What’s Market: Legal Trends in Canadian M&A Transactions (2017 Report)

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Practical Law Canada completed its 2017 issue of What’s Market: Legal Trends in Canadian Private M&A Transactions. This report analyzes 150 purchase agreements signed in 2015 and 2016 and filed publicly on Canada’s SEDAR platform or the U.S EDGAR platform.

Transactions reviewed in the 2017 Report range in deal size from $5.0 million to $2.65 billion. The report reviews trends regarding key provisions, including:

Escrows and Holdbacks
Nearly 40% of the deals surveyed for the 2017 Report used one or the other.

Purchase Price Adjustments
65% of deals included some form of purchase price adjustment. The top three adjustments, in order were: working capital, effective date adjustments, and debt.

Earn-outs
Nearly 17% of the deals surveyed contained some form of earn-out.

Qualifiers
92% of the deals surveyed included a definition of the term “knowledge” for such purposes.

Representations and Warranties
- Full disclosure – Full disclosure representations appeared in 33% of the deals surveyed.
- Compliance with laws – 87% of the deals surveyed included some form of a compliance representation.
- Sufficiency of assets – 39% of the deals reviewed included a sufficiency of assets representation.

Covenants
Several key covenants were noted:
- Commitment that the Seller will operate the business or maintain the assets in the ordinary course. This covenant was included in 94% of surveyed transactions.
- Commitment to preserve the goodwill of the purchased business – included in 48% of the deals.
- Interim period compliance covenant appeared in 39% of the deals surveyed.

Indemnification
The 2017 Report examines several key indemnification topics, including: Survival periods, survival period carve-out, types of damages, indemnification baskets, and indemnification caps.

For the full detailed summary of findings, download the white paper What’s Market: Legal Trends in Canadian Private M&A Transactions.

Practical Law Canada provides easy access to deal summaries and filings, custom comparative reports, and topical analyses for subscribers, based on thousands of Canadian transactions. www.practicallaw.ca