Tag: Canada


M&A at a Glance: 2015 Year-End Roundup

Ariel J. Deckelbaum is a partner and deputy chair of the Corporate Department at Paul, Weiss, Rifkind, Wharton & Garrison LLP. This post is based on a Paul Weiss client memorandum by Mr. Deckelbaum. The complete publication, including figures, is available here.

Continuing the upward trend started in 2013, 2015 was a record-breaking year for M&A activity. Almost every measure tracked in our Year-End Roundup increased sharply both globally and in the U.S.

Globally, overall deal volume as measured by total deal value was $4,741 billion, which is 63.7% greater than in 2014 ($3,506 billion), and 83% greater than in 2013 ($2,591 billion). In the U.S., overall deal volume was $2,285 billion, which is 56% greater than in 2014 ($1,465 billion), and 133.4% greater than in 2013 ($979 billion). Strategic deal volume in 2015 increased from 2014 by 41.8% globally (from $2,620 billion to $3,715 billion), and by 63.9% in the U.S (from $1,040 billion to $1,705 billion). As a result of this growth, the ratio of strategic to sponsor-related deal volume in the U.S. increased from approximately 2:1 in both 2013 and 2014 to approximately 3:1 in 2015. (Figure 1 of the complete publication, available here). Average deal value in the U.S. was 12.1% higher in 2015 than in 2014. The average value of the ten largest “megadeals” in 2015 was approximately $44 billion, which is consistent with 2014, but more than 160% greater than the average value in 2013. (Figure 2.)
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Can Institutional Investors Improve Corporate Governance?

Craig Doidge is Professor of Finance at the University of Toronto. This post is based on an article authored by Professor Doidge; Alexander Dyck, Professor of Finance at the University of Toronto; Hamed Mahmudi, Assistant Professor of Finance at the University of Oklahoma; and Aazam Virani, Assistant Professor of Finance at the University of Arizona.

In our paper, Can Institutional Investors Improve Corporate Governance Through Collective Action?, which was recently made publicly available on SSRN, we examine whether a collective action organization of institutional investors can significantly influence firms’ governance choices. Growth in institutional investor ownership over the last few decades puts these investors in the position to have significant influence, particularly if they can work collectively and coordinate their efforts. But we have very limited evidence whether institutional investors are able to overcome the obstacles to collective action. We focus on the Canadian Coalition for Good Governance (CCGG), an organization of institutional investors whose mandate is to promote good governance. We use proprietary data on its private communications and find that its private engagements between owners and independent directors influenced firms’ adoption of majority voting and say-on-pay advisory votes, improved compensation structure and disclosure, and influenced CEO incentive intensity.

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Foreign Antitakeover Regimes

Daniel Wolf is a partner at Kirkland & Ellis focusing on mergers and acquisitions. The following post is based on a Kirkland memorandum by Mr. Wolf. Related research from the Program on Corporate Governance includes The Case Against Board Veto in Corporate Takeovers by Lucian Bebchuk.

The confluence of a number of overlapping factors—including an uptick in global and cross-border M&A activity, a resurgence in unsolicited takeover offers, the continued flow of tax inversion transactions, and the growth of activism in non-U.S. markets—means that U.S. companies and investors are more often facing unfamiliar takeover (and antitakeover) regimes as they evaluate and pursue offers for foreign targets. While experienced dealmakers are often well-versed in the nuances of friendly transactions with a foreign seller, the defenses available, and sometimes unavailable, to foreign companies facing unsolicited or hostile offers occasionally come as a surprise and complicate the pursuit or defense of these bids.

While a comprehensive survey of antitakeover regimes in various foreign jurisdictions is well beyond the scope of this post, it is instructive to highlight a number of examples where the regime—mandatory or permissive—departs significantly from U.S. practices, even in countries with well-developed legal systems and capital markets.

In a number of jurisdictions, the applicable takeover rules can be seen to facilitate, or even encourage, offerors in taking rejected overtures to the public shareholders:

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Shareholder Involvement in the Director Nomination Process

Stephen Erlichman and Catherine McCall are Executive Director and Director of Policy Development, respectively, at Canadian Coalition for Good Governance (CCGG). This post is based on a CCGG policy publication, titled Shareholder Involvement in the Director Nomination Process: Enhanced Engagement and Proxy Access; the complete publication is available here. Related research from the Program on Corporate Governance includes Private Ordering and the Proxy Access Debate by Lucian Bebchuk and Scott Hirst (discussed on the Forum here).

Proxy access is the corporate governance cause célèbre in the 2015 U.S. proxy season. There has been a concerted push on the part of institutional shareholders and others to convince companies to adopt proxy access, most commonly in the form of a trigger of 3% of outstanding voting shares held for 3 years. Shareholders have responded very favourably to the proxy access shareholder proposals put forward by institutions such as the New York City Pension Funds through its Board Accountability Project. A surprising (to many) number of companies [1] have adopted proxy access on the 3%/3 year basis, including some of the largest, best known and established of U.S. companies, some voluntarily and without a majority approved shareholder proposal on the matter. In Canada, the Canadian Coalition for Good Governance (CCGG), an organization which represents institutional shareholders that collectively own or manage approximately Cdn $3 trillion of assets and which has a mandate to promote good corporate governance at Canadian public companies, has just released its own proxy access policy. The policy, entitled Shareholder Involvement in the Director Nomination Process: Enhanced Engagement and Proxy Access (available here), has been developing for over a year following widespread input and consultation among CCGG’s members and other market participants.

