November 17, 2017
Canada’s new takeover bid regime has impacted the strategic tactics used during negotiations, specifically the use of the “poison pill.” Poison pills, as discussed in this Torys insight, were used by target boards to “buy more time to seek an alternative offer or create negotiating leverage” during hostile takeovers.
Gone are the days of the poison pill as the new takeover regime has given target boards 70 additional days to reassess negotiations and seek alternative bidders. An article in Lexpert’s latest issue focuses on the impact of the takeover bid regime changes, which they discussed with partner and M&A co-head John Emanoilidis. John said, “poison pills are redundant now, because they amount to a tactic used to buy time, something the regulators have now provided.”
However, other defensive tactics are rising as a replacement – an outcome John said was to be expected following the poison pill being rendered superfluous under the new regime. One defensive tactic gaining popularity is the tactical private placement, which predates the poison pill strategy and has re-emerged.
While the new regime has not altogether deterred hostile bids, it has certainly impacted negotiation tactics and it is expected to continue doing so.
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