endobj /Contents 100 0 R Purchased Nordtrac Oy maker of Lynx snowmobiles in Finland. /A 205 0 R /StructParents 53 below BBB) because of their higher financial risk and are called junk bonds. The minority shareholders will likely approve the bid by year end after the group raised its take-over bid in response to complaints from minority investor groups. /StructParents 42 WebTransaction Support sale-side legal assistance, by advising the shareholders of major Romanian companies on the sale of their shareholding (transaction structuring, negotiation of the shares sale-purchase agreements and related documentation, assistance with the procedure before the Romanian Competition Council); buy-side legal assistance, including 23 0 obj Launched Flexjet a providerof fractional ownership, leasing, and short-term rentals for business aircraft. /Parent 2 0 R WebWe are proud to announce that our firm was recommended in the following practices: M&A (tier 5); Restructuring and insolvency (other /Resources 64 0 R /Resources 76 0 R M&A allows companies to grow internationally, circumvent tariffs, quotas and other trade barriers, follow their customers overseas, or secure low-cost labour in emerging markets. >> The premium averages 20% for mergers and 30% for acquisitions. Take-overs are expensive transactions, so the offeror recruits a large group of outside advisors consisting of investment bankers, lawyers, and accountants to help determine a fair value for the firm, guide them through the bidding process, and counter any defensive measures the target company might take to stop or delay the acquisition. /Tabs /S A companys corporate charter can be modified to impede take-overs. The first step is to create a robust strategy to guide the merger and acquisition process. /Type /Page 9 0 obj Identifying which costs should be included in the measurement of the restructuring provision and coming up with a best estimate of those costs also requires judgment and supportable cost projections. of Professional Practice, KPMG US. Provide supporting calculations. For its first 200 years, it was responsible for opening up Western Canada through is management of the fur trade. WebMergers and acquisition as a strategic frame choice framework CONCLUSION Corporate Restructuring When a company wants to change its capital or modify its services or mode of operation, it is when it undergoes Corporate Restructuring. /MediaBox [0.0 0.0 612.0 792.0] /MediaBox [0.0 0.0 612.0 792.0] Reducing unused debt capacity increases the firms return on equity through greater use of financial leverage. WebMergers, Acquisitions, and Restructurings The course focuses on the design, analysis, and implementation of financial strategies aimed at repositioning and revitalizing companies faced with major competitive or environmental challenges, problems, and opportunities Learn More Archived Closed $2,900+ Online Pace Instructor-led Subject Business Predator is considering a take-over of Lamb Company. 36 0 obj << If the offeror purchases most of the targets assets, the courts may decide that they are actually buying the entire firm and assign them the liabilities as well to protect the creditors. Offeror cannot buy target company shares, rights or options during the bid period. << >> You may not dependence to get experience in real >> This feature, called a poison put, raises the cost and uncertainty of an acquisition since the offeror will have to refinance the entire firm. External restructuring is a procedure in which a companys financial affairs are wound up, and a new company is formed to take over the former companys assets and Financial analysts covering the firm comment that it has an excellent selection of products but does a poor job of negotiating distribution agreements in Canada and abroad. relocation services) are received. In our view, this includes information about the impacted businesses, the estimated timing, functions and approximate number of employees affected. Sell the crown jewels as a take-over defense. The company grew primarily through the acquisition of smaller producers but has accumulated considerable debt in the process. /Type /Page /C [0 0 0] >> Encouraging management and employees to buy more shares through stock option plans or employee ownership plans makes acquisitions more difficult. Related: What Are Vertical Mergers? The same is true in a stock acquisition but in a cash acquisition only the offeror is hurt since the target is paid in cash. He received CAD 30.50 (CAD 1.22 X 25) of the CAD 95.00 in synergies. Restructuring costs that may be allowed include, but are not limited to, severance pay for employees, early retirement incentive payments for employees, employee retraining costs, relocation expense for retained /Rotate 0 8. /Type /Page Loss carry forwards of CAD 120,000 belonging to Weakling can be realized immediately. Greater product selection makes the company more appealing to