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2015 Canadian Hostile Take-Over Bid Study

The following post comes to us from Fasken Martineau DuMoulin LLP and is based on the executive summary of a Fasken Martineau study by Aaron J. Atkinson and Bradley A. Freelan, partners in the Mergers & Acquisitions practice at Fasken Martineau DuMoulin LLP. The complete publication is available here.

In Canada, there are numerous ways to acquire a public company; however, a take-over bid made directly to shareholders is the only means by which legal control can be acquired without the consent of the target board. Such an unsolicited (or “hostile”) bid is often used to bypass the board and present an offer directly to shareholders after discussions with the target board have failed, thereby putting the target company “in play”.

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Beyond Term Limits: Using Performance Management to Guide Board Renewal

The following post comes to us from Stan Magidson, President and CEO of the Institute of Corporate Directors and Chair of the Global Network of Directors Institutes. This post is based on portions of an ICD publication titled Beyond Term Limits: Using Performance Management to Guide Board Renewal; the complete survey is available here.

The debate over board renewal is moving into sharper focus in Canada. New public company disclosure requirements demand greater transparency on such things as term limits and other renewal mechanisms, and some large investors are sending the implicit message that companies must renew the board or they will seek to do it instead. The ICD agrees that the composition and renewal of the board are vital processes that demand rigour and analysis and are best undertaken by the board pro-actively.

In the paper Beyond Term Limits: Using Performance Management to Guide Board Renewal we seek to provide a framework for boards to build a renewal process that increases accountability and achieves the right mix of skills and experience to create long-term effectiveness.

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ISS Releases 2015 Benchmark Policy Updates

Carol Bowie is Head of Americas Research at Institutional Shareholder Services Inc. (ISS). This post relates to ISS global benchmark voting policy guidelines for 2015.

ISS recently issued updated guidelines for several of its benchmark global voting policies, which will be effective for analyses of publicly traded companies with shareholder meetings on or after Feb. 1, 2015. For the 10th year running, ISS gathered broad input from institutional investors, corporate issuers, and other market constituents worldwide as a key part of its policy development process. The 2015 updates reflect the time and effort of hundreds of investors, issuers, corporate directors, and other market participants who provided input through a variety of channels, including ISS’ annual policy survey, topical and regional roundtables, and direct engagements with staff.

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Canadian Court Takes Hybrid Approach to Poison Pill

The following post comes to us from Berl Nadler, partner at Davies, Ward, Phillips & Vineberg LLP, and is based on a Davies publication by Kevin J. Thomson, Peter Hong, and Gilles R. Comeau.

On May 2, 2014, the British Columbia Securities Commission (the “BCSC”) determined to allow the shareholder rights plan of Augusta Resource Corporation (“Augusta”) to remain in effect for at least 156 days after the announcement of the unsolicited offer by HudBay Minerals Inc. (“HudBay”) to acquire the shares of Augusta. The BCSC order was issued at a hearing held shortly after the continuance of the rights plan was approved by the shareholders of Augusta.

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Shareholder Value Enhanced Through Sufficient Time to Generate Alternative Transaction

The following post comes to us from Berl Nadler, partner at Davies, Ward, Phillips & Vineberg LLP, and is based on a Davies publication by Kevin J. Thomson and Peter Hong.

On April 2, 2014, Osisko Mining Corporation announced a superior alternative to Goldcorp Inc.’s unsolicited offer for Osisko in the form of a partnership with Yamana Gold Inc. resulting in Osisko’s shareholders receiving cash and share consideration with an implied value representing a 22% premium to Goldcorp’s offer. This transaction was announced 79 days after Goldcorp announced its intention to launch its unsolicited offer.

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Majority Voting Finally Arrives in Canada

The following post comes to us from Stephen Erlichman, securities law partner at Canadian law firm Fasken Martineau and Executive Director at the Canadian Coalition for Good Governance, a nonprofit corporation whose members are most of the largest pension funds, mutual fund managers and other money managers across Canada.

Thursday February 13, 2014 was an important day for shareholder democracy in Canada. We know that athletes train many years in order to reach the Olympics, but the Canadian Coalition for Good Governance (CCGG) also has worked publicly and behind the scenes for many years to bring majority voting to Canada. Finally, last week the Toronto Stock Exchange (TSX) agreed to adopt a listing requirement effective June 30, 2014 pursuant to which TSX listed companies (other than those which are majority controlled) must adopt a majority voting policy which requires each director of a TSX listed issuer to be elected by a majority of the votes cast with respect to his or her election other than at contested meetings.

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