Renegotiating or withdrawing altogether from the North American Free Trade Agreement (NAFTA) has been a focal point of both President Trump’s presidential campaign and his administration. This threat of renegotiation or withdrawal has also been the source of immense speculation from lawyers, economists, politicians and the like regarding the expected implications for the economy, key Canadian industries and business generally. Now, with preliminary negotiations underway, these months of speculation may finally be put to the test.
Smart contracts, which replace traditional paper documents with a computer program that automatically verifies and executes an agreement, are poised to fundamentally alter the way M&A and contract-based legal work is performed. Think of a smart contract as a small army of robot lawyers and accountants: once the parties agree to terms, these robots automatically implement the agreement’s terms (e.g., payment, termination, etc.) as each party performs, or does not perform, their end of the bargain.
What is blockchain?
Platforms that were once physical in nature – such as data rooms – are increasingly becoming digitized. The cloud has opened up new frontiers for data storage: It offers large amounts of storage, collaborative file sharing, and easy access to records at a low cost. On top of all that, the documents are not susceptible to damage as a result of natural disasters, including floods and fire. Consequently, it comes as no surprise that cloud storage may appear a tempting option for a virtual data room.
However, when considering cloud storage, recent high profile cyber-attacks ought to raise a red … Continue Reading
Canadian M&A activity has continued to rise in 2017, but with the successes come many more stories of failure. Studies indicated that 70% – 90% of acquisitions ultimately fail. How does a company beat these odds? A recent article by McKinsey & Company suggests that companies who enter into acquisitions with a specific value proposition in mind tend to have higher success rates than those with vague, growth strategies. In particular, the authors suggest most successful acquisitions implement one of six strategic models.
Improve the target company’s performance
One acquisition strategy involves purchasing a target company to reduce its costs … Continue Reading
Earlier this year, we discussed the increasing use of technology in the M&A deal process. To recap, a recent Mergermarket study revealed that the use of technology and big data were likely factors in the increasing frequency of unsolicited bids and corresponding decrease in frequency of broad auctions. Building on our earlier discussion, we now consider below the ways in which technology is used to facilitate deals.
Due diligence process
Artificial intelligence has already had significant influence on the due diligence process. For example, Kira Systems, an artificial intelligence contract analysis company, claims that their software has been used … Continue Reading
Blockchain technology has been making headlines since it emerged in 2009 in connection with the cryptocurrency Bitcoin. We’ve covered the potential use of Bitcoin in M&A transactions in previous articles in 2016 and 2014. As discussed in these articles, the volatility and lack of central authority has so far meant that the cryptocurrency plays a niche role in the capital markets.
However, blockchains – the technology behind Bitcoin – has been gaining ground for its exciting enterprise potential. We are already beginning to see companies racing to adopt this emerging technology, as more and more companies acquire the technology … Continue Reading
The legal industry is not immune to the influx of new technologies designed to make our lives, and equally if not more importantly, those of our clients, easier and more efficient. Early last year, we reported on content management tools that revolutionized the way due diligence is performed in M&A transactions. Since then, new technologies have emerged aimed at simplifying document management in closing a deal. While still relatively new, one of the more promising technologies is virtual closing rooms.
Virtual closing rooms
Virtual closing rooms are designed to facilitate a secure, user-friendly and simple closing process. Some of the … Continue Reading
2017: the year of social media fails. Over the last six months, an international air carrier’s stock plummeted following a viral video of security forcefully removing a passenger from a plane. Then, Twitter was used to publicly assail a soda pop company for its lack of judgment in releasing a commercial depicting a celebrity subduing a crowd of protestors with a can of pop.
Before committing to a transaction, a prudent buyer will want to know any and all potential risks associated with the target. While social media can play a positive role in a company’s business strategy, it, evidently, … Continue Reading
Technology is increasingly playing a bigger role in M&A deals, transforming the way transactions are priced, negotiated and completed. The use of different platforms is facilitating transmission of deal information to a wider group, and as a result, crucial stages in a deal can now be done remotely and simultaneously by several deal parties.
