Torys’ M&A Top Trends in 2015: What they mean to private equity pros

Torys LLP has released its much-anticipated M&A Top Trends 2015 report.

Like past annual reports, it scopes out the major themes that we expect will influence deal activity in the coming 12 months.

Of course, the state of mergers and acquisitions is always of crucial importance to private equity and venture capital investors, especially now that dealmaking in Canada is on the upswing.

For this reason, my Torys’ colleagues and I have identified some key findings of the 2015 report that we believe will be of particular interest to readers of peHUB Canada.

Torys 2015

Co-investments: We expect institutional investors’ strong demand for co-investment opportunities to continue and accelerate in 2015. A number of factors are contributing to this trend, including the complementary nature of this strategy to passive fund investments, the potential for enhanced return, and the increased sophistication of institutional investors to assess such opportunities.

Locked-box deals: In private M&A, sellers benefiting from the market’s recent frothiness may seek use of the “locked-box” deal structure as an alternative to conventional purchase price adjustment mechanisms. Under the “locked-box“ approach, the purchase price for a target is fixed at signing, calculated as of an effective date (typically, the date of a recent balance sheet). From that date forward, the risks and rewards of the target business transfer to the buyer. This alternative pricing mechanism is gaining popularity, especially in the context of “hot” auctions..

Japanese foreign investment: We expect North America to continue to draw interest from Japanese investors who are looking to overseas markets for investments that can contribute to their long-term growth and sustainability. A host of factors suggests that their interest in M&A opportunities outside Japan will continue in 2015.

Renewable M&A: The renewable energy sector represents a natural fit for the growing pool of acquirors seeking sustainable long-term assets, positioning the sector well for ongoing M&A activity in 2015. As the world as a whole increasingly focuses on climate issues, the trend tilts toward a rising use of renewable energy which in turn will support M&A activity in this sector.

Aboriginal relationship-building: For resource plays, we expect that buyers of Canadian resource development targets will pay increasing attention to whether appropriate consultation and accommodation have occurred with local aboriginal communities in light of recent court rulings.

To read more about the top 10 trends that will influence M&A activity in the year ahead, and to download a copy of the full 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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