Torys Business Brief: Preparing for a COVID-19 recovery

| Rudyard Griffiths

Torys Business Brief focuses on key issues and actionable knowledge for businesses to emerge from the COVID-19 crisis resilient and well-positioned for the future. Each episode of Torys Business Brief features in-depth, accessible interviews with Torys lawyers, moderated by Munk Debates convener Rudyard Griffiths. These episodes are accredited for CPD purposes.

What’s waiting for businesses on the other side of the COVID‑19 crisis? This week on Torys Business Brief, Rudyard Griffiths speaks with Torys partners Mike Amm and Krista Hill, who share what they are seeing on the ground working with business leaders throughout the outbreak. This episode discusses the top issues on leaders’ minds as they look to anticipate post-pandemic realities: the dealmaking landscape, the role of government as a major investor and more.

A full episode transcript follows.

Rudyard Griffiths (00:02): Hello and welcome to Torys Business Brief. I'm Rudyard Griffiths. You may know me as the convener of the Munk Debates where we bring together some of the world’s brightest minds and sharpest thinkers to debate the top issues of the day.

As the host of Torys Business Brief, my role is to provide you, the listener, with compelling conversation about the legal challenges the COVID‑19 pandemic presents for businesses and business leaders. We’re all taking stock of the ongoing effects of the pandemic. As the world continues to respond, businesses have wide ranging issues to consider. This podcast will equip you with actionable knowledge your business can use to emerge from the current crisis resilient and ready to thrive.

RG (00:44): To do this, I’ll be drawing on the expertise and insights of the lawyers working at the firm named corporate law firm of the year by Chambers and Partners, Torys LLP.

RG (01:24): On today’s business brief, we speak with partners, Mike Amm and Krista Hill about the issues business leaders must think through now, in the heart of the crisis, in order to come out of the pandemic in a position of strength.

Mike Amm is a partner at Torys focusing on M&A, corporate finance, and governance matters including cross-border transactions and Krista Hill is a partner and co-head of Torys infrastructure practice. Krista has expertise in M&A and project development both here in Canada and internationally. Mike, Krista, welcome to Torys Business Brief.

Krista Hill (02:04): Thank you. Welcome.

Mike Amm (02:04): Thanks, Rudyard.

RG (02:05): Well look, let’s dive right in here and I think we want to start off with both of you kind of looking at the big picture maybe starting with you, Krista, what are you hearing from your clients and the extent to which ... What are the top of mind issues for them as we move out of that kind of acute crisis phase into the challenge of kind of managing this pandemic and their response over a longer term period?

KH (02:34): Well, we’re starting to see, I think generally across Canada in many of the provinces we appear to have peaked in terms of the pandemic. We are starting to see some light at the end of the tunnel. And so, the conversation shifted a bit I think in the last few days and we see governments beginning to consider lifting some of the social distancing measures in the weeks to come. Really all levels of government in Canada are starting to talk about this. But as you would expect, we’re seeing a very cautious approach being voiced. So, I’d say businesses, our clients are also really beginning to prepare for their workforce to return on a part-time basis or full-time basis. What that looks like really remains to be seen, but we are seeing the businesses really starting to envision what that could look like for them.

RG (03:35): Thanks Krista. Mike, what’s your sense of, in terms of the corporations and CEOs that you’re talking to about their view on the pace of this recovery? Are they anticipating a quick bounce back? Are they planning for a longer recovery? Give us a little sense of the temperature out there in terms of the clients that you’re talking to.

MA (03:58): Rudyard, I think there’s a quite a lot of certainty about how the reopening and the recovery will occur. I think many business leaders are expecting that there will be an incremental return to normal operations on a gradual basis with some of the social distancing restrictions being lifted, some being kept for a period of time. They do recognize that we’re in for a longer-term return to normal until there is a vaccine available or some broader social immunity that’s established. I think there’s a general realization that the recovery will be a longer and staggered process with some bumps in the road along the way.

KH (04:59): I agree with all of that. And I think what’s interesting is this idea of return to "normal" because I do think that we probably are going to see a new normal coming out of this. I mean we’ve had millions of people pick up one day and go home and start working at home the next day and it’ll be interesting to see how much of that carries over in this kind of forced trial period. If it has worked out for your business, we may see more of that continuing to go on as a way to achieve the social distancing that will still be required.

