Canadian M&A Perspectives

Private and Public Mergers & Acquisitions | Private Equity

Rethinking Representation and Warranty Insurance in Canada

Posted in Contractual Matters, Private Equity, Private Transactions, Public M&A, Strategy
Jake IrwinLama Sabbagh

With special contribution from Robyn Weber, AVP, Private Equity Practice Leader, HUB International

The sale of Representation and Warranty Insurance (“RWI”) policies has soared in recent years. In the United States, between 2012 and 2014, the number of RWI policies issued has doubled every year. Yet Canada has not been as quick to adopt RWI in M&A transactions mainly due to our typically smaller transaction values, making RWI cost prohibitive in many instances.

However, the Canadian market is warming to RWI as the cost of this insurance product has decreased by approximately 50% over the past 5 years. With the increased demand for RWI to facilitate deals, insurers have also been quick to develop new customized solutions for risk allocation, making RWI even more attractive. As the underwriting process has been streamlined and insurers have developed a proven claims history, RWI is now a recognized product in the M&A community.

RWI reduces, or even eliminates, seller proceeds being trapped in escrow under traditional indemnification provisions and ensures the buyer is able to recover losses directly from a financially secure insurer. It also facilitates the often complex negotiations surrounding representations and warranties that sellers are willing to give and buyers are willing to accept, potentially reducing legal fees.

RWI does not make sense for all transactions. Prior to proceeding with a RWI policy, in addition to cost, timing and coverage considerations, we recommend a careful review of the policy exclusions and how they line up with the risk profile of the business.

For more information on the benefits of RWI, the process and timing considerations for obtaining RWI, and the costs of RWI, check out our Canadian Representation and Warranty Insurance FAQ.

Canadian Representation and Warranty Insurance FAQ

Posted in Contractual Matters, Private Equity, Private Transactions, Public M&A, Strategy
Ian C. MichaelJake IrwinLama Sabbagh

With special contribution from Robyn Weber, AVP, Private Equity Practice Leader, HUB International

In the context of the purchase and sale of a company, when sellers seek to negotiate a “clean exit” and limit exposure to indemnification claims and buyers seek to avoid unknown pre-closing risks, the question increasingly arises: can’t insurance cover these risks?

Canadian M&A participants have been slower than participants in other markets to regularly seek this type of insurance, known as Representation and Warranty Insurance (“RWI”). However, insurers have been quick to offer RWI products and interest is growing. The rationale for purchasing insurance can be unique for each party.

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Cybersecurity and M&A – Part Three: Cyber Insurance

Posted in Contractual Matters, Private Transactions, Public M&A
Roland HungMatthew HarrisBeverly Ma

In the second installment of this series we offered a brief review of cybersecurity provisions and considerations in M&A transaction agreements, and in the first installment of this series we offered a brief review of cybersecurity issues that can arise in the course of M&A transactions and discussed the importance of cybersecurity due diligence by the buyer. This third installment will focus on cyber-insurance and some specific considerations relating to cyber insurance that targets and acquirers should make in the context of M&A transactions.

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Updated OECD Principles of Corporate Governance: Canada Continues to be Ahead of the Curve

Posted in Public M&A, Shareholders, Strategy
Ryan HornbyBlake Jones

The OECD’s updated G20/OECD Principles of Corporate Governance (the “Principles”) highlight that core corporate governance principles are well embedded in the Canadian framework and that many of the new governance initiatives outlined in the Principles are already being pursued in Canada.[1] The Principles, first published in 1999 and previously revised in 2004, provide a widely accepted international reference point used by policymakers in setting corporate governance standards across the globe.

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Harnessing Social Media for Crisis Management: Lessons following recent events involving short seller allegations

Posted in Canadian Market Entry, Public M&A, Shareholders, Strategy
Shane C. D'SouzaDeandra L. SchubertBlake JonesAndrea Kareclas

In October, 2015, short-sellers attacked three Canadian public companies: Valeant Pharmaceuticals International, Inc., DH Corporation and Nobilis Health Corp. All three companies refuted the short sellers’ allegations in traditional media. We suggest below that these companies could have also used social media to get their side of the story out. In our view, there was a potential opportunity to further influence market sentiment about allegations that had already negatively impacted secondary market trading.[1]

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The 2016 Proxy Season: Updates to the ISS Canadian Proxy Voting Guidelines

Posted in Shareholders, Strategy

The following post on the Canadian Securities Regulatory Monitor blog may be of interest to readers of this blog:  The 2016 Proxy Season: Updates to the ISS Canadian Proxy Voting Guidelines.

On November 20, 2015, Institutional Shareholder Services Inc. (“ISS”) released its updated Canadian proxy voting guidelines for meetings on or after February 1, 2016.1 The updates provide new or updated guidance with respect to voting for equity compensation plans, electing directors with too many board appointments and electing directors of externally managed issuers such as REITs.  Read More

 

Universal Proxies Coming to Canada? The CCGG Makes Its Case

Posted in Public M&A, Shareholders
Fraser BourneBlake Jones

In a recent policy statement, the Canadian Coalition for Good Governance (“CCGG”) endorsed the use of “universal proxies” whenever there is a contested director election at a Canadian public company. A “universal proxy” is a proxy voting form which lists all nominees for election regardless of who nominated them (whether management or dissident shareholder). Although there is nothing under corporate or securities laws which prohibits a company or a dissident from using a universal proxy,[1] it is common practice for Canadian issuers and dissident shareholders to solicit votes with the use of proxies which only list their own nominees. Continue Reading

Cybersecurity: More than a Byte-Sized Problem in M&A

Part Two: The Transaction Agreement

Posted in Contractual Matters, Private Transactions, Public M&A
Roland HungMatthew HarrisBeverly Ma

In a previous blog entry, we offered a brief review of cybersecurity issues that can arise in the course of M&A transactions and discussed the importance of cybersecurity due diligence by the buyer. This entry will focus on contractual provisions that the buyer can request in the definitive transaction agreement to hedge against any cybersecurity risks it assumes. In particular, this blog post will focus on purchase price adjustments, representations and warranties, and indemnities. Continue Reading

Harnessing Social Media: Syngenta’s high-profile use in Monsanto bid

Posted in Canadian Market Entry, Public M&A, Shareholders, Strategy
Shane C. D'SouzaDeandra L. SchubertBlake JonesBreanna Needham

In our two recent articles, available here and here, we outlined how social media can influence proxy contests and identified some potential legal challenges with this development. This update focuses on the recent use of social media in the high-profile (failed) hostile bid for Syngenta AG (“Syngenta”) by Monsanto Company (“Monsanto”).

Background

In May 2015, Monsanto made a $45 billion bid (its third bid in four years) for Syngenta. Syngenta’s board almost immediately rejected the offer on the grounds of anti-trust concerns and lack of protection for shareholders should the deal fall apart. The rejection did not end Monsanto’s pursuit and through a series of bids, the last of which was withdrawn in late August, Monsanto continued to seek support for its bid. Continue Reading

Cybersecurity: More than a Byte-Sized Problem in M&A

Part One: Due Diligence

Posted in Contractual Matters, Private Transactions, Public M&A
Roland HungBeverly Ma

In a previous blog entry, we canvassed Canadian privacy legislation and offered businesses a cursory review of the issues that arise in the due diligence phase of a business transaction. Expanding on that, this entry is the first in a series of three blog entries concerning specific cybersecurity considerations in the M&A context. This entry will focus on cybersecurity due diligence considerations, while the entries that follow will respectively discuss cybersecurity considerations in definitive transaction agreements and cybersecurity insurance. Continue Reading