CANADA LAW AND PRACTICE Contributed by: Kevin West, Andrea Hill, Priya Ratti and Meryam Kellow, SkyLaw
6. Structuring 6.1 Length of Process for Acquisition/ Sale Parties typically enter into a non-binding letter of intent setting out the proposed deal terms with binding provisions regarding exclusivity, expenses and confidentiality. Parties then conduct due diligence and negoti- ate a definitive acquisition agreement. The time required varies depending on the size and nature of the target and the involvement of third parties, such as lenders. The timeline for a friendly takeover bid gener- ally is 50–65 days beginning from the start of preparation of the takeover bid circular to the completion of the transaction, assuming the tar- get waives the minimum bid period of 105 days (shortening it to no less than 35 days). A hostile takeover bid must remain open for at least 105 days. The bid period may be shortened by the target or reduced to no less than 35 days if the target announces an alternative transac- tion, such as a plan of arrangement, requiring approval by the target’s shareholders. A man- datory ten-day extension period will apply if the bidder satisfies the minimum tender condition and is required to take up securities that were tendered under the bid. Defensive tactics used by the target may vary the timeline to complete the bid. Typically, following a successful takeover bid, the acquiror will conduct a second-step trans - action to obtain 100% of the outstanding shares. If the target is a private company, the parties may sign the definitive documents and close the transaction on the same day. Otherwise, closing
may take 30–60 days or longer depending on the extent to which shareholder, court or regulatory approvals are required. Complex transactions often will have outside dates that may be extended to accommodate regulatory approvals. 6.2 Mandatory Offer Threshold An acquisition of outstanding voting or equity securities of a reporting issuer that would cause a shareholder to, together with any joint actors, have beneficial ownership of and/or control over 20% or more of the outstanding securities (cal- culated on a partially diluted basis) is prohibited unless: • the shareholder makes an offer to all share - holders of the same class via a takeover bid; or • an exemption from the takeover bid rules is available. Such exemptions include: • certain purchases by private agreement from not more than five persons; and • normal course market purchases of no more than 5% of the outstanding securities in any 12-month period. 6.3 Consideration Both cash and shares of the acquiror are com - monly used in Canada as consideration in M&A transactions. The takeover bid rules require that identical con - sideration be provided to all target shareholders, with limited exceptions. Generally, no collateral benefits are allowed to be offered selectively to certain shareholders.
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