RG (05:41): Mike, do you sense that a new normal is really a big part of how businesses and business leaders should be thinking about this? I guess I hear a lot of people talking about this idea of 80%. We’re going to get back to 80% and I guess I’m trying to figure out what does that practically mean? Does that mean 80% of what it was before or 80% of something that’s really quite new and could have some unintended consequences but maybe also some unintended opportunities?

MA (06:12): I think you’re quite right Rudyard, that the 80% is really referring to something that’s a bit new that’s not exactly what was in place prior to the crisis. Business leaders are thinking about staggering the return of their workforce. Perhaps they don’t all come back at the same time. Perhaps there are shifts that are on or shifts that are off for a period of time. Certainly, some of the social distancing requirements in terms of gatherings and sizes of meetings that can be held will be affected. Workers who can work from home will probably continue to do that for a little bit longer than what we might expect and certainly I think there’s going to be a big change in travel.

MA (07:03): Certainly, international travel restrictions are likely to stay in place for some time and I think that is going to really determine the character of how we recover and how we reopen, but it certainly won’t be in the short term back to pre-crisis normal. It will be something new that will be more scaled back and that will create more challenges for businesses in terms of how they navigate that and implement their strategies in a less than 100% economy.

RG (07:44): Krista, just out of curiosity, what is this been like for you? Managing a busy practice, doing that in a very different way than you were six weeks ago. What is your new normal look like and is that something that you feel you can work with or there’s some real challenges there? What’s it like for you?

KH (08:07): Well, certainly there have been challenges. My spouse is also a practicing lawyer. We have 13-year-old twins that are doing online homeschooling. So, the four of us during school days each go to separate rooms and our internet certainly is getting the full load during those times. But it’s interesting, I’ve practiced for over 25 years and thought about if this had been ... Well certainly when I started practicing in the mid-90s we wouldn’t have been able to do any of this. We would have just gone home and neither we nor our clients would have been able to carry on pretty much in any fashion. But even 10, 15 years ago the technology was nowhere near advanced and I think we would have really struggled.

KH (09:06): To a certain extent that this happened in 2020 I think has allowed a significant part of the economy to continue at home. Of course, nobody wants to be in this situation. And the one thing we are quite concerned about is the mental health of our people, our employees, our clients, our families as it goes on, prolonged effects and can affect people’s mental health.

RG (09:40): Hi, thanks for listening to Torys Business Brief. For more information on how organizations and business leaders should be addressing the challenges of the COVID‑19 pandemic, visit you’ll find a wealth of in-depth resources featuring the analysis and insights of Torys lawyers. Again, that website is

RG (10:06): Let’s move on and start talking about some kind of practical advice and insights that both of you can offer listeners in terms of, as we’ve discussed moving out of this initial phase of reaction into a big government policy response to this crisis, new regulation, new opportunity, but also some new risks to manage and maybe, Michael, if I could start with you just to give us a sense as our kind of securities and markets expert on this edition of the podcast, what are you seeing in terms of best practices around security disclosures, other public company issues related to a very fast changing marketplace?

MA (10:53): Sure Rudyard. I think that our clients, almost universally, the first stage of their reaction to the crisis was to really try and deal with questions from the market and investors and quite frankly their own organizations about the initial impact of the pandemic on their business. Whether that is the safeguarding our employees through enhanced safety practices and distancing, whether it was borrowing under credit lines and ensuring liquidity, whether it was other business continuity plans. It was really important at the outset for management teams to demonstrate that they were taking all the right steps and proactively addressing what they could as a very uncertain situation.

MA (11:58): One of the particular issues that came up shortly after that was how public companies would treat their guidance and in many cases they had released a forward looking guidance for financial performance well before the shutdown occurred and very quickly many of them suspended or withdrew that guidance really on the recognition and realization that it was going to be difficult to figure out exactly how the crisis would unfold and would affect them.

