Leveraging Technology for the Canadian Private Target Mergers & - - PowerPoint PPT Presentation

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Leveraging Technology for the Canadian Private Target Mergers & - - PowerPoint PPT Presentation

Dec 21, 2022 154 likes •459 views

Osler, Hoskin & Harcourt LLP Leveraging Technology for the Canadian Private Target Mergers & Acquisitions Deal Points Study ABA MARKET TRENDS COMMITTEE MEETING Andr Perey Natalie Munroe March 2019 LEVERAGING TECHNOLOGY FOR THE

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Osler, Hoskin & Harcourt LLP

André Perey Natalie Munroe

Leveraging Technology for the Canadian Private Target Mergers & Acquisitions Deal Points Study

March 2019

ABA MARKET TRENDS COMMITTEE MEETING

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LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

Background

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LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

Previous Studies

  • Manual review of acquisition agreements
  • Complete questionnaires in Word

(100 acquisition agreements = 1,000 Word documents)

  • Compile information from Word documents in Excel
  • Aggregate and produce report
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LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

Kira Systems

Leveraging

andHighQ

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LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

  • A software that analyzes and

extracts certain information from documents

  • Enhances legal due diligence
  • Extranet that streamlines

collaboration, legal service delivery, legal operations, client engagement and much more

  • Plan, organize, track and

complete work more efficiently and intelligently

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Kira Systems

  • Set up a worksheet for each questionnaire.

LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

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LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

Kira Systems

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Kira Systems

  • All worksheets were applied to each acquisition agreement

LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

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Kira Systems

  • For each worksheet, exported the information extracted in Kira and

uploaded to HighQ

LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

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HighQ

  • Two main tabs in HighQ: Questionnaires and Results

LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

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HighQ

  • Each questionnaire was built as an interactive questionnaire in HighQ
  • As a reviewer, you would only see the folder for the questionnaire assigned to you

LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

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HighQ

  • Once you enter the folder, you are taken to the first acquisition agreement
  • The questionnaire is on the right-hand side

LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

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HighQ

  • After the general information, reviewers answer the specific

questionnaire

LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

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LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

HighQ

  • To ensure that the review

could be tracked, reviewers would indicate by checkmark

  • nce their review was

complete

  • We included notes boxes to

give reviewers an ability to communicate with other reviewers

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HighQ

  • The “Results” tab shows the results from the review of each

questionnaire for each acquisition agreement

LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

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HighQ

  • The results were exported to Excel and aggregated in order to

generate the study results

LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

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LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

Deal Points

Study

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LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

Private Target M&A Deals – North American Comparison

US 2017 Deal Points Study Canadian 2018 Deal Points Study

Years Deals which closed in 2016 and H1 2017 Deals signed in 2016 and 2017 Number of Deals 139 91 Three Principal Industries

  • Technology
  • Health Care
  • Construction & Materials
  • Oil & Gas
  • Industrial Goods & Services
  • Health Care/Food & Beverage

Deal Sizes*

  • $30M - $50M
  • 7.9%
  • $51M - $100M
  • 30.2%
  • $101M - $200M
  • 23.7%
  • $201M - $300M
  • 24.5%
  • $301M - $500M
  • 13.7%
  • $5M - $50M
  • 49%
  • > $50M - $100M
  • 12%
  • > $100M - $200M
  • 7%
  • > $200M to $500M - 18%
  • > $500M
  • 11%

* 3% of Canadian deals had a redacted or indeterminable deal size.

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LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

Earnouts

Indeterminable Other Combination of Revenue & Earnings Earnings/EBITDA Revenue

7% 53% 0% 33% 12% 13% 19% 6% 38% 25% 8% 31% 0% 23% 38%

Deals in 2018 Deals in 2016 Deals in 2014*

* Percentages reported for 2014 exceed 100% as one agreement used more than one metric.

