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%

Footnotes

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.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.