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140 Canada | Mergers and acquisitions The Canadian M&A market witnessed a reduction in deal volumes last year similar to those seen in 2002-2003. Hostile market conditions allowed for few of the headline-grabbing deals seen in previous years and unravelled some of those that did make it to market. For many Canadian lawyers, the failed privatisation of BCE (Bell Canada Enterprises) signalled not only an end to years-long negotiations, but to the era of leveraged buyouts as a whole. The transaction was abandoned after an audit revealed that the $41 billion buyout was no longer an acceptable financial risk for the company. Restricted lending and poor debt spreads resulting from the credit crisis have forced Canada’s private-equity investors to retreat from their previous binge of leveraged buyouts. “It’s a very different climate than it was 18 months ago, when you had private equity still enormously active,” says a partner. “The pension funds in Canada have suffered. They’ve got lots of problems to manage. We’re not seeing them provoke M&A situations.” The scarcity of financing has ultimately forced deal activity into the mid-market, producing the double-edged sword of sustained deal volume with lower overall values. “The pattern in Canada is there are still a lot of deals happening but it’s the size that’s fallen off,” says one partner. “There are some significant transactions that have happened, but the over-$1 billion deals you can count on the fingers of one hand.” According to lawyers here, this sudden focus on the mid-market has strained the bench strength of Canadian firms, favouring those with a stable of talent beyond their high-profile partners. Going forward, the ability to broadly staff lower-value files is seen as an area of growth for firms. Diminished stock prices have created marked dislocation between buyers and sellers, halting most deals in their preliminary stages. “That’s the biggest problem right now. It’s weird because other than AIG and people you would suspect would be sellers, the sellers are not so pushed that they’re lowering their prices. And the buyers aren’t going to pay those prices.” The gridlock has left most deals to wither on the vine as sellers come to terms with the valuations of the new, post-recession, reality. Blake Cassels & Graydon Blakes breaks into the first tier after a round of strong peer feedback concerning the firm’s commitment to quality in its M&A work. “They’ve been on an upward trend in number of deals and deal value over the past five years,” says one peer. www.iflr1000.com With equally respected banking and finance platforms, the subsequent rise of Blakes’ M&A practice in the rankings exhibits the firm’s full-service strategy across practice areas and geography. One detail that doesn’t escape the recognition of Blakes’ peers is its presence in every province of Canada and its ability to staff cross-border files through offices in New York, Chicago, London and Beijing. With particular strength in the western Canadian provinces, energy and mining are strong focuses for the group. Brock Gibson is credited by peers as having given the M&A group at Blakes a resurgence as of late. Elected chairman of the firm in January 2009, Gibson is leading the response for Suncor Energy in its proposed merger with Petro-Canada, potentially the largest oil and gas transaction in Canada since 2006. The $38.5 billion merger of rivals will create the largest Canadian energy company through a weighted share exchange that gives Suncor 60% ownership and Petro-Canada 40% in the new company. The exchange and subsequent ownership percentages were determined by the existing pre-merger share prices of each company. Elsewhere in the energy sector, Blakes advised Nexen when the oil services company acquired an additional 15% interest in the Long Lake oil sands project from Opti Canada. Closing in January 2009, the $735 million transaction gives Nexen an overall stake of 65%. Leading lawyers Frank Arnone Pat Finnerty Brock Gibson Graham Smith Davies Ward Phillips & Vineberg While megadeals have disappeared from the market, the expertise harboured at Davies Ward has not. Peers still regard the firm’s M&A group as one of the most capable in Canada. Offering offices in Toronto, Montreal and New York, the firm has long focused on the types of transactions symbolised by their representation of BCE in the proposed privatisation of the Canadian telecoms company. Even with the proposal of the largest buyout in history occupying the firm, Davies Ward managed to take on a host