Canadian Context

Question 1

Which agency primarily governs mergers in Canada?

Answer 1

Competition Bureau Canada.

Question 2

Who has authority to review mergers for competition issues in Canada?

Answer 2

The Commissioner of Competition.

Question 3

What are two examples of provincial securities regulators in Canada?

Answer 3

Ontario Securities Commission and Autorité des marchés financiers (Québec).

Question 4

What must bidders listed on the TSX do when issuing new shares above 25% of outstanding shares?

Answer 4

Obtain shareholder approval.

Question 5

What are the two main methods of public acquisitions in Canada?

Answer 5

Plan of arrangement and takeover bid.

Question 6

How does a plan of arrangement differ from a takeover bid?

Answer 6

It requires court supervision and is usually a friendly, single-step method.

Question 7

What voting threshold is often required to approve a plan of arrangement?

Answer 7

Two-thirds of target shareholders’ approval.

Question 8

How long after an arrangement agreement must a shareholder vote be held?

Answer 8

Within 45 to 90 days.

Question 9

Are takeover bids made with or without target approval?

Answer 9

They can be made with or without target firm approval.

Question 10

What must the bidder prepare for a takeover bid?

Answer 10

A detailed takeover bid circular.

Question 11

How long must a takeover bid remain open under 2016 rules?

Answer 11

At least 105 days, unless waived by the target board.

Question 12

What happens if the target board waives the 105-day requirement?

Answer 12

The bid must remain open for a minimum of 35 days.

Question 13

At what threshold must an investor launch a takeover bid in Canada?

Answer 13

Acquiring 20% or more of voting shares.

Question 14

What must happen to consideration offered in a takeover bid?

Answer 14

It must be at least equal to what was paid for shares in the last 90 days.

Question 15

At what percentage must regulatory disclosure be made for shareholding in Canada?

Answer 15

At 10% ownership (versus 5% in the U.S.).

Question 16

What is the Canadian stance on anti-takeover measures?

Answer 16

They favor auctions but do not legally require them.

Question 17

Are most Canadian shareholders’ rights plans chewable or dead-hand?

Answer 17

Chewable.

Question 18

Why have poison pills become less meaningful in Canada since 2016?

Answer 18

The 105-day bid period weakened their usefulness.

Question 19

What is a no-shop provision?

Answer 19

It prevents a target from soliciting competing bids.

Question 20

What is a right-to-match provision?

Answer 20

It allows the bidder to match any competing bid.

Question 21

What are typical break fees in Canadian M&A?

Answer 21

Between 2% and 5% of the target’s equity value.

Question 22

What law governs merger reviews in Canada?

Answer 22

The Competition Act.

Question 23

What is the Size of Parties test for Canadian merger review?

Answer 23

Combined assets or revenues of >$400 million in Canada.

Question 24

What is the Size of Transaction test for Canadian merger review?

Answer 24

Target firm’s assets or revenues must exceed $96 million.

Question 25

At what equity ownership level must a bidder notify regulators in a public firm?

Answer 25

Exceeding 20% ownership.

Question 26

At what equity ownership level must a bidder notify regulators in a private firm?

Answer 26

Exceeding 35% ownership.

Question 27

What is the waiting period after pre-merger notification in Canada?

Answer 27

30 days before the transaction can close.

Question 28

What special rule applies for acquisitions by non-Canadians in Canada?

Answer 28

They must receive a “net benefit to Canada” approval.

Question 29

What is the minimum disclosure required for material changes in M&A?

Answer 29

Prompt disclosure once the board deems approval probable.

Question 30

What happens once a toehold exceeds 10% in Canada?

Answer 30

Prompt public disclosure and regulatory filing.

Question 31

What is the main difference between Canadian and U.S. toehold disclosure thresholds?

Answer 31

Canada requires at 10%, U.S. at 5%.

Question 32

What act regulates anti-competitive mergers in Canada?

Answer 32

The Competition Act.

Question 33

What are the two types of takeover defenses allowed under Canadian law?

Answer 33

Permitted defensive tactics and deal protection measures.

Question 34

What happens if a Canadian target accepts a superior bid despite a no-shop?

Answer 34

It must pay a break fee to the original bidder.

Question 35

How does the right to match impact deal negotiations in Canada?

Answer 35

It gives the original bidder a chance to match competing offers before losing the deal.

Question 36

What two types of stock exchanges impose additional rules for M&A?

Answer 36

TSX and CSE (Canadian Stock Exchange).

Question 37

What is a break fee or termination fee?

Answer 37

A penalty paid if the target abandons the initial merger agreement.

Question 38

What is a reverse termination fee?

Answer 38

A fee paid by the bidder if they fail to close the deal.

Question 39

What was the main reason for extending the bid-open period to 105 days?

Answer 39

To give target companies more time to respond to hostile bids.

Question 40

What is the Canadian policy on shareholder auctions during M&A?

Answer 40

Encouraged but not mandatory.

Question 41

Can a Canadian bidder close a merger immediately after shareholder approval?

Answer 41

Only after the applicable waiting periods and conditions are satisfied.

Question 42

Under what conditions can the 105-day minimum bid period be shortened?

Answer 42

If the target board agrees to waive it.

Question 43

What is a plan of arrangement similar to in the U.S.?

Answer 43

A friendly merger with court supervision.

Question 44

Why are plans of arrangement preferred for friendly Canadian mergers?

Answer 44

They simplify acquiring 100% of target shares in one step.

Question 45

When does Canadian law require shareholder approval for share issuance?

Answer 45

When offering shares exceeding 25% of pre-existing non-diluted shares.

Question 46

What happens if you acquire over 20% of a public company without launching a bid?

Answer 46

You violate Canadian securities laws.

Question 47

What is the main goal of the Competition Bureau in M&A?

Answer 47

Prevent substantial lessening or prevention of competition.

Question 48

What kind of disclosure is needed for a material change before definitive agreements are signed?

Answer 48

Prompt disclosure if board approval becomes probable.