On June 22, 2017, the pre-closing review threshold that applies to most direct acquisitions of Canadian businesses by non-Canadian1, non-state owned investors from WTO member states increased to C$1 billion from $C800 million2. In an effort to encourage foreign investment that is beneficial to Canada, the Canadian Government increased this threshold to C$1 billion two years ahead of schedule3.… Continue Reading
Today the pre-closing review threshold that applies to most direct acquisitions of Canadian businesses by non-Canadian, non-state owned investors from WTO member states has risen from C$600 million to C$800 million. A further increase is set to occur later this year. The Canadian government has announced that in 2017 (two years ahead of schedule) the Investment Canada Act will be amended to increase this threshold to C$1 billion.
The C$379 million (2017) pre-closing review threshold for direct acquisitions of Canadian businesses by non-Canadian, state-owned investors continues to apply. Also continuing to apply is … Continue Reading
On March 22, 2017, Ontario’s Bulk Sales Act (BSA) was repealed, bringing to an end bulk sales legislation in Canada.1 The BSA was enacted in 1917, and was intended to protect unpaid trade creditors (i.e. the people a seller is indebted to for goods, money or services furnished for the purpose of enabling the seller to carry on his or her business) from “bulk sales” by a seller of all or substantially all of its assets over a short period of time.
The BSA was an important consideration for both the buyer and the seller in an Ontario … Continue Reading
Alberta’s Court of Appeal recently overturned a controversial interlocutory decision involving a proposed acquisition by Alberta Oil Sands Inc. (“AOS”) of Marquee Energy Ltd. (“Marquee”) pursuant to a plan of arrangement under s. 193 of Alberta’s Business Corporations Act (“ABCA”). Even though only Marquee was being arranged, thus necessitating a vote by its shareholders, the underlying decision of the Court of Queen’s Bench required that AOS also seek the approval of its shareholders to implement the transaction. The Court of Appeal set aside the lower Court’s order requiring AOS shareholders to vote on the … Continue Reading
On June 8, 2016 Bill 218 (the Burden Reduction Act, 2016) passed first reading. The Bill is part of a provincial government initiative to, in part, reduce the regulatory burden on Ontario businesses. Schedule 3 of the Bill repeals Ontario’s Bulk Sales Act (BSA). The BSA was enacted in 1917, and is intended to protect unpaid trade creditors (i.e. the people a seller is indebted to for goods, money or services furnished for the purpose of enabling the seller to carry on his or her business) from “bulk sales” by a seller of all or substantially all of its assets … Continue Reading
Undertaking to use “best efforts”, “commercially reasonable efforts” and variations of such specified levels of effort are frequently provided for in M&A deals. Undertaking to use a specific degree of effort addresses parties’ obligations that are not entirely within their control and indicates that performance and result are not guaranteed or assured. Examples of obligations for which parties typically undertake to use a specified degree of effort include the obtaining of regulatory approvals, financing and third party consents. Although the rationale for undertaking to try to accomplish something is clear, the desire to circumscribe obligations by “best” or “reasonable” efforts … Continue Reading
Fintech M&A activity, in both the Canadian market and globally, is expected to be on the rise over the next few years. In its 2016 Report, FinTech: Prepare for a Wave of M&A, UK-based investment bank FirstCapital, predicts that fintech M&A deal flow will increase “as financial incumbents look to catch up with widespread innovation from new entrants, the internet majors scale up in financial services and the technology/software majors add new technology to deepen their offerings in this sector”.
Like with the acquisition or sale of any technology company, strategic due diligence is a critical component of the … Continue Reading
Along with the announcement on February 25, 2016 of final amendments to Canada’s take-over bid regime (see our February 26, 2016 publication, Canada’s New Take-Over Bid Rules Seek to Level the Playing Field, relating to that announcement), the Canadian Securities Administrators (CSA) published the text of final amendments to Canada’s Early Warning Regime (EWR), which will take effect on May 9, 2016.1
The release of the amendments (EWR Amendments) brings to an end a three-year engagement by the CSA with market participants that began in March 2013 with an initial set of EWR proposals (see our March … Continue Reading
On February 25, 2016, the Canadian Securities Administrators (CSA) published a CSA Notice of Amendments to Take-Over Bid Regime confirming the adoption of a harmonized take-over bid and issuer bid regime for all Canadian jurisdictions (New Bid Regime),1 effective May 9, 2016.2
On February 25, 2016, the CSA also published a CSA Notice of Amendments to Early Warning System, which confirms the adoption of changes to Canada’s early warning reporting (EWR) system. These changes to the EWR system are to come into effect at the same time as the New Bid Regime and will be reflected in … Continue Reading
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 … Continue Reading
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 … Continue Reading
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.… Continue Reading
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
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
The recent attention surrounding cyber security is a reminder of how a company’s records are no longer stored in boxes filled with paper files. Although the (not so) new age of electronic data storage has resulted in new ways of doing business that were never before possible, it has also resulted in a host of complexities when considering how, and in some cases what, electronic records will be handed over to the buyer of a business in an M&A transaction. These complexities are compounded when a buyer is only purchasing a portion of a business, the rest of which will … Continue Reading
In the first part of this blog post series, we looked at recent general trends in the Canadian M&A market overall, including a decline in overall transaction activity since 2009.