of other complex matters. In September 2008, the firm advised the special committee of the board at Rothmans in its $2 billion acquisition by rival Philip Morris. May 2008 saw the firm represent the parent for the Toronto Stock Exchange, TSX Group, in its merger with the Montreal Exchange to create the TMX Group. The deal included issuance of 15.32 million shares and $1.1 billion in cash paid to shareholders of the Montreal Exchange. “As far as I’m concerned, from an M&A perspective, they’ve got the best guys on the street,” says a client. “For takeover bids, which is our business, they are great. They know the statutes, all the rules. And from the practical side, their legal advice is a dose of practical reality – what you can get done in the circumstances – which I think separates them from everyone else in town. One other thing I like is they use very small teams and you’re only dealing with one or two guys over there at one time.” Leading lawyers William Ainley Maryse Bertrand William Gula Kenneth Klassen Kevin Thomson Goodmans Goodmans has the ability to consistently appear on high-profile transactions – even with one of the smaller M&A groups in Canada and a single office, located in Toronto. “They punch above their weight,” comments one peer. And while rivals debate whether this setup is optimal for the long term in comparison to larger, more geographically diverse firms, few can deny the market presence Goodmans has been able to establish in recent years. The perennial talents of Stephen Halperin and Jonathan Lampe are highlighted by peers with regard to deal execution for clients. Through 2008, Lampe led the firm’s representation of the acquiring parties in the BCE buyout, including the Ontario Teachers Pension Plan and Madison Dearborn Partners. The firm engineered two simultaneous offerings of common stock and convertible senior notes for Newmont Mining Corporation as financing for an acquisition in February 2009. With $1.1 billion in fresh capital from the offerings in place, Goodmans then advised Newmont on its purchase of the remaining interest in the Boddington project from AngloGold Ashanti of Australia. To date, Boddington is the largest active gold mine in the world. Goodmans is also counselling Deutsche Bank and RBC Capital Markets as the financial advisors to Petro-Canada for that company’s proposed merger with Suncor Energy. With a combined value of $38.5 billion, the merger of oil and gas rivals will create Canada’s largest energy company. 2010 EDITION
Mergers and acquisitions | Canada 141 Leading lawyers Stephen Halperin Jonathan Lampe Dale Lastman Neill May Osler Hoskin & Harcourt Economic downturns produce their own stratification in terms of which law firms are in demand, and Osler hasn’t missed a step. “Osler is always a force to be reckoned with,” remarks one peer of the firm’s M&A practice. Representations like advising long-time client RBC (Royal Bank of Canada) in the $2.2 billion acquisition of the Royal Bank of Trinidad and Tobago have reinforced Osler’s reputation for cross-border expertise. Fifteen years with an established New York office stands as further proof. Osler’s strength is ultimately in its breadth of representations, a carryover benefit of having one of the leading corporate departments in Canada. “They were our corporate counsel and we’ve used them extensively – not just for corporate work but for some reorganisations,” says a client. “I think they’re excellent. I’ve been with a number of different companies over my career and worked with a number of major Canadian law firms, and I would say Osler is as good as any I’ve ever dealt with. It comes down to the individual you’re dealing with – and they did a great job with the technical advice they provided us.” Osler is currently serving as Canadian counsel to Nova Chemicals in its cross-border acquisition by IPIC (the International Petroleum Investment Company), the oil and gas investment arm of the Abu Dhabi government. The firm also advised the controlling shareholders of CHC Helicopter Corporation in its sale to First Reserve Corporation in August 2008. Singled out by competitors as a standout lawyer of the practice, Robert Yalden led the $3.7 billion transaction for CHC in Canada. Leading lawyers Clay Horner Brian Levitt Mark Trachuk Frank Turner Robert Yalden Stikeman Elliott “They’re always on the big deals. You see a consistency year after year,” says a rival partner of the M&A group at Stikeman Elliott. Indeed, Stikeman is nothing if not consistent. Ranked in the top tier for Canadian M&A for the last five years, the firm has built a