12 Take-aways from 2012 - Developments in the Western Canadian M&A and Private Equity Market
February 201312 Take-aways from 2012Developments in the Western Canadian M&A and Private Equity Market
Overview• In 2012, Pierre Magnan and the Gowlings Calgary deal team had the privilege ofsupporting clients as lead legal advisors on 18 closed M&A and private equitytransactions worth over $600 million in aggregate.• We thank our clients for giving us the opportunity to be of service.• As we look back on 2012 and ahead to the coming year, we wanted to share some ofour thoughts on trends and deal points based on what we have seen in the WesternCanadian marketplace.2
Take-aways from 20124Macro1. Oil & gas horizontal drilling technology development and adoption continued todrive E&P private equity investment in resource plays and oilfield services M&Aactivity.2. Diversified industries doing business with oil sands and infrastructure developersgarnered significant interest from private equity investors and strategic buyers.3. Succession planning, retiring owner-managers and the need for growth capitalfueled mid-market company sales and management buy-outs across sectors.4. 2012 saw an increase in strategic acquisitions and competition from corporatebidders in auctions.
Take-aways from 20125Structuring & Deal Points5. Club deals and co-investments alongside private equity sponsors by institutionalinvestors, family offices and specialized funds were more common in financingsand buy-outs.6. Earn-outs and other performance-based forms of deferred consideration featuredmore prominently. Terms are trending longer.7. Indemnity caps and total trailing liability exposure for vendors are trending lower.8. Full disclosure representations were given in most M&A transactions and havebecome “market”.9. Lower materiality deductibles and thresholds in purchase and sale agreementsmade US-style materiality scrapes (materiality qualifications are disregarded forpurposes of indemnity) more common.
Take-aways from 20126Other Observations10. Management teams generally favoured local over out-of-market buyers other thanin the case of all-cash deals. Fit was a critical factor in most buy-outs and privateequity financings.11. Time to close and total legal fees in M&A and private equity transactions decreaseddue to:(a) simplified tax and carry structures;(b) more surgical due diligence reviews; and(c) fewer legal opinions at closing.12. Valuation gaps and market-driven changes in prospects were the leading causes offailed deals.
Appendix 1 – 2012 Publicly Announced DealsWho?Represented Crossroads , Yellow Point Equity Partners and Roynat Capital on Crossroads’sale to Distribution International, an Audax companyWhat?Sale of distributor & fabricator of commercial and industrial insulation products andaccessories in CanadaWhere?EdmontonWhen?Q2 2012 (Closed)How?Raymond James-led process7Winner of an ACG Vancouver Dealmakers Award 2012Finalist for the M&A Advisors’ Cross-Border Deal of the Year 2012
Appendix 1 – 2012 Publicly Announced DealsWho?Represented GEOTrac and its owners in a sale to Trimble NavigationWhat?Sale of provider of wireless fleet management and worker safety solutions for the oil and gasindustryWhere?CalgaryWhen?Q2 2012 (Closed)How?CIBC-led process8
Appendix 1 – 2012 Publicly Announced DealsWho?Represented Xtend and its private equity sponsor 32 Degrees Capital in a sale to LoganInternationalWhat?Sale of the developer of a proprietary tool that enhances horizontal drilling effectiveness byintroducing a variable frequency into the drill string that is designed to mitigate the effects ofwell-bore frictionWhere?CalgaryWhen?Q1 2012 (Closed)How?Negotiated Transaction9
Appendix 1 – 2012 Publicly Announced DealsWho?Represented Canbriam in private equity financings by Warburg Pincus, ARC Financial, GEPension Fund, BlackRock and Ontario Teachers Pension PlanWhat?Private equity financings for an unconventional gas developerWhere?CalgaryWhen?Q2-Q3 2012 (Closed)How?Negotiated Transactions10
Appendix 2 – Description of Non-public Deals11In 2012, we also represented:• the owners of an oilfield services rentals company in connection with the sale of the business to astrategic buyer;• the owners of a specialized oilsands drilling company in a sale to a strategic buyer;• a private equity-sponsored oilfield services company in connection with two platform acquisitions;• a private equity-sponsored oilfield services company in connection with two acquisitions;• a private equity-sponsored financial services business in connection with two roll-up acquisitions;• a private equity fund in connection with its investment in an exploration and production company;• the owners of an oilfield services real estate assets in a sale to a private equity group;• a major hardware distributor in connection with the acquisition of a regional lumber distributor;• a family office in connection with several investments and real estate investment projects;• an engineering consulting firm in connection with a partner buy-out; and• multiple parties in connection with unsuccessful bids and pending transactions.
Appendix 3 - Approach to Mandates• We offer low-ego, high-performance, client-centric and timely deal advice. We prideourselves in being very responsive.• We put our clients first, listen, and leverage our deal experience and best practices toexecute transactions efficiently and cost effectively.• We think critically, anticipate problems, pay attention to detail and use creativity toresolve legal and business issues that arise during the course of transaction.• We keep our core teams small to keep costs down and only include specialists on aselect, as-needed, basis.12
Appendix 4 – Gowlings M&A Overview• Gowlings’ M&A professionals are focused on middle-markettransactions across Canada.• In 2012, Gowlings’ strength in this space was reflected in thefollowing league table placements:13Canada#1 law firm for Canadian M&A by deal count (Thomson Reuters)#2 law firm for Canadian M&A by deal count (Bloomberg)#4 law firm for Canadian M&A by deal count (mergermarket)Global#2 Canadian law firm for global M&A by deal count (Thomson Reuters)#1 Canadian law firm for global mid-market M&A by deal count(Thomson Reuters)#1 Canadian law firm for global small-cap* M&A by deal count(Thomson Reuters)#5 Canadian law firm for global M&A by deal count (mergermarket)* Thomson Reuters defines “small-cap” as deals up to US$50 millionin value.