MA (12:38): Another sort of big issue that a lot of public companies have been dealing with in the light of all of this has been their approach to their dividends. Do they maintain their dividends, do they cut their dividends? It’s been a tough thing and a very sensitive topic because they do want to show confidence in their business. They do want to balance the interests of their employees and workforce who may be subject to cut backs and they certainly want to preserve liquidity. So many issuers have been trying to grapple with and balance those concerns and each one has had to make a call on that. That is unique to its own circumstances and we certainly have seen many companies reduce their dividend payouts or cut them. And as a related point there’s been a lot of focus on do issuers continue with share buyback programs?

MA (13:44): And I think that those have been much more sensitive in terms of a lightning rod of should an issue where be considering using funds for repurchases given the impact and uncertainty of the crisis. And again, there’s no single answer that applies to all issuers. It’s a highly contextualized balancing act to get to the right answer but also be sensitive to the sort of market and social implications of those decisions.

RG (14:22): Krista, you are kind of resident M&A—Mergers and Acquisitions—expert on this edition of the Torys Business Brief podcast. So, we went into this crisis with a fairly kind of strong and active M&A environment in Canada. Give us a sense of where we’re at now, but also maybe more importantly what your feelings are about M&A going forward for the rest of the year. This is a moment where people are now kind of saying, "Whoa, we need to see how this crisis is going to play out before we’re going to make big decisions on acquisition or sale of assets."

KH (15:03): Well, when the pandemic really hit full force in North America and we started our social distancing measures, I’d say if some M&A transactions did get put on hold, some temporarily, some perhaps permanently, others have continued, obviously there’s definitely been a slow down just as companies are focused as they should be on the managing the effects of the pandemic. But I think coming out of the pandemic when we start all heading back to work in some form or another, I do think we are going to see increased M&A. Even we can see that now, but I think it will be a little bit different. Like I think we’re going to see some sectors may actually need to consolidate coming out of the pandemic. Others might really need capital given what they’ve gone through in the prior few months. I think we might see target companies having to make decisions faster and quicker.

KH (16:20): I think interestingly we’ve seen, and this is not just a Canadian trend, but an international trend where governments are concerned about the effects of the pandemic and how it’s affected businesses in their countries and are concerned about foreign investors coming in and buying up companies that perhaps are at the bottom end of the cycle and might be easily snapped up. We first saw this, Australia announced this in March that they were going to apply much greater scrutiny to foreign investment as a result of the pandemic.

KH (17:06): And most recently we’ve seen Canada make a similar announcement, that the Canadian Minister of Innovation, Science and Industry announced that certain foreign investments into Canada will be subject to enhance scrutiny under our Investment Canada Act. And this new policy will apply to investments in public health, the supply of critical goods and services or that are undertaken by investors with ties to foreign government. Six months ago, the deal might’ve received very little scrutiny if any. Now I think you really need to, very early on in considering an acquisition if there is going to be foreign investment, to consider how this might apply to your transaction.

RG (18:33): Talking about investment, Mike, we know that the Government of Canada will most likely become a major investor, possibly in multiple large publicly traded companies as a result of this crisis. Companies that simply can no longer access the capital, or no longer have a business model as a result of the types of social distancing and social control that may have to continue for months. What type of advice and what are you hearing from your clients related to that piece of this puzzle? I guess we all know that if you’re a public company, a private company, if you take in large amounts of government funds in form of a bailout, there’s very significant implications for control, for your capital structures. Again, what’s kind of top of mind for you when it comes to this potentially large-scale government involvement in corporations and markets?

MA (19:36): I think you’ve raised some very good points there. I think the reality is given the impact and the challenges that are going to be faced by many companies in Canada, more support and direct support is likely to be needed. And you’re quite right, there’s lots of considerations that come with that type of assistance. I think the companies and their boards are thinking of it in the sense of what are our alternatives, can we raise the money in the public markets, if we can raise it in public capital markets worth and private investors in particular to try and rebalance the debt equity ratios that have been skewed by the additional borrowings during the crisis.

MA (20:30): They will try to do that first most likely and if they can’t do that to the scale required, they may well look to government assistance and that comes with a whole host of considerations around how those businesses will operate going forward with a significant government investment. Whether that is debt, whether that is equity, whether it’s some other type of support measure and certainly is a political reality. There will be, for those firms that do take significant government assistance, there will be questions and heightened considerations around what’s happening with their workforce, what’s happening with their dividends, what’s happening with their executive compensation and that’s certainly what has played out in government support in more localized and specific situations in prior years prior to the crisis.

