It is quite common in negotiated acquisitions for companies to perform a pre-signing market canvass and to enter into an acquisition agreement that contains a “no-shop” provision with a fiduciary out clause for unsolicited third-party proposals, as well as a break fee payable in the eventuality of the target company accepting a superior offer. Less common is the practice of foregoing the pre-signing market canvass and combining a “go-shop” provision that allows the target company to actively solicit superior proposals for a specified period of time after entering into the acquisition agreement with a two-tiered break fee that provides for … Continue Reading
A few days ago, I blogged about one of the key differences between taking security in Canada, as compared to the US (a question I’m often asked by lenders when working on cross-border M&A transactions). As a follow up to that post, I’m going to discuss one other reason why lender rights are generally a bit more robust in Canada than in the US – that is, the option of private power of sale that’s available in Ontario.
A private power of sale in Ontario allows a lender to (on not less than 15 days after default and 35 days … Continue Reading
Dealing with a target company’s working capital in the context of a public M&A transaction is often a challenge because the buyer has no recourse against the target’s former shareholders after closing if working capital is not at an agreed-upon level. It’s impracticable to implement a post-closing working capital adjustment mechanism where there’s no one to “true up” with after closing. Traditionally, a buyer in a friendly public M&A transaction must rely on the target’s interim operating covenants and the accuracy of the target’s representations and warranties in a support agreement to get comfortable on appropriate levels of working capital.… Continue Reading
US lenders in cross-border M&A transactions often ask how real estate security differs in Canada. The short answer is not much; the security and legal requirements are pretty much the same (though perhaps not as heavily negotiated and labyrinthine as US-style documentation).
The best news, however, is what’s unique about Canada as compared to the US, including the fact that certain important aspects of Canadian bankruptcy laws are considered to be more “creditor-friendly”. An example of more “creditor-friendly” treatment is the absence of “cram-down” (and “cram-up”) provisions under Canadian bankruptcy laws. Under Canada’s two main insolvency regimes, a restructuring plan … Continue Reading
Resolute’ s battle for ownership of 100% of Fibrek Inc. recently came to an end with a friendly “white knight” offer from Mercer being withdrawn after a lengthy court battle. Resolute’s hostile bid for Fibrek was successful, notwithstanding that Fibrek’s board had endorsed Mercer’s offer at a 40% premium to the hostile bid. The Fibrek saga causes us to ask whatCanadian regulators are trying to achieve with the regulation of defensive tactics, and where they may go next.