However, when looking at M&A activity in certain sectors or by deal value, we see slightly different trends emerging:
- The steepest decline in activity has been concentrated at the lowest end of the market (value under $5M), where we have seen a 64% decline in the number of transactions since 2009 or an annualized decline of 18% per year.
- At the high end of the market (value over $250M), overall
Canadian M&A activity has been on a rollercoaster ride in recent years, influenced by market factors, currency fluctuations, oil prices and other economic conditions. In this two-part blog post series, we highlight some interesting trends that we have identified from our recent market review.
In spite of the apparent volatility in M&A activity in Canada, our review of market activity reveals that there have been some notable trends in recent years when looking at M&A deal activity overall.… Continue Reading
Insurance M&A activity, in both the Canadian market and globally, has been on the rise since the 2008 financial crisis, and is expected to continue to increase. Deloitte recently reported that there were 399 insurance M&A transactions in Canada and the United States during 2014, an increase of 27% over 2013. The consulting firm Optis Partners reported that the first half of 2014 was the most active M&A period since they started tracking transaction information in 2008. In a survey published in 2014 by the professional services firm Towers Watson, over 85% of North American insurance executives said that they … Continue Reading
There’s been a lot of buzz surrounding the Supreme Court of Canada’s recent precedent-setting judgement, Bhasin v. Hrynew, 2014 SCC 71, in which the Court recognized, for the first time, a new common law duty that applies to the performance of contracts throughout Canada. The new common law duty is a duty of honest performance, and is a manifestation of the general organizing principle of good faith. The implication is that parties must perform their contractual duties honestly and reasonably, and that they must have appropriate regard to the legitimate contractual interests of the other parties to the contract. … Continue Reading
The Competition Bureau has announced that the pre-merger notification transaction-size threshold for 2015 will increase to $86 million from the 2014 threshold of $82 million. The 2015 threshold will come into effect immediately following publication in the Canada Gazette Part 1 (anticipated to occur on February 7, 2015). As per the indexing mechanism set out in the Competition Act (Act), the pre-merger notification threshold is reviewed annually.
The threshold is based on the book value of assets in Canada of the target (or in the case of an asset purchase, of the assets in Canada being acquired), or the gross … Continue Reading
Because of the growing risk of litigation by unhappy (or simply opportunistic) shareholders following the sale or acquisition of a company, corporate governance practices during the M&A process face increasing scrutiny.
In a recent article titled “Documenting the Deal: How Quality Control and Candor Can Improve Boardroom Decision-making And Reduce The Litigation Target Zone”, forthcoming in The Business Lawyer, Leo Strine, Chief Justice of the Delaware Supreme Court, sets forth some best practices for directors and legal and financial advisors “to conduct an M&A process in a manner that: i) promotes making better decisions; ii) reduces conflicts of … Continue Reading
Industry Canada has announced that the 2015 Investment Canada Act (“Act”) threshold that applies to most direct acquisitions of Canadian businesses by non-Canadians will be C$369 million. This is an increase from last year’s $354 million threshold. The threshold applies to the gross book value of the target’s assets. Note that under the Act, a non-Canadian includes a Canadian-incorporated entity that is ultimately controlled outside of Canada.
The existing lower threshold of C$5 million will continue to apply to transactions that relate to cultural businesses or where none of the parties are from a country that is a WTO member.… Continue Reading
The text of the Canada and European Union (EU) Comprehensive Economic and Trade Agreement (CETA) is due to be released soon, but it remains to be seen if the Canadian government will clarify which countries, in addition to those in the EU, will benefit from the higher $1.5-billion threshold for review under the Investment Canada Act (ICA).
On October 29, 2013, the Canadian government released the Technical Summary of Final Negotiated Outcomes of CETA, in which it indicated that the ICA threshold would be raised to $1.5 billion for EU investors and that investors from Canada’s other free trade agreement … Continue Reading
There is no denying the increasing popularity and notoriety of the virtual currency Bitcoin. Bitcoin market capitalization currently stands in the billions of dollars, with over 13 million Bitcoins having been mined and made available for circulation. An increasing number of merchants, including Dell, have begun accepting payment by way of Bitcoin. The list of goods and services that have been purchased with Bitcoin now includes university tuition, airline tickets, cars, and pizza delivery. Some companies have started paying employees in Bitcoins. Canada in particular has been a world leader in Bitcoin ATM’s: the first Bitcoin ATM in the world … Continue Reading