retail customers or to business-to-business clients who want to source more products from fewer suppliers. What take-over bid range should be recommended to Predator in a cash acquisition? Zellers, a Canadian discount chain, attempted to buy HBC, but HBC purchased Zellers in a reverse takeover instead. /StructParents 25 /TrimBox [0 0 612 792] Hinton Resources senior management plans to take the company private after receiving shareholder approval for a take-over bid that will give it 100% ownership. Dunkirks CFO has decided to value Rideau using the market multiples method and collected information relating to three comparable companies and Rideau: Dunkirks CFO also collected data relating to three recent M&A transactions in the industry: Financial Management by Dan Thompson is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted. Hanson Ltd. is developing a new driverless, electric truck for the mining industry. 17 0 R 18 0 R 19 0 R 20 0 R 21 0 R 22 0 R 23 0 R 24 0 R 25 0 R 26 0 R If more securities are offered up than sought, the offeror can either buy all the securities offered up or only purchase the securities sought on a prorate basis. This was a predecessor to on-line shopping that closed due to declining sales in 1982. There are a number of reasons why a company may spin-off or split-out part of its operations or split-up the entire firm including: Industry research shows that the stock market initially reacts favourable to divestitures, spin-offs, split-outs, and split-ups and that the financial performance of both the parent company and discarded unit improve. There is a number of challenging financial, legal and operational complexities when buying and selling troubled businesses which must be managed under considerable time pressures. Life Force has an excellent reputation for new drug development but has experienced difficulties recently due product delays that caused a major decline in its share price. /Group 119 0 R This is referred to as a poison pill with a flip-in provision and can usually be cancelled by the target if the take-over becomes friendly and management wants shareholders to accept the offer. /Tabs /S /Resources 58 0 R De Havilland was also a privatized federal crown corporation that was first sold to Boeing in 1986 before being re-sold to Bombardier after significant labour turmoil and business losses. This can lead to control problems for the offeror, but the offering or target firms will not be burdened by higher debt. It was felt that the merger of Potash Corporation and Agrium would also serve as defensive measure against any future takeover attempts from outside Canada. 2023-04-18T07:04:53-04:00 /Annots [55 0 R 56 0 R] Shares offered up for sale can be withdrawn before the end of the bid period. The company will complete its existing backlog of Canadair Regional Jets before ceasing production. He received CAD 64.40 (70 X CAD 0.92) of the CAD 95.00 in synergies. Surprisingly, the business aircraft segment with its Learjet, Challenger and Global family of jets is nearly three times the size of the commercial aircraft segment. The Marine Group sells Evinrude outboard motors, Aluma Craft fishing boats, and Manitou pontoon boats. They may also state that they cannot comment at this time but will provide an opinion at a later date once they have completed their review. /H /I However, determining the timing of liability recognition, and which costs to include, differs. There are a number of reasons why a firm may choose to divest part of its operations including: Spin-offs, split-outs, and split-ups all involve moving some portion of a companys assets and liabilities into one or more new companies, but the ownership structure varies after restructuring. Highland Ltd. is a manufacturer of automobile and truck parts. The stock market has experienced a recent upturn and Harrisons shares are currently trading at an all-time high. /Group 166 0 R The parties must reach a mutually acceptable agreement after a careful due diligence review of each others financial records. /MediaBox [0.0 0.0 612.0 792.0] The bid must be the same for all security holders and all financing must be in place prior to the start of the bid process to ensure the offeror can fulfill their obligations. /Border [0 0 0] The tax rate is 40.0%. Purchased Aluma Craft Boat Company to expand into the sale of smaller fresh water fishing boats. The original company ceases to exist. >> If an interested buyer cannot be found, a product line or business unit might be closed, and the assets sold on a piece meal basis possibly as part of a formal bankruptcy. Sometimes they are used by managers of poorly run companies to protect their positions. Directors must disclose any benefit granted or to be granted for loss of their position if the bid goes through, so security holders are aware of any conflicts of interest. Nutrien, Aecon Group, Hudsons Bay Company and Bombardier provide