Tag archives: post-closing

COVID-19 Series: Considerations and Modifications of Certain Provisions in M&A Agreements (Valuation and Post-Closing Pricing Mechanisms)

In recognition that businesses are adjusting to their “new normal” and some companies are exploring acquisitions or divestitures as opportunities to strengthen their bottom line, we will be publishing a series of blogs aimed at highlighting some of the considerations and key drafting areas in a purchase and sale agreement that parties to Canadian private M&A transactions should consider in light of the COVID-19 pandemic.

Valuation Gaps

The impact of COVID-19 creates a lot of challenges in determining the valuation of a target – which ultimately, helps the parties determine the price of the shares or assets being sold/purchased. For … Continue Reading

Creating value beyond the deal

In today’s M&A market, dealmakers are increasingly under pressure – resulting from increased disruption, industry convergence, technological change and the need to shift to new business models to stay competitive – to maximize and deliver value from each deal they do. One would think, therefore, that value creation would be a priority for dealmakers. However, a recent report by PwC (prepared in conjunction with Mergermarket and Cass Business School) shows that this may not be the case.

Key findings from the report include:

  • Many acquisitions and divestments do not maximize value – even when some dealmakers think they do.
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Strategies for parenting start-ups, post-acquisition

In recent years, we have seen more acquisitions of start-ups by big corporations in the tech industry, healthcare, retail, fashion, beauty, food, and transportation. The benefits of M&A transactions in these sectors has been more widely recognized. For instance, for a start-up, partnering with a large corporation provides broader market access, deeper industry knowledge and accelerated brand development opportunities. From the perspective of the corporation, it means access to growing markets, new technologies, and tapping into niche skills, talents and entrepreneurial and agile culture.

Despite the surging interest in enhancing collaborations between start-ups and bigger companies from both sides, Accenture Continue Reading

Shareholder representatives in M&A

The post-closing process can be complex and time consuming. Hiring a professional independent shareholder representative to manage post-closing matters, such as purchase price adjustments, indemnification claims, earn-outs and escrow management, may be beneficial for target shareholders and management. In recent years, shareholder representatives have been commonly used in the U.S., and they are becoming increasingly common in Canada.

There are many benefits to hiring a shareholder representative to deal with post-closing matters:

  • Avoid conflicts of interest. When the purchaser decides to continue to employ target executives and management post-transaction, there is an inherent conflict of interest for the target
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Managing the psychological impact of M&A

MA_680x220Studies reveal that 50 to 70% of M&A transactions ultimately fail to realize expected synergies and, in fact, many actually dilute shareholder value. One of the causes of M&A failures is that companies often neglect to adequately consider the psychological impact of M&A on their employees.

Will I be laid off? Will I be moved to a different position? Will I get along with my new colleagues? Like downsizing and other types of organizational change, M&A creates considerable uncertainty and has widespread psychological effects on employees in every level. A paper by People & Culture identifies the following potential psychological … Continue Reading

Employee retention: good people equals better results

Light BulbHuman capital is a critical component of any merger or acquisition.  High profit margins and synergistic gains cannot be realized without key talent who are able to motivate employees to achieve high levels of performance. Although there is no simple solution to retaining top performers, retention strategies should be adopted in any merger or acquisition. The most common retention award offered to executives and employees is a cash bonus, calculated as a percentage of base salary.  Expressed relative to purchase price, retention budgets are quite minimal and are usually borne by the purchaser.

The Global M&A Retention Study conducted by Continue Reading

Locking the box: an emerging tool to avoid post-closing negotiations

In Canada, private M&A transactions have long followed a familiar structure: the parties settle on a “cash free, debt free” price, which then must be adjusted post-closing to account for the target’s actual cash, debt and working capital (or other measures such as net assets) in an effort to reach the true “equity value” of the business. Calculating and settling these post-closing adjustments to the purchase price can frequently take many months and is one of the main causes of acrimony between buyers and sellers.

In light of these frustrations, it is perhaps unsurprising that one recent trend that has … Continue Reading

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