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The Spin on Spin-Offs (Part 3)

A Valuable Tool to Unlock Shareholder Value

Posted in Public M&A, Shareholders, Strategy

In our recent series on corporate-spin off transactions, we focused on why a company should consider a spin-off, and how the spin-off could be implemented. In this post, we briefly outline some of the common risks that a company should be aware of before pursuing the spin-off.

Even for seasoned practitioners, a great deal of planning is required to effectively “spin-out” a part of an existing business and the road to completion is rife with challenges and legal complexities. First and foremost, a failure to adequately address the division of assets and liabilities as between the Parent and Spinco could … Continue Reading

The Spin on Spin-Offs (Part 2)

A Valuable Tool to Unlock Shareholder Value

Posted in Public M&A, Shareholders, Strategy

In our last post, we outlined some of the reasons why corporate spin-offs are used. In this post, we address some of the most common methods used to implement the corporate spin-off.

How do I implement it?

In some cases, a Canadian public corporation seeking to distribute shares of Spinco to its shareholders will be able to do so by a reorganization known as a “butterfly transaction”.  The advantage of a butterfly transaction is the deferral of Canadian income tax both at the corporate and shareholder level. The tax rules governing butterflies are highly complex and various restrictions, including … Continue Reading

The Spin on Spin-Offs (Part 1)

A Valuable Tool to Unlock Shareholder Value

Posted in Public M&A, Shareholders, Strategy

On March 6, 2013, Time Warner Inc. issued a press release announcing plans to implement, courtesy of a spin-off transaction, a “complete legal and structural separation of Time Inc. from Time Warner.”

The proposed spin-off highlights an increasing trend among public companies in the face of tough market conditions – the transformation of what are usually large corporations not by building up their assets, but by efficiently siphoning them out. Time Warner would know, too – in the past decade, the company has used the vehicle of the spin-off to divest several of its major divisions, including the spin-off of … Continue Reading

Reverse Takeovers – An Alternative Exit Strategy

Reverse takeovers may be a worthwhile alternative for business owners looking for an exit strategy, especially during a cool IPO market

Posted in Public M&A, Shareholders, Strategy

What is a reverse takeover?

When evaluating possible exit options, an alternative to the typical IPO or sale transaction is a reverse takeover transaction (often referred to as an “RTO”). An RTO is a type of sale transaction where the shareholders of a company, often an unlisted entity, sell the company to a publicly listed issuer (“Pubco”) in exchange for shares of Pubco, which results in an effective change of control of Pubco. An RTO allows shareholders of an unlisted company to effect the sale of 100% of the business while maintaining a continuing indirect interest in the business and … Continue Reading

The Rising Trend of Reverse Break Fees

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

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

Overseas Financing and Acquisitions: The Increasing Importance of Anti-Corruption Due Diligence

Posted in Private Transactions, Public M&A, Strategy

The recent commitment of the Canadian government to the enforcement of the Corruption of Foreign Public Officials Act marks a new period in foreign investment transactions and necessitates a re-evaluation of the legal due diligence strategies employed by financiers and prospective acquirers alike, as well as by issuers and other companies operating in foreign jurisdictions in general.

Corrupt practices can result in criminal charges, unlimited monetary penalties, reputational consequences, derivative shareholder claims and class actions, and may even undermine the rights and benefits to which a company is entitled in a foreign jurisdiction.

Due diligence conducted in advance of foreign … Continue Reading

What’s the Best Way to a Billion: M&A or IPO?

Posted in Public M&A, Strategy

Unless you’ve been living under a rock for some time, you’ll recall the exchange in The Social Network between Sean Parker, Mark Zuckerberg and Eduardo Saverin: “this is no time to take your chips down. A million dollars isn’t cool. You know what’s cool? A billion dollars.”

If you’re an entrepreneur or investor with audacious plans and ambition – it’s on your mind. What’s the best way to a billion dollars? Is it through an initial public offering or an M&A sale transaction? These are good questions to have to ask yourself if your business is growing fast and you’re … Continue Reading

7 Tips For Hiring the Right Investment Banker

Posted in Public M&A

So you are on the board of a public company that has decided to explore strategic alternatives, including a potential sale of the company. Or perhaps you are the CEO of a company who is looking at a significant strategic acquisition or divestiture of a business unit or division. You have a great team of lawyers at your disposal to advise on legal and structuring matters but you need to find the right investment banker to provide sound financial advice, including potentially a fairness opinion.  Here’s a list of things to look for that I’ve developed with significant input from

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Eight Things to Do Before Selling Your Business – Part 2 of 2

Posted in Private Equity, Private Transactions, Strategy

In my last post, I focused on getting your house in order as a first big step in preparing your business for a possible sale.  Here are four more things you can do to maximize the value of your business.

  1. Understand Your Rights and Obligations – If you have one, now’s the time to dust off your shareholder agreement. Most shareholder agreements will set out important rights and obligations that apply during a sale process, and will be particularly important if some shareholders do not support the transaction. These agreements can be dense and complex, so if it doesn’t
  2. Continue Reading