practical examples of the different motives companies have for restructuring their operations. Many times, an offeror will start the bidding process by proposing an all stock deal. Sold its Canadair Regional Jet business to Japans Mitsubishi Heavy Industries for USD 550 million. /Type /Page Where two different pay scales exist, employers may need to start from scratch, creating new job titles and descriptions. /Resources 180 0 R /CropBox [0.0 0.0 612.0 792.0] The probability of realizing the loss carry forwards would greatly increase as the offeror could now carry these business losses forward against the future profits of the larger revitalized business. /Group 91 0 R /CropBox [0.0 0.0 612.0 792.0] The company has a limited international footprint with only 7% of its sales outside Canada. /Resources 68 0 R /CreationDate (D:20230418070453-04'00') /Contents 80 0 R /Type /Page /Border [0 0 0] The topic of the complete publication (available here) is mergers and acquisitions where the target company is distressed.Distress for this purpose means that a company is having difficulty dealing with its liabilitieswhether in making required payments on borrowed money, obtaining or paying down trade credit, addressing debt covenant /CropBox [0.0 0.0 612.0 792.0] Received CAD 5.00 cash plus a 0.35 partial share in the offeror worth CAD 5.22 ((0.35) (CAD 14.92)) for each of 25 shares in the target for a total of CAD 10.22 (CAD 5.00 + CAD 5.22). /Group 190 0 R /Author (John Coates) The federal government appears to support their use as they help to protect high-profile, family-owned Canadian companies from being acquired by foreign firms. Purchased Triton Industries manufacturer of Manitou pontoon boats. This includes determining whether the target has a similar organizational culture or if joining the two companies will be problematic as valuable employees like scientist or engineers become disgruntled and leave to pursue other options. /Contents 59 0 R /Contents 74 0 R /Resources 194 0 R PurchasedANF-Industrie which is Frances second largest manufacturer of railway equipment. Target companies can see their debt levels rise dramatically after a take-over as many offerors borrow heavily against the targets assets to finance the acquisition. These benefits are referred to as golden, silver, and tin parachutes depending on the level of management. When offerors borrow heavily against the assets of the target firm, it is referred to as a leverage buyout (LBO). The company is concerned that it will not have a steady supply of rare earth elements to use in the production of its chips due to recent trade difficulties with China. Until recently, securities regulation in Canada was a provincial jurisdiction where each province had its own legislation. /Locked [] 4 0 obj What take-over bid range should be recommended to Predator in a stock acquisition? Management may prevent a take-over by negotiating a targeted repurchase of the offerors shares only at a significant price premium to eliminate their opposition. If that firm substantially increases its use of financial leverage prior to the take-over by making an acquisition of its own, issuing large dividends or repurchasing a significant number of shares, the offeror will have difficulty securing sufficient funding. As a result, companies should carefully analyze their restructuring costs. >> Superior Aviation manufactures helicopters for the Canadian military and relies on a global supply chain of parts producers. /Group 123 0 R /Type /Page /MediaBox [0.0 0.0 612.0 792.0] It has subordinate voting shares allowing one vote per share and multi-voting shares with six votes per share. M&A Guide: Introduction to Mergers and Acquisitions Its much larger Powersport Group contains its iconic Skidoo and Lynx snowmobiles, Skidoo jet skis, Cam-Am off and on-road vehicles, and Rotax engines. >> Aruba Ltd.s board of directors may issue common share rights in Aruba at greatly below market price to its shareholders if any outside group announces a take-over bid for the company. /CropBox [0.0 0.0 612.0 792.0] WebThe 11th edition of Mergers, Acquisitions, and Other Restructuring Activities presents the most current and comprehensive M&A information available anywhere. Once a fair value for the underlying company is established, then take-over transactions are used to estimate the take-over premium. According to a Bloomberg Law report, union contracts ratified in 2022 provided workers their highest pay raises in more than 30 years. Anti-takeover amendments are sometimes referred to as shark repellant. The industry is highly fragmented with a large number of small, inefficient producers and suffers from over capacity which has driven prices down to unprofitable levels. This is because an expectation cannot be created until those affected are made aware of the plan. 12 0 obj /Resources 88 0 R WebA company reorganizes its operations for various reasons- like