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COURTSUPERVISED MERGERS AND ACQUISITIONS
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The Need for a Court Process for Distressed M&A ... (e) expense reimbursement for the stalking horse if outbid. The Convergence of the Canadian ... – PowerPoint PPT presentation
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Title: COURTSUPERVISED MERGERS AND ACQUISITIONS
1
COURT-SUPERVISED MERGERS AND ACQUISITIONS
- Opportunities For Knowledgeable Buyers In
Distressed Markets - Presented by
- Pamela Huff
2
The Need for a Court Process for Distressed MA
- The acquisition of an insolvent target requires a
court process - A corporation may be insolvent on either
- an asset value test, or
- a cash flow test
3
The Need for a Court Process for Distressed MA
(contd)
- A court process will be necessary
- to convey to a purchaser assets that have a value
which is less than the liabilities of the
seller - to convey to a purchaser the assets free and
clear of those liabilities - to distribute the proceeds of the sale
distributed under court supervision
4
The Canadian Framework for Court-Supervised Sales
- Companies Creditors Arrangement Act (CCAA)
- the principal statute in Canada for the
reorganization of large insolvent corporations - Bankruptcy and Insolvency Act (BIA)
- suitable for smaller, less complex corporate
restructurings - Court appointed receivers
- under the BIA or provincial legislation
5
The CCAA Sale Process
- How fast is too fast
- Adequate time for purchaser due diligence
- Balance against the financial strain on the
insolvent target
6
The CCAA Sale Process (contd)
- The usual steps
- Company retains an investment banker or financial
advisor or the company runs the sale process
itself with the assistance of the Monitor - Data room prepared for purchaser due diligence
- Advertising in appropriate newspapers / industry
journals - Summary information package / confidentiality
agreement distributed to identified prospective
purchasers
7
The CCAA Sale Process (contd)
- Deadline for completion of due diligence and site
visits - Deadline for letters of intent or binding offers
- Deadline for execution of a definitive agreement
- Motion for approval of a purchase agreement
recommended by the debtor and the Monitor - Granting of a vesting order in favour of the
purchaser
8
The U.S. Influence
- Increased number of cross-border insolvency
filings over the last several years - Increased participation of U.S. interests, as
owners, financiers and potential buyers of
Canadian businesses - Resulting U.S. influence on the sales process for
a Canadian insolvent business
9
The U.S. 363 Sales Process
- Auction under Section 363 of Chapter 11 of the US
Bankruptcy Code - Company identifies a stalking horse
- Enters into a definitive agreement to purchase
the companys assets - Prospective purchasers solicited to top the deal
at auction
10
The U.S. 363 Sales Process (contd)
- The court-approved bidding procedures often
include - (a) minimum bidding increments
- (b) an approved form of purchase agreement
- (c) standard bidder qualifications
- (d) a negotiated break fee
- (e) expense reimbursement for the stalking
horse if outbid
11
The Convergence of the Canadian and U.S. Sales
Processes
- Recent examples in Canadian insolvency
proceedings where a stalking-horse style process
has been used or has evolved in the sales process - Recent examples in Canadian insolvency
proceedings where the Canadian business has been
sold in a full-blown 363 sales process
12
Be Ready for Opportunity
- Canadian insolvency practitioners by necessity
are knowledgeable of the U.S. sales process - Buyers in the distressed marketplace must be
knowledgeable as well - Knowledge and comfort with a fast track process
essential to pursue the insolvent target
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