RG (21:34): Krista, do you have some thoughts on that too, just in the context of how the M&A environment is potentially affected by government suddenly stepping in as a major purchaser of equity or debt within public markets and on the part of specific companies?

KH (21:52): Yeah, I mean, I think we saw this a bit in obviously the 2008 financial crisis where we saw government step in to save or bail out what we’re seeing as critical industries. In particular, the auto sector. We saw this both in the U.S. and Canada, but you’ll have seen obviously with the auto sector that eventually the governments sold their stakes and you withdrew from being an investor. So, I don’t think there’s likely a long-term desire of the government to own stakes or entire businesses. So, I imagine it would be viewed as a short to medium term, stop gap to assist businesses to come out of this, the effects of this pandemic and be successful viable operations on the other side.

MA (22:55): There’s one point I’d like to jump in here on and that is that sort of segue as well from what Krista was saying is that I think one thing that we’ve learned through this crisis and certainly that many of our provincial and the federal governments have recognized and are talking about is the importance of supporting domestic Canadian supply chains, especially for critical products. Whether it’s personal protective equipment, whether it’s food supplies, whether it’s other basic manufacturing, and that really has been a bit of a shift, quite a bit of a shift. And what will be very interesting to see is the extent to which both government assistance and government encouragement and support and the sort of regulatory framework may shift a little bit towards supporting these critical domestic supply chains and how that will impact our clients in the opportunities that that will create for them domestically that may not have been there before.

RG (24:11): Thanks Mike. That’s a good segue to where I want to take our conversation in our remaining minutes together and that’s to the longer-term positioning of Canadian businesses in the context of let’s hope will be a sustained recovery. Could you give some thoughts too about what you think in terms of some of these longer term challenges possibly around trade, around just the nature of a world that has been severely disrupted and that world that went into this crisis with some pretty big geopolitical tensions between Canada’s probably most important markets in terms of future current growth, the United States and China.

MA (24:57): I think coming out of this crisis, the one thing that our population has seen and reacted to is some of the shortfalls of globalization. Certainly, the response around the world has not always been coordinated. The issues around some countries taking steps to get preferential access to PPE and other critical supplies has created, I think a bit of a skepticism of globalization and its impact, which will change the way that our population and to some extent our government will look at this going forward.

MA (25:46): Clearly international trade is critical to Canada. As a middle power, we really do depend on large and successful export markets. I think we’re likely to see those markets resume their pace more slowly than we expected and it’s likely that we’ll see at a global level trade that is perhaps less free and open than it was before. And in particular it brings into focus some challenges that we’ve seen with two of our largest trading partners, China and the United States. And it’s going to be really important for us to manage those relationships and to broaden our trade focus so that we do have the export markets available to us and all of this is going to impact the strategy of our companies that are based on exports and our views on foreign investment and trade issues. And we’re going to have to navigate those carefully both in the business community and through governments to position ourselves for success going forward.

KH (27:08): Just building on what Mike said, I do think that we have seen over the last 20 years significant growth in pools of Canadian capital that are doing international acquisitions, international investments. There’ll always be that tension of ... To the extent that Canada becomes more closed off or more protectionist, it doesn’t just affect potentially Canadian businesses that are manufacturing goods and exporting them. It can have knock on effects and affect views on foreign investment. I imagine any decisions made in this regard will obviously have multiple considerations, but either we’ll want to tread carefully to make sure that we’re not unintentionally also causing other knock on effects in other industries.

RG (28:14): Well, Mike, Krista, I want to thank you for a really thoughtful and far-ranging discussion. You’ve provided us with I think some practical actionable insights that can guide our future decisions together. So, on behalf of Torys Business Brief, appreciate both of you taking the time to come on the program today.

KH (28:33): Thanks Rudyard.

RG (28:35): Well, that wraps up this episode of Torys Business Brief. You can find more of Mike and Krista’s analysis on this issue in their article “Emerging from the first wave of COVID‑19: key recovery considerations for Canadian businesses”. You’ll find this piece by visiting

On our next podcast, we’ll meet with Torys partner Cornell Wright, and prominent Canadian corporate director and Torys chair, Robert Prichard, to discuss important governance issues for boards and directors as they help companies stay the course through the pandemic.

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