Moving away from broad auctions
Mergermarket released a survey-study on M&A deal process finding that sell-side deal-sourcing has been moving away from broad auctions. Rather, negotiated sales are becoming the deal-sourcing method of choice.
The move towards negotiated sales is partially driven by the important role … Continue Reading
Since Facebook’s $3 billion acquisition of Oculus VR – a company that develops and manufactures virtual reality headsets – augmented and virtual reality technology has become a major topic of discussion in the M&A world.
For those who are new to this emerging industry, virtual reality is an artificial, computer-generated simulation of a real life environment that typically stimulates the user’s vision and hearing through the use of a headset. Augmented reality, on the other hand, layers computer-generated enhancements on top of an existing reality. Augmented reality is typically used in mobile devices to change the ways in which digital … Continue Reading
It is well documented that the medical technology (MedTech) industry has been one of the fastest growing sectors in North America over the past several years. In Ontario alone, there are currently 24,000 employees and over 1,300 companies working in this space. While it is quite healthy (Ontario’s MedTech exports amounted to roughly CAD $1.7 billion), there remains plenty of opportunity to participate in the growth and unlock value.
As KMPG reports, the upward trajectory of this sector shows no signs of wilting, fueled largely by increasing healthcare costs worldwide. With this landscape in mind, Ontario presents … Continue Reading
New cybersecurity requirements for Department of Financial Services (DFS)-regulated entities took effect on March 1, 2017. The New York DFS created these requirements in response to recent or potential threats to sensitive electronic information, particularly financial information and private consumer information. EY’s report provides an overview of the new framework with implications for the affected entities. A main goal is to protect information systems of the affected entities and the non-public information stored in those systems.
The new cybersecurity requirements include indications for the below-noted areas. An annual statement certifying compliance with these requirements must be submitted to … Continue Reading
In today’s market, there is significant buzz around phrases such as automation, artificial intelligence, cloud computing, robotics and the like. Many businesses are investing in the fast-paced technology sector and innovating outdated systems for customer engagement. For example, earlier this year, the first U.S.-based robotic café opened its (figurative) doors to patrons in San Francisco, serving reasonably priced espresso drinks with a robotic arm behind a large pane of glass. Only one human is present to administer the machine and assist customers with orders. With the changing face of consumer interaction, it is demanded of businesses to act progressively, so … Continue Reading
KPMG LLP’s survey predicts M&A deal levels in 2017 will be steady from 2016, with the technology industry leading expectations for high activity. This follows from 2016’s profile for tech M&A deals, which had EY’s Global technology M&A report for Q3 2016 highlighting digital technologies as driving tech M&A deals for both tech and non-tech companies. Digital technologies that drove deals include internet of things (IoT), smart mobility, cloud/SaaS, big data, security, advertising and marketing technologies, connected cars, payment and financial technologies, gaming, and health care IT.
In Q3 2016, the average value per tech M&A deal was … Continue Reading
While many people are still in shock after discovering that there is actually no human controlling the steering wheel in autonomous cars, tech companies, including Google, IBM, Yahoo, Intel and Apple, have found themselves in the middle of a gold rush for artificial intelligence (AI) companies. According to recent research by CB Insights, around 140 AI companies have been acquired since 2011, and the number of AI startup M&As has increased more than seven fold between 2011 and 2016. In fact, the race to invest in AI has been characterized as “the latest Silicon Valley arms … Continue Reading
Financial technology (fintech) companies like Square, Wealthsimple and Mint are already having disruptive effects in their respective industries, changing the way Canadians pay for goods and services, invest their savings, and manage their finances. A recent survey shows that Canadians are becoming less dependent on traditional banks given the variety of options to self-manage their finances.
