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Category Archives: Public M&A

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Canada’s early warning rules get tougher in May

Canadian Securities Administrators adopt enhanced disclosure, retain 10% reporting threshold

Posted in Canadian Market Entry, Contractual Matters, Private Equity, Private Transactions, Public M&A, Shareholders, Strategy

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

Background

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

Canada’s New Take-Over Bid Rules Seek to Level the Playing Field

The Canadian Securities Administrators confirm the adoption of a harmonized Canadian take-over bid and issuer bid regime (including a 105 day minimum bid period), effective May 9, 2016

Posted in Canadian Market Entry, Contractual Matters, Private Equity, Private Transactions, Public M&A, Shareholders, Strategy

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

Rethinking Representation and Warranty Insurance in Canada

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

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

Canadian Representation and Warranty Insurance FAQ

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

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

Cybersecurity and M&A – Part Three: Cyber Insurance

Posted in Contractual Matters, Private Transactions, Public M&A

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

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

Posted in Public M&A, Shareholders, Strategy

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.… Continue Reading

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

Posted in Canadian Market Entry, Public M&A, Shareholders, Strategy

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]Continue Reading

Universal Proxies Coming to Canada? The CCGG Makes Its Case

Posted in Public M&A, Shareholders

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 … 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

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

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 … 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

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

Beyond Boxes: Books and Records in the (not so) New Digital Age

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

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

Earning Earn-outs: new decision affirms the dangers of not negotiating objective measures and standards in earn-out provisions

Posted in Public M&A

Earn-out provisions are intended to provide a “win-win” scenario for buyers and sellers to maximize their post-closing returns. However, they can also lead to post-closing controversy and litigation. For instance, what happens when the buyer’s actions divert, defer or entirely prevent an earn-out payment from being triggered? The Delaware Supreme Court’s recent decision in Lazard Technology Partners, LLC v. Qinetiq North America Operations, LLC[1] provides a cautionary tale relating to the drafting of earn-out provisions in M&A transactions.

As discussed in a previous blog post, earn-out provisions are negotiated to bridge the valuation gap between buyers and sellers. … Continue Reading

Keeping it Clean

Clean Teams: a way to keep your options open in M&A transactions

Posted in Public M&A

In the context of M&A transactions, the use of “clean rooms” (i.e., data rooms containing commercially sensitive information concerning a target only available to clean teams) and “clean teams” (i.e., isolated work groups often made up of third party experts having access to clean rooms) to isolate commercially sensitive information concerning a target from the prospective bidder(s) can sometimes help clear the path to a negotiated deal.… Continue Reading

“Golden Leash” arrangements secure ISS’s cautious nod

Posted in Public M&A, Shareholders, Strategy

After taking a break last proxy season, “golden leash” arrangements are back in the spotlight. A few days ago, Institutional Shareholder Services Inc. (“ISS”) gave “cautious support” to so-called “golden leash” arrangements between Third Point LLC and its two nominees to the board of Dow Chemical Co.… Continue Reading

Four Due Diligence Issues in Insurance M&A Transactions

Posted in Private Transactions, Public M&A, Strategy

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

Harnessing Social Media in Proxy Contests: Opportunities and Legal Challenges

Posted in Private Equity, Public M&A, Shareholders, Strategy

Social media has very seldom been leveraged in Canadian proxy contests. One reason for this may be the lack of knowledge about its full potential.[1] To address this reason, our first post in this series reviewed social media’s impact on public discourse and proxy contests in the U.S. and Canada.

Another reason for the limited use of social media in Canadian proxy contests is the lack of specific regulatory guidelines. Unlike in the U.S.,[2] in Canada there is no regulatory guidance on the use of social media to communicate with shareholders. This article reviews some legal considerations applicable … Continue Reading

Harnessing Social Media in Proxy Contests: Not Just “Social”

Posted in Private Equity, Public M&A, Shareholders, Strategy

Social media has revolutionized how stakeholders receive information about companies. An estimated 1.79 billion people used social media in 2014; 2.44 billion will by 2018.[1] Despite such staggering statistics, social media has not been leveraged to its full potential in Canadian proxy contests. According to a 2013 survey,[2] a majority of directors on the boards of Canada’s largest companies acknowledged that they did not know much about social media.

This is the first of two posts about harnessing social media in Canadian proxy contests. It reviews the use of social media to influence public discourse and proxy contests … Continue Reading

CSA Releases Amendments to the Take-Over Bid Regime

Posted in Private Equity, Public M&A, Shareholders, Strategy

On March 31, 2015, the Canadian Securities Administrators (CSA) published a CSA Notice and Request for Comment with respect to proposed amendments to Multilateral Instrument 62-104 – Take-Over Bids and Issuer Bids (MI 62-104) and changes to National Policy 62-203 – Take-Over Bids and Issuer Bids.

The proposed amendments codify and in some cases clarify the concepts previously announced by the CSA in September 2014 and result in some significant changes to the take-over bid regime. Please see our detailed report Amendments to Take-Over Bid Rules Will Deliver More Support to Boards for an in-depth review of some of the … Continue Reading

Good Faith, Honest Performance and M&A: Top 5 Takeaways Stemming from Bhasin v. Hrynew

Exploring the impact on Canadian mergers and acquisitions of the Supreme Court of Canada’s recent recognition of a new common law duty of honest performance

Posted in Contractual Matters, Private Transactions, Public M&A, Strategy

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

New 2015 Competition Act Merger Notification Threshold

Posted in Private Equity, Private Transactions, Public M&A

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

5 Corporate Governance Tips to Reduce Risk in the M&A Process

Posted in Private Transactions, Public M&A, Shareholders, Strategy

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

New 2015 Investment Canada Act WTO Review Threshold

Posted in Contractual Matters, Private Equity, Private Transactions, Public M&A, Shareholders, Strategy

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 2015 Proxy Season: Glass Lewis and ISS Canadian Proxy Voting Guidelines Updates

Posted in Public M&A, Shareholders, Strategy

With the 2015 Proxy Season close at hand, Glass, Lewis & Co., LLC (Glass Lewis) and Institutional Shareholder Services Inc. (ISS) recently released their updated Canadian proxy voting guidelines. Changes and clarifications have been made to their guidelines in such areas as advance notice policies and by-laws, shareholder rights plans and majority voting.… Continue Reading