The PE implications of Torys’ M&A Top Trends in 2014

Torys LLP this week published its much-anticipated M&A Top Trends 2014. My colleagues and I thought it would be helpful to highlight for peHUB Canada readers some of the top 10 trends discussed in the report that are most relevant to private equity activity in the coming year.

• The tough deal-making environment in 2013 created acquisition opportunities for businesses that had access to capital and, in some cases, spurred innovative deal practices. In other cases, it encouraged companies, particularly in the resources sector, to shed non-core businesses and focus on capital efficiencies—a trend we expect will continue in 2014.

• Sales of quality assets are drawing interest from a significant number of private equity firms, especially U.S.-based firms. U.S. sponsors coming to Canada have been influencing Canadian acquisition financing, and we expect this trend will continue in 2014.

Torys 3• As competition for proprietary deals continues, private equity firms are doing what it takes to win private company auctions and gain an advantage. For example, financial buyers are increasingly using industry specialization to differentiate themselves in competitive sales processes, forming an emerging breed of hybrid-strategic buyers.

• Timing and certainty of closing are other factors buyers are using to differentiate themselves. In some cases, buyers are pursuing transactions on a “sign and close” basis. In other instances, they are taking out representation and warranty insurance to reduce their indemnification demands on the sellers.

• From the sellers’ perspective, we expect to see target boards focus on building a robust sales process that shows fairness and satisfactory price discovery. This is a natural outcome of improved governance practices, shareholder activism, more extensive disclosure and recent cases where sales processes have been challenged.

To read more about the top 10 trends that will influence M&A activity in the year ahead, and download a copy of Torys’ report, please visit www.torystrends.com.

Michael Akkawi is a partner at Torys LLP, and head of the firm’s Private Equity Group. Sophia Tolias, an associate at Torys who is focused on M&A and private equity transactions, was a contributor to this column. Both Akkawi and Tolias are based in Toronto.

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