Break fees have for many years been a conventional deal protection feature of public M&A transactions. These fees, often referred to as termination fees as they are tied to the termination provisions in the contract containing the deal terms, are typically payable by a target company where it elects to end an agreement for an M&A deal with a prospective buyer (almost always in order to accept a higher offer from another suitor). Such fees can promote deal certainty for a buyer by attaching adverse monetary consequences to a target terminating the deal.
Reverse break fees (as opposed to … Continue Reading
There are a number of ways in which a MAC clause can be drafted. Typically, these provisions begin with a broad definition of the type of event that will constitute a “material adverse change” on the business or assets being acquired. This is often followed by a list of explicit “carve-outs” which designate the events that fall outside this definition. By negotiating the definition and carve out sections of the MAC clause, parties may allocate the risk of adverse changes to either the seller by including them in the definition of material adverse change, or to the buyer by explicitly … Continue Reading
In most acquisitions, the distance between signing and closing is measured in weeks, if not months. During this interim period the buyer’s ability to safeguard or control the target’s business is limited. This is an uncomfortable position that can be exacerbated if the transaction is consummated between strategic competitors or in a market with substantial volatility. Accordingly, this is a context in which astute counsel can provide significant value to clients through effective risk allocation. There are a number of contractual tools that can be employed to help mitigate the inherent risks during this gap period (i.e. indemnities, escrows, price … Continue Reading
Recently, a curious team of our M&A bloggers presented an internal roundtable discussion aimed at understanding some of the key issues regarding material adverse change (otherwise known as “MAC”) clauses. Part of what came out of that discussion is a presentation that provides an introduction to the MAC clause and some analysis regarding current trends in the way MAC clauses are being negotiated and implemented in the Canadian deal market.
In the coming weeks we will publish a series of posts that address some of these trends and other issues to keep in mind when negotiating, drafting, or … Continue Reading
In our last post we highlighted some of the important developments in the regulatory rules regarding foreign direct investment and the Competition Bureau’s merger review process. In consideration of these changes, we’ve put together some of the important strategies to keep in mind when conducting a transaction that will fall under these, or any other regulatory review process.
Issue Spotting and Implementing a Review Strategy
In order to ensure a smooth review process, or to avoid the review process entirely through proper notification, parties to a transaction and their counsel must be alive to the applicable regulatory issues early in … Continue Reading
Last week we discussed the new merger review guidelines released by the Competition Bureau of Canada. On Tuesday, February 7, 2012 the Bureau announced additional changes to one of the key thresholds that trigger pre-merger notification and the review process discussed in our earlier post.
In Canada, parties are required to notify the Commissioner of Competition where a contemplated transaction triggers two thresholds: the “size of transaction threshold” and the “size of parties threshold”.
Where a transaction involves the combination of multiple entities, the “size of transaction threshold” is measured based on the aggregation of either the value of … Continue Reading
Earlier this month, the Competition Bureau published new Guidelines for its review process under the federal Competition Act. These Guidelines describe the Bureau’s general approach to administering its review process.
In general, where a proposed transaction surpasses the “party-size” and “transaction-size” thresholds parties are required to notify the Commissioner prior to completing the proposed transaction. Following notification, there is a two-stage review process.
First, there is an initial thirty day waiting period during which the Bureau will assess whether the proposed transaction threatens a “substantial lessening or prevention of competition”. In those relatively few instances where this test is … Continue Reading
In recent weeks, Industry Canada has announced important developments that affect the regulatory review process for Canadian mergers and acquisitions. Below, we give a brief introduction to the foreign direct investment review process and highlight some of these important changes.
Under the Investment Canada Act, Industry Canada is empowered to receive notice and often conduct a regulatory review whenever a non-Canadian makes an investment to establish a new Canadian business or to acquire control of an existing Canadian business. In this context a “non-Canadian” is defined to include foreign entities, as well as an entity incorporated in Canada that … Continue Reading
Good communication within a deal team can be the linchpin of a successful transaction. Equally important, however, is the need to preserve privilege and ensure that sensitive information is insulated from any subsequent litigation. Balancing these two demands in a complex and fast moving transaction can be cumbersome, complicated and fraught with risk. Fortunately, recent developments in the common law have shed some light on this issue and provide useful guidance on how best to manage sensitive communications within a deal team.
Solicitor-client privilege exists as a common law exception to the evidentiary rules that compel disclosure during a litigation … Continue Reading