Canada and the United States have one of the most significant cross-border investment relationships in the world. Robust M&A activity continues to expand between Canada and the U.S., both north bound and south bound. While Canada is heavily influenced by transaction activity, jurisprudence and trends in the U.S., there are important distinctions. M&A practices in North America have converged to a degree, but disparities between market terms on both sides of the Canada-U.S. border continue to exist. This is reinforced by the recent release of the American Bar Association's 2015 Canadian Public Target Mergers & Acquisitions Deal Points Study which analyzed 88 Canadian transactions with a value of C$50+ million announced in 2013 and 2014.1 This study is the second of its kind issued by the ABA, focussing on the acquisition of Canadian public targets. Below we identify some of the important differences between Canadian M&A transactions and the comparable U.S. M&A transactions analyzed as part of the ABA's 2015 U.S. Strategic Buyer/Public Target Mergers & Acquisitions Deal Points Study for transactions announced in 2014:
Target's Representations & Warranties Included | Deal Term | US | Canada |
| No undisclosed liabilities - all liabilities covered | 48% | 79% |
| No undisclosed liabilities - only GAAP liabilities covered | 52% | 21% |
| Compliance with law - no time limit | 15% | 69% |
| Compliance with law - date restricted | 58% | 21% |
| Compliance with law - current | 27% | 10% |
| Full disclosure | 5% | 40% |
Closing Conditions Included | Deal Term | US | Canada |
| Availability of financing | 0% | 25% |
| Appraisal rights - cash only | 0% | 92% |
| Appraisal rights - cash/shares | 13% | 100% |
No Shop - Fiduciary Out | Deal Term | US | Canada |
| Actual superior proposal | 3% | 14% |
| May reasonably lead to superior proposal | 90% | 85% |
Superior Proposal Definition - Assets | Deal Term | US | Canada |
| All or substantially all | 20% | 85% |
| > 50% but < all | 15% | 11% |
| <50% | 3% | 2% |
Superior Proposal Definition - Shares | Deal Term | US | Canada |
| All or substantially all | 9% | 69% |
| > 50% but < all | 15% | 24% |
| <50% | 3% | 2% |
Match Right | Deal Term | US | Canada |
| Included | 99% | 97% |
| 5 business days or more | 28% | 78% |
| 4 business days | 32% | 1% |
| 3 business days | 26% | 13% |
Target Break Fee Triggers | Deal Term | US | Canada |
Naked no vote/
expense reimbursement | 24% | 23% |
| Acquisition proposal & no vote | 81% | 85% |
| Acquisition proposal & outside date | 77% | 53% |
| Change in Board recommendation | 98% | 95% |
Target Break Fee | Deal Term | US | Canada |
| Characterized as liquidated damages | 31% | 88% |
Operating Covenant to Operate in Ordinary Course | Deal Term | US | Canada |
| Consistent with past practice | 69% | 91% |
D&O Insurance - Premium Caps | Deal Term | US | Canada |
| No cap | 5% | 35% |
| 300% | 59% | 25% |
| 200% | 12% | 18% |
1 We were pleased to once again participate in the Canadian Study, with Cyndi Laval serving as Vice-Chair, Stephen McKersie serving as an Issue Group Leader and Ian Palm and Kathleen Ritchie serving on the Working Group.
