictionally dispersed. The international nature of companies and deals often result in contracts that are drafted in languages other than those commonly spoken by the lawyers on a file. To maximize efficiency, minimize errors and drive down costs, law firms … Continue Reading

Baskets and caps: limits to indemnification obligations

Indemnification provisions are among the most highly negotiated provisions in private M&A transactions. These provisions set out the terms and conditions under which one party will be required to indemnify the other party for any losses the other party may suffer post-closing. In other words, indemnification provisions set forth the “rules of the road” and allocate the risks involved in a transaction.

While risk allocation may seem conceptually simple, structuring indemnification provisions may become quite complicated. As the size, complexity and economics of a transaction increase, it can sometimes be very difficult to specify the scope of a party’s indemnification … Continue Reading

Global automotive M&A ends 2017 in high gear with no signs of slowing down

As seen in this recent PwC article, global automotive M&A activity was strong in 2017.  Automotive deal value increased 29.9% to $53.2b from 2016 to 2017 primarily as a result of two mega deals in the Auto-Tech sector, which PwC defines as “investments in connectivity, autonomous, electrification, ride-sharing and the software, sensors, intellectual property and other components that support these trends.”  For 2018, it is expected that investments in the Auto-Tech sector will continue to drive global automotive M&A activity.

Auto-tech deals spark M&A activity

Auto-tech deal value increased from $5.3b in 2016 to $26.7b in 2017. Further, deal volume … Continue Reading

Legal update: common interest privilege in commercial transactions

On March 6, 2018, the Federal Court of Appeal reversed the decision of the Federal Court of Canada in Iggillis Holdings Inc v Canada (National Revenue).

As we discussed in a previous post, the trial court decision in Iggillis Holdings had called into question the availability of common interest privilege in commercial transactions. The trial court found that privilege with respect to a memorandum prepared by purchaser’s counsel (with input from seller’s counsel) outlining the most tax-efficient way to structure a series of transactions had been waived when it was shared on a confidential basis with the seller.… Continue Reading

Cross-border agreements and the choice of governing law

In order to meet the demands of a constantly evolving global marketplace, companies often seek to expand their operations through cross-border mergers and acquisitions. When pursuing an international transaction, the parties must consider a unique aspect of the deal – the legal framework in which the deal and any contractual agreements within it are to be governed.

Governing law provisions

Canadian law generally espouses the principles of contractual autonomy and international comity (being respect for a foreign court’s jurisdiction and laws). As a result, when multiple jurisdictions are involved in an M&A transaction, the contracting parties have an opportunity to … Continue Reading

Inherited liability under a workers’ compensation system: a surprise to avoid

Canadian provinces and territories all administer some form of a workers’ compensation system within their jurisdiction. Funded by employer-paid premiums, these no-fault insurance systems provide wage replacement and medical benefits to injured employees who relinquish their right to sue their employer for losses arising from their injuries. In Ontario, for example, the relevant legislation is the Workplace Safety and Insurance Act (WSIA).

Why is workers’ compensation relevant to M&A?

When acquiring a business, it is important to be aware of the seller’s record under the applicable workers’ compensation legislation. In Ontario, for example, when an employer sells its … Continue Reading

Working capital adjustments: lessons from De Santis and Iacobucci v Doublesee Enterprises Inc.

In complex M&A transactions, there could be a significant delay between the initial valuation of a target company and the closing of the deal. As we explained in our previous article, “Net working capital adjustments: what’s the deal?”, parties can protect themselves against fluctuations in value during this period by negotiating purchase price adjustments (PPAs). According to the American Bar Association’s 2016 Canadian Private Target Mergers & Acquisitions Deal Points Study, the most common PPA is the working capital adjustment (which was included in 83% of recent Canadian M&A deals with a PPA).

Mechanics of

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Hacking your way through cyber due diligence

Last year saw an increase in the frequency of data breaches and this trend is unlikely to disappear in 2018. We previously reported on the importance of cybersecurity in the M&A due diligence process. Conducting due diligence of a target’s cybersecurity procedures has become even more crucial in light of Canada’s new notification requirements. These requirements, regulated by the Personal Information Protection and Electronic Documents Act (PIPEDA), are based on amendments made to PIPEDA in 2015 as well as a regulation proposed in 2017 called Breach of Security Safeguards Regulations (Regulations). The Regulations will impose new … Continue Reading

Canadian M&A: a look back 2017 and a glimpse into 2018

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

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Cybersecurity update: from transaction start to finish

Cybersecurity has never been more critical. This growing area of concern has been on the mergers and acquisitions (M&A) radar for some time, and we’ve previously blogged on its effect on the due diligence process, regulatory requirements, and overall acquisition risk assessments. With only 4% of organizations reportedly agreeing that their current cybersecurity strategies had been fully considered, with all risks incorporated and relevant threats and vulnerabilities monitored, it’s crucial to push forward in developing a comprehensive and current cybersecurity strategy to manage risks at all stages of an M&A transaction.

In a recent reportContinue Reading

Legal update: M&A in the pharma sector

Of counsel James Baillieu explores the pharma M&A horizon in PharmaTimes magazine. The pharma sector saw deal activity fall in 2017 compared to previous years. While the number of deals remained robust, their value was significantly lower due to fewer large acquisitions. Looking ahead, however, many expect deal levels to pick-up as Trump’s tax reforms give US companies increased cash resources to fund acquisitions. Indeed, as of mid-January deals worth over $30 billion have already been announced.

Please check out the article in PharmaTimes for more.

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