stable of talent that brings it files like the recent representations of BCE and Teck Cominco. Brian Pukier, Richard Clark and William Braithwaite are viewed by peers as pillars of the practice, with William Rosenberg receiving particular praise from a client: “William is a leader there and he’s tremendous.” As co-counsel to BCE with Davies Ward Phillips & Vineberg, Stikeman lawyers helped create the privatisation strategy for the largest leveraged buyout in history, negotiating with an acquisition group of private-equity investors led by the Ontario Teachers Pension Plan. Despite the transaction ultimately failing due to deteriorating credit conditions, the two years of work on the file bears witness to the expertise and commitment at Stikeman. Beyond the financial services sector, William Braithwaite and Christopher Nixon led the Stikeman team in the acquisition of the Fording Canadian Coal Trust by rival miner Teck Cominco in October 2008. Already holding a minority stake in Fording, the $12.3 billion transaction gave Teck Cominco full ownership of the trust and also called upon the capital markets practice at Stikeman to reach completion. Teck Cominco was forced to issue 36 million Class B shares in co-operation with the establishment of a $4 billion senior term loan facility and a $5.8 billion senior bridge loan facility. Further financing was obtained through the sale of Teck Cominco’s minority stake in Fording in preparation for the deal’s closing. Leading lawyers William Braithwaite Richard Clark Curtis Cusinato Christopher Nixon Brian Pukier William Rosenberg Bennett Jones Bennett Jones is a premiere energy firm with an established presence in western Canada. “Bennett Jones are excellent. They’re probably the best known firm in Calgary and we use them a lot,” says one client. Although established in the west, Bennett Jones has begun to develop its brand more effectively in eastern markets. Recently, the firm’s growing Toronto presence was enhanced by the recruitment of Francis Allen from Borden Ladner Gervais. Bennett Jones advised Precision Drilling Trust in its eventual acquisition – through a series of unsolicited offers – of oil services provider Grey Wolf in December 2008. Estimated at a $2 billion value, the acquisition was finalised after three unsolicited bids by Precision and the procurement of financing commitments during the worst of the credit crisis. Also in December 2008, Bennett Jones again advised the acquirer in Riverstone Holdings’ acquisition of Gibson Energy Holdings. Valued at C$1.25 billion ($1.13 billion), the acquisition of Gibson Energy gives private-equity player Riverstone assets including crude storage and processing facilities, and over 290 miles of pipeline. Leading lawyers Alan Bell John Kousinioris McCarthy Tétrault Robust banking and project finance groups provide a healthy carryover of M&A deals from the financial services sector for McCarthy Tétrault. The firm’s coverage of western Canada supplements this with a presence in the energy sector – demonstrated this year by Richard Shaw’s involvement in the Suncor Energy/Petro-Canada merger. Senior partners Garth Girvan and David Woollcombe are considered by peers to be standouts in the practice. A returning client of the firm’s project finance group, Borealis Infrastructure retained McCarthy’s services in November 2008 for the unsolicited acquisition of the Teranet Income Fund. After delivering an original offer of $11 per unit for outstanding partnership units of Teranet and its subsidiaries, worsening economic conditions caused Borealis to revise their bid. After three months of negotiation, the deal was closed with an offer of $10.25 per unit for Teranet and its holdings, equalling $1.6 billion for the software developer. As foreign lenders retreated from Canada this year, those with strong relationships in the financial sector saw an uptick in asset sales related to balance-sheet correction. And thanks to its longstanding relationships with the domestic banks, it was no surprise that McCarthy acted in a number of these transactions. Scotiabank hired McCarthy to handle its $442 million cash acquisition of E*Trade Canada. As part of the acquisition, McCarthy relied on its banking expertise to navigate regulatory processes associated with uncoupling the online brokerage from its US parent. Leading lawyers Richard Balfour Garth Girvan Richard Shaw David Woollcombe Ogilvy Renault Ogilvy Renault has made a name for itself in M&A, servicing the financial sector in eastern 2010 EDITION www.iflr1000.com
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