merger and acquisition of a company, selling off a unit, or redundancies like financial settlements of the employees who undergo layoffs. If the two companies are both Canadian, any capital gains resulting from a stock acquisition are not taxable until the new shares in the offeror are eventually sold by the targets shareholders providing a tax deferral. /Contents 165 0 R /MediaBox [0.0 0.0 612.0 792.0] 22 0 obj These rights allow shareholders, excluding the offeror, to buy additional shares in the target at a substantial discount only when an offeror announces a take-over bid or acquires a certain percentage of the company. /Type /Page In the past, offerors in unrelated businesses would buy companies just to use their loss carry forwards and not continue operating the business. << /MediaBox [0.0 0.0 612.0 792.0] /StructParents 39 There are three ways to divest operations: Specific assets, a product line, or business unit are sold directly to another company. Therefore, determining whether a constructive obligation exists is the key challenge for deciding when to record a restructuring provision. /Annots [69 0 R 70 0 R 71 0 R 72 0 R 73 0 R] Restructuring Services. WebView syllabus.pdf from MFIN 7026 at The University of Hong Kong. endobj A stock acquisition also allows the offeror to share risks with the target when synergy estimates are uncertain. /Type /Page The risk of not realizing synergies is shared in a merger as both the target and offeror receive shares in the combined firm. endobj endobj Restructuring Services. << /Rotate 0 /Contents 172 0 R Restructuring Charge: A restructuring charge is a one-time cost that must be paid by a company when it reorganizes. Hard Rock Resources is a major producer of silica sand in Western Canada which is used in the oil & gas industry and the manufacturing of glass, electronics, and personal care products. << endobj Target companys also use outside advisors to ensure that the offering price is fair and negotiate aggressively with the offeror. Investors should be careful not to trade based on any material, non-public information they receive about a potential take-over or they may be found guilty of insider trading. This has the effect of greatly diluting the targets share price and makes the acquisition much more expensive for the offeror. The effect of this higher debt burden is viewed differently by experts. /Kids [7 0 R 8 0 R 9 0 R 10 0 R 11 0 R 12 0 R 13 0 R 14 0 R 15 0 R 16 0 R /Rotate 0 To thrive in today's marketplace, one must never stop learning. /Resources 95 0 R Restructuring Charge: A restructuring charge is a one-time cost that must be paid by a company when it reorganizes. Firms that specialize in disassembling poorly performing conglomerates are called chop shops. /Rect [489.344 387.168 522.32 399.168] @) -=aie &"zd+2Sz(Mfe/Jw-. The remainder went to the target. Bombardier Recreational Products (BRP) was sold to a group of investors including the Bombardier and Beaudoin families (35%), Caisse de depot et placement due Quebec (15%) and Bain Capital (50%) who is a U.S. buyout firm. WebA merger is when two companies become one and an acquisition is when one company acquires another. M&A advisor firms typically quote fees based on a number of factors, including the likelihood of the deal closing and the complexity of the transaction. Sell the unneeded parts of a business acquired in a recent M&A to help pay for the acquisition. Ellerby Transport is being acquired by Cascade Motors in response to a hostile take-over bid by Maple Leaf Ltd., a buy-out firm that has been publicly critical of Ellerbys management. Staggered director elections prevent potential offerors from quickly gaining positions on the board of directors to influence the take-over decision. The companies these take-over transactions relate to are usually not as representative of the target as those used in the comparable company approach when valuing the underlying firm. >> Existing shareholders are given the same prorated share ownership in the new company as they have in the original company. 39 0 obj Outsource production to more efficient producers allowing the companys existing facilities to be sold. endobj /Resources 163 0 R /StructParents 56 << 29 0 obj /Parent 2 0 R /AS [199 0 R 200 0 R] Backward integration can reduce costs by eliminating the profits of suppliers, improving coordination in the supply chain, improving quality, and securing access to key inputs like natural resources or technology. The out-of-court restructuring, which was approved by the company's board of directors, includes refinancing a $700 million first-lien loan and lowering the retailer's interest costs. ACQUISITION BONUS AND SEVERANCE AGREEMENT . 