Each year in M&A Trends, Torys looks ahead to the trends that will shape business. This year’s 10 trends are accompanied by a range of visual supplements and selected “In the Market” deals—recent transactions connected to the issues discussed in the trends.
The year 2013 saw boardrooms continue to undergo change. A rise in shareholder activism is influencing corporate governance practices, and boards are more active than ever before. In the M&A context, target boards are becoming engaged at an earlier stage. They are meeting more frequently and supervising management’s negotiations more closely, especially where conflicts of interest are prevalent. We expect this focus on robust sales processes will continue in 2014.
With boards becoming more engaged, they will increasingly demand broader rights to protect their fiduciary duties. And we expect deal terms will come under pressure. For related party transactions, we predict that special committees of independent directors will take centre stage in negotiating transactions in order to benefit from the most deferential treatment by the courts and regulators and to help withstand criticism from discontented shareholders.
The tough deal-making environment in 2013 created acquisition opportunities for firms that had access to capital and, in some cases, spurred innovative deal practices. In other cases, it encouraged corporations, particularly in the resources sector, to shed non-core businesses and focus on capital efficiencies – a trend we expect will continue in 2014. Sales of quality assets are drawing interest from a significant number of private equity firms, especially U.S.-based firms. Private equity firms are doing what it takes to win competitive auctions and gain an advantage in this environment, including by building deep sector-specific expertise in-house. The presence of U.S. financial buyers in Canada will also continue to influence deal financing terms, as acquisition financing takes cues from the United States.
Foreign buyers of Canadian targets will encounter stricter tax rules that will have an impact on the planning and structuring of cross-border deals in 2014. Although some buyers may be concerned that they will also face longer regulatory review timelines, we predict that in most cases, these concerns are not warranted.
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