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LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

North American Comparison of Financial Provisions

US 2017 Deal Points Study* Canadian 2018 Deal Points Study Deals with Post-Closing Adjustments 86%

(86% in 2015 US study) (85% in 2013 US study)

72%

(73% in 2016 study) (70% in 2014 study)

Working Capital Adjustment Metric 95%

(83% in 2015 US study) (91% in 2013 US study)

83%

(70% in 2016 study) (70% in 2014 study)

Buyer Prepares First Draft of Closing Balance Sheet 95%

(87% in 2015 US study) (91% in 2013 US study)

47%**

(76% in 2016 study) (61% in 2014 study)

Methodology – GAAP Consistent with Past Practices 36%

(35% in 2015 US study) (45% in 2013 US study)

17%**

(38% in 2016 study) (39% in 2014 study)

Deals with Earnouts 28%

(26% in 2015 US study) (25% in 2013 US study)

14%

(17% in 2016 study) (25% in 2014 study)

  • The "2013 US study" refers to the 2013 Private Target Mergers & Acquisitions Deal Points Study released by the ABA Mergers & Acquisitions

Committee in December 2013. The "2011 US study" refers to the 2011 Private Target Mergers & Acquisitions Deal Points Study released by the ABA Mergers & Acquisitions Committee in December 2011.

  • ** Details regarding the closing balance sheet were not specified in 20 deals. This may account for the signifiant drop in these deal points.
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LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

Sandbagging

* For purposes of this Study, "benefit of the bargain/pro-sandbagging" is defined by excluding clauses that merely state, for example, that Target's representations and warranties "survive Buyer's investigation" unless they include an express statement on the impact of Buyer's knowledge on Buyer's post-closing indemnification rights.

INDEMNIFICATION

Anti-Sandbagging Provision Included 12%

(14% in 2014 study) (15% in 2016 study)

Benefit of the Bargain / Pro- Sandbagging Provision Included* 22%

(15% in 2014 study) (31% in 2016 study)

Silent 66%

(71% in 2014 study) (54% in 2016 study)

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LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

North American Comparison of Sandbagging

US 2017 Deal Points Study Canadian 2018 Deal Points Study

Sandbagging Provisions Included 49% (51% in 2013 US study) (44% in 2015 US study) 34% (29% in 2014 study) (46% in 2016 study) ▪ Pro 42% (41% in 2013 US study) (35% in 2015 US study) 22% (15% in 2014 study) (31% in 2016 study) ▪ Anti 6% (10% in 2013 US study) (9% in 2015 US study) 12% (14% in 2014 study) (15% in 2016 study) ▪ Silence 51% (49% in 2013 US study) (56% in 2015 US study) 66% (71% in 2014 study) (54% in 2016 study) Express Non-Reliance Provision Included 55% (43% in 2013 US study) (40% in 2015 US study) 30% (43% in 2014 study) (32% in 2016 study)

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CAPS*

(Subset: deals with survival provisions)

LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

* Caps generally applicable to contractual indemnification obligations; does not take into account different caps for specific items (see "Cap Carve Outs").

Yes – Less than Purchase Price 65%

(60% in 2014 study) (62% in 2016 study)

Yes – Equal to Purchase Price 13%

(19% in 2014 study) (18% in 2016 study)

Yes – But Not Determinable 16%

(11% in 2014 study) (12% in 2016 study)

Silent 6%

(10% in 2014 study) (8% in 2016 study)

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LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

North American Comparison of Baskets

US 2017 Deal Points Study Canadian 2018 Deal Points Study

No Basket 2% (4% in 2013 US study) (2% in 2015 US study) 20% (8% in 2014 study) (9% in 2016 study) Deductible 70% (59% in 2013 US study) (65% in 2015 US study) 30% (36% in 2014 study) (41% in 2016 study) "First Dollar" 26% (32% in 2013 US study) (26% in 2015 US study) 44% (50% in 2014 study) (45% in 2016 study) Combination (Threshold & Deductible) 2% (5% in 2013 US study) (7% in 2015 US study) 7% (6% in 2014 study) (5% in 2016 study)

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LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

Governing Law

Ontario 40%

(52% in 2016 study) (43% in 2014 study)

Alberta 24%

(26% in 2016 study) (17% in 2014 study)

Quebec 10%

(3% in 2016 study) (7% in 2014 study)

British Columbia 15%

(15% in 2016 study) (23% in 2014 study)

Other 11%

(5% in 2016 study) (10% in 2014 study)

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LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

Learned

Lessons

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LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

Lessons Learned

  • Ability to leverage Kira and HighQ simultaneously
  • Further standardization of questionnaire response options

(e.g., Other ____________) to facilitate aggregation

  • Workflow automation and notifications
  • Functionality of the Notes and Comments sections and editing of

responses

  • Formatting of spreadsheet output
  • Role of issue group leaders
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LEVERAGING TECHNOLOGY FOR THE CANADIAN PRIVATE TARGET MERGERS & ACQUISITIONS DEAL POINTS STUDY

Questions?

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Thank you!