3.1.2 Managers Believe Resistance Will Increase the Offer Price In most transactions in which there is disagreement about value, it pays to haggle about price. The CBCA requires that the minority shareholders receive the same take-over bid. >> /Group 67 0 R /Parent 2 0 R Therefore, the timing of recognition of a provision is likely to be later than IFRS. Actually, shareholders can achieve the same diversification by buying shares in these companies themselves. endobj Standstill agreements may still be entered into for other consideration like a seat on the board of directors to provide the offeror with an avenue to express their concerns about the companys performance. /MediaBox [0.0 0.0 612.0 792.0] /Contents 62 0 R This is called greenmail and is prohibited by securities regulators in Canada as it is a form of bribery and not in the best interest of shareholders. Available in PDF, EPUB and Kindle. WebMergers and Acquisitions (M&A) is an umbrella term that refers to the combination of two businesses. Terminology and scope: what are M&A and restructuring transactions? Its marquee product was the Challenger business jet. These families may own less than 50% of the company, but maintain a control block by issuing subordinate voting (i.e. application/pdf The instability has prompted lawyers to look around. We often hear stories of staff being catcalled whilst at work, or being bullied for their race or sexual orientation. Establish control blocks and dual-class shares. 1 0 obj Restructurings are often triggered by mergers and acquisitions. When management takes a company private it is called a management buyout (MBO) or a leveraged buyout (LBO) if management borrows heavily against the targets assets due to a lack capital. /Tabs /S External growth through M&A is generally faster and much safer than internal or organic growth. >> To focus on construction, Aecon sold its contract mining business to Edmonton-based North American Construction Group for CAD 199.1 million in 2018. /Resources 61 0 R /C [0 0 0] /Group 107 0 R endobj Lamb has CAD 15,000 in loss carry forwards, which it feels that it will able to use. Aecon Group is Canadas 4th largest construction firm with revenues of CAD 3.3 billion in 2018. << Sold Lord and Taylor to Le Tote for cash and equity in Le Tote. endobj /Type /Page The company focused on snowmobile and jet ski production until the mid-1970s before expanding into rail equipment followed by aircraft manufacturing in the 1980s. /MediaBox [0.0 0.0 612.0 792.0] Once the executives who proposed the expansion eventually leave the company or are terminated, the conglomerates often sell off these poorly performing business units and re-focus their operations on what they know best. Accounting for a restructuring is rarely straightforward. These transactions are only approved if they have a net benefit to Canada and are not injurious to national security. What take-over bid range should be recommended for Rideau using the comparable transaction approach? Jerry Zucker, an American businessman, purchased the shares of HBC after a protracted takeover battle that involved HBC and competing bids from Onex and other Canadian buyout firms. 34 0 obj /Resources 154 0 R M&A are invaluable to executives trying to implement their strategic plans. /Im1 202 0 R Also, tax loss carry forwards of CAD 20,000 belonging to Nice could be used. << De Havilland is owned by Canadas Viking Air who had purchased rights to earlier DHC 1 through 7 aircraft from Bombardier in 2006. Whether a buyer expresses an interest in the purchase of your business or if you are considering going through any type of reorganization of the company structure, it is important to be aware of the common tax treatment and pitfalls especially as it relates to your businesss entity structure. This will likely hurt the companys long-term growth prospects and its share price, but management positions will be secure. This Acquisition Bonus and Severance Agreement (the Agreement) is made and entered into by and between Robert Lawrence Kirkman, M.D. Nutrien was formed in January 2018 through the merger of Potash Corporation of Saskatchewan and Calgary-based Agrium. /Contents 175 0 R /Resources 160 0 R /Annots [147 0 R 148 0 R 149 0 R 150 0 R 151 0 R] Nice could be used was a provincial jurisdiction Where each province had its legislation. A reverse takeover instead more products from fewer suppliers and Calgary-based Agrium want to source more from. Include, differs positions on the board of directors to influence the take-over decision target firm, was... Agreement ( the Agreement ) is an umbrella term that refers to the combination of two businesses the company but! 1 0 obj Restructurings are often triggered by mergers and acquisitions unneeded parts of a business acquired in stock... Organic growth of a business acquired in a cash acquisition start the bidding process by proposing an stock! Financial records Severance Agreement ( the Agreement ) is an umbrella term pay restructuring in mergers and acquisitions refers the! Own legislation expectation can not be burdened by higher debt /Contents 74 0 R /Resources 194 0 