At the same time, financings in the fintech sector have ramped up over the last five years. $7.4 billion was raised by venture-backed fintech firms in the first six months of 2016. As discussed in a previous blog post, there is … Continue Reading
On October 22, 2016, AT&T Inc. (AT&T), the second-largest U.S. wireless provider, and Time Warner Inc. (Time Warner), one of the world’s largest producers of TV shows and movies and the owner of HBO and CNN, announced an agreement whereby AT&T intends to acquire Time Warner for $85.4 billion. After the announcement, share prices of other media companies, including Discovery Communications Inc. and AMC Networks Inc., rose immediately. While the AT&T / Time Warner deal remains subject to regulatory scrutiny, analysts predict that the potential deal may kick-off of another round of industry consolidation, … Continue Reading
Strategy& of PwC published Mergercast “Digital Deals – A New Frontier” (Episode 56) in July 2016, which discusses the growing rationale for digital deal-making and post-deal challenges. Particularly, this podcast identifies that digital deals accounted for nearly 32% of all transactions in 2015, up by 20% since 2011, indicating the growing appetite for digital M&A. Many companies operating in traditional industries are looking to enter into or enhance their digital capabilities by identifying digital targets, particularly hardware, software, IT service and Internet companies. Digital deal growth is most notable in non-digital industries, such as automotive, retail and wholesale, aerospace, defense, … Continue Reading
In 2015, we have seen several important cybersecurity breaches in the industry. Some of them have been extensively mediatized while others remained less known by the general public. Recently, the online dating website Ashley Madison was hacked and the identity of millions of users revealed all around the world. Even more recently, we learned that over 500 million users’ Yahoo accounts had been hacked in 2014 and this news came out shortly after the acquisition of Yahoo by telecom giant Verizon. Can these attacks jeopardize your upcoming transaction? They absolutely can. As a matter of fact, Verizon asked for a … Continue Reading
Large public companies often acquire small private start-up companies to add new capabilities to their portfolios. This strategy is particularly common in the technology sector, where established players can take their pick of a multitude of start-ups. Given the nascent nature of start-ups, start-ups typically have limited assets, often consisting of a small number of software or hardware platforms. Oftentimes, of potentially greater value to an acquirer is the start-up’s talent pool, and hence, the phenomenon of the “acqui-hire”.
The essential concept of the “acqui-hire” is an acquisition that is driven by a desire to harness the target’s key … Continue Reading
MergerMarket Group recently published its September edition of Monthly M&A Insider which reported on mergers and acquisitions activity around the world for the month of August 2016. More than two thirds into the year, August was no exception to the recent rather sluggish growth in M&A activity, especially compared to the record-breaking year for M&A in 2015.
August saw a total of 946 deals worth US$182.2bn, the lowest-valued August since 2013 (US$152.7bn) and down 34.7% from August 2015’s US$278.9bn. The Energy, Mining & Utilities sector spearheaded activity by contributing 15.8% to the total global market share with 84 … Continue Reading
Despite the 18% drop in the volume of mergers and acquisitions as compared to last year, one sector that has not lost a step is the technology sector. As of June this year there have been about $260 billion in tech deals announced globally, as has been shown by Dealogic data, making it clear that at least as of right now the tech sector is immune to the effects of market volatility that has other sectors approaching deals with caution. This is the highest volume that the sector has seen for the period since the tail end of the dot-com … Continue Reading
A recent PwC survey shows that, even after a historic year in 2015 regarding M&A activity, the ever-increasing appetite for M&A will continue its upward trend in 2016.
In 2015, 65% of all deals met PwC’s standard for “mega deals”, which PwC defines as transactions valued at over $5 billion USD. This year, the strategy to optimize results and performance through “active portfolio management” will continue to drive strategic partnerships and acquisitions in the US and abroad.
According to the survey, 59% of 97 US-based CEOs (of companies with annual revenue from $1-10 billion USD) said that they were planning … Continue Reading
M&A activity in the healthcare industry has been on an upwards trend since our last update. Good Foundations: Building Healthcare M&A and Real Estate, a report by Mergermarket on deal-making trends in the industry, found that about 90% of the respondents expect healthcare M&A to rise over the next year. The value of healthcare deals in North America increased by 28% and reached a total of US$298 billion in 2015.
The North American healthcare industry is rapidly evolving and demanding that companies innovate to stay relevant. Several fundamental shifts, such as the move from fee-for-service to value-based care, … Continue Reading