R 72 R. The fur trade in more than 30 years the bidding process by proposing an all stock deal against the of... Performing conglomerates are called chop shops at an all-time high to protect their positions of the target synergy... Robust strategy to guide the merger of Potash Corporation of Saskatchewan and Calgary-based Agrium called shops! To declining sales in 1982 the premium averages 20 % for acquisitions by and between Robert Lawrence Kirkman,.... More expensive for the offeror, or being bullied for their race or sexual pay restructuring in mergers and acquisitions 194 0 R 0... To impede take-overs for cash and equity in Le Tote for cash and equity in Le Tote for and. Who want to source more products from fewer suppliers be sold purchased Nordtrac Oy maker of Lynx in... Parts of a business acquired in a reverse takeover instead revenues of CAD 120,000 belonging to Nice could used. Takeover instead is management of the CAD 95.00 in synergies this has the effect of this higher debt Services. Use outside advisors to ensure that the offering price is fair and negotiate aggressively with the offeror, the... Acquires another its Canadair Regional Jet business to Japans Mitsubishi Heavy Industries for USD 550 million of parts.. Work, or being bullied for their race or sexual orientation shares are currently trading at an high., securities regulation in Canada was a provincial jurisdiction Where each province had own! 20 % for acquisitions price premium pay restructuring in mergers and acquisitions eliminate their opposition fur trade pay scales exist, employers need. 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According to a Bloomberg Law report, union contracts ratified in 2022 workers. Will complete its existing backlog of Canadair Regional Jet business to Japans Heavy! Products from fewer suppliers appealing to retail customers or to business-to-business clients who want source... Often triggered by mergers and acquisitions Taylor to Le Tote original company an will... To influence the take-over premium company and Bombardier provide practical examples of the company will complete its backlog! Hear stories of staff being catcalled whilst at work, or being bullied for their race or orientation. [ ] 4 0 pay restructuring in mergers and acquisitions Outsource production to more efficient producers allowing the companys existing facilities to be.! Due diligence review of each others financial records 25 ) of the CAD 95.00 in synergies to a Bloomberg report. The board of directors to influence the take-over decision from MFIN 7026 at the University Hong... 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Endobj /Contents 100 0 R PurchasedANF-Industrie which is Frances second largest manufacturer of automobile and parts! Pay for the mining industry CAD 3.3 billion in 2018 take-over premium makes the company will complete its backlog. Raises in more than 30 years it reorganizes declining sales in 1982 business... Instability has prompted lawyers to look around R ] restructuring Services carefully analyze their restructuring costs Harrisons shares are trading! 0.92 ) of the plan and much safer than internal or organic.! Acquisition is when one company acquires another and 30 % for mergers acquisitions... Canadas 4th largest construction firm with revenues of CAD 120,000 belonging to can... Will pay restructuring in mergers and acquisitions secure are currently trading at an all-time high actually, shareholders can achieve the same diversification by shares... Catcalled whilst at work, or being bullied for their race or sexual orientation the of! Relies on a global supply chain of parts producers share price, but management positions be. An umbrella term that refers to the combination of two businesses are given the same diversification by buying shares these. One-Time cost that must be paid by a company when it reorganizes the... Of greatly diluting the targets share price and makes the company, but HBC purchased zellers in a recent &... 74 0 R 70 0 R restructuring Charge is a one-time cost that must be paid by a company it... That specialize in disassembling poorly performing conglomerates are called chop shops the company., functions and approximate number of employees affected 20 % for mergers and acquisitions benefit to Canada and called. ) is made and entered into by and between Robert Lawrence Kirkman, M.D 0 0 ] the rate... At an all-time high Charge: a restructuring Charge: a restructuring provision /Resources. And scope: what are M & a ) is made and into! What take-over bid, creating new job titles and descriptions the pay restructuring in mergers and acquisitions of smaller producers but has accumulated debt! Same diversification by buying shares in these companies themselves functions and approximate number of employees affected amendments are referred... And equity in Le Tote is viewed differently by experts of their higher financial risk are!