Appendix 5 – Biographies14Pierre Magnan, PartnerM&A and Private Equity403email@example.comPierre Magnan is a partner based in Gowlings Calgary office. His practice is focused on M&A, private equity buy-outs andfinancing transactions.Pierre leverages industry relationships for capital raising and deal sourcing, and leads multi-disciplinary teams to efficientlymeet client needs. He represents public and private companies, private equity sponsors and investment funds, and serves asdirector and corporate secretary for oil & gas, oilfield services and technology companies.Bar Admissions & EducationPierre is called to the bar in Alberta, Ontario, New York, England & Wales. He is a graduate of Cambridge University and theUniversity of Ottawa.Rankings & RecognitionRated AV® Preeminent™, Martindale-Hubbell’s® highest Peer Review Rating, in Mergers, Acquisitions and Divestitures,Corporate Law and Banking LawThe Best Lawyers in Canada® 2013Queen Elizabeth II Diamond Jubilee Medal 2012Canadian Legal Lexpert® Directory 2012Who’s Who Legal 2011Who’s Who Legal: The International Who’s Who of Business Lawyers, 2011The International Whos Who of Business Lawyers, 2011Oilweek Magazine, 2011 - Rising StarTeaching & Community InvolvementCanadian Bar Association, Business Law Section (South), Executive Member.New York State Bar Association, International Section, Executive Member.Faculty of Law, University of Calgary, Guest Lecturer, 2011 - 2012, Business Clinical Course.Faculty of Law, University of Calgary, Lecturer, 2010, Unjust Enrichment.Faculty of Law, University of Calgary, Lecturer, 2002-2008. Advanced Business Transactions, the mergers and acquisitionscourse.Recent PublicationsOilfield Services Dealmaking: Legal Considerations, Calgary CFA Society Oilfield Services Course, December 3, 2012Why do deals fall apart? An Advisors Prospective, Divestopedia, September 22, 2012Association of Corporate Growth, Calgary Private Equity Panel, March 20, 2012Private Equity Sponsorship: Downstream Deal Fundamentals, Gowlings Presentation, September 23, 2011Avoiding Price/Value Inversion in Private Company M&A, Calgary CFA Society, June 2, 2011
Appendix 5 – Biographies15Martin Mix,PartnerCorporate Finance and M&A403firstname.lastname@example.orgMartin Mix is a partner in Gowlings’ Calgary office and a member of the Corporate Finance and M&A Group. His practicefocuses on domestic and cross-border corporate finance and mergers and acquisitions transactions as well as private equitytransactions.Martin also acts for public and private issuers as well as underwriters on a range of transactional matters, including public andprivate debt and equity offerings, reorganizations and recapitalizations. Martin also regularly provides advice on corporategovernance and securities regulatory compliance matters to various issuers.Greg Lindsey, PartnerTax403email@example.comGreg Lindsey is a partner in Gowlings’ Calgary office and is the leader of its Tax Practice Group. He practises in the area oftax law, with a focus on corporate acquisition and reorganization tax planning.Greg has extensive experience in: high net worth, succession, family office and related tax planning; mergers and acquisitionstax planning; cross-border acquisitions and other international tax issues affecting foreign corporations; private equity andhedge fund formation and structuring including inbound and outbound financings and related business arrangements.Rankings & RecognitionThe Best Lawyers in Canada® 2013Scott McLeman, PartnerBanking403firstname.lastname@example.orgScott McLeman is a partner practising in Gowlings’ Calgary office in the area of business law with an emphasis on financialservices, real estate and diversified lending. He is the head of the financial services group in Calgary and has extensiveexperience in secured transactions for lenders and borrowers,M&A, sales of private businesses, corporate governance (incorporation, reorganization and dissolution of companies andadvice to shareholders, officers and directors) as well as commercial real estate acquisitions and sales.Patrick Burgess, PartnerOil & Gas403email@example.comPatrick Burgess is a partner in Gowlings Calgary office, and is the head of the Calgary Energy, Infrastructure and MiningIndustry Group. Patrick has more than 27 years experience practising primarily in energy law, and his approach to files onbehalf of his clients has always stemmed from his belief that he is retained to facilitate transactions. Practising all aspects ofenergy law, Patrick has extensive experience in domestic and international oil and gas property acquisitions and dispositions,property exchanges, and diverse joint venture transactions. For over 27 years Patrick has negotiated and drafted a variety ofcontracts relating to all aspects of the energy industry.Rankings & RecognitionNamed one of Albertas 50 Most Influential People, Alberta Venture Magazine, 2010Deal Team of the Year, Canadian Dealmakers, 2009Leading practitioner, Energy – Oil & Gas, Canadian Legal Lexpert Directory
Appendix 5 – Biographies16Maxine Mongeon,Senior AssociateCorporate Finance and M&A403firstname.lastname@example.orgMaxine Mongeon is a senior associate in Gowlings’ Calgary office practising in the Corporate Finance and M&A Group. Herpractice focuses on corporate finance, M&A, private equity buy-outs and securities transactions.Maxine has experience in mergers and acquisitions of both public and private companies, private placements, corporatereorganizations, private equity fund formation, real estate financings, corporate governance, limited partnership agreements,public offerings, capital pool transactions, stock exchange listings and continuous disclosure matters. Maxine also regularlyadvises clients on day-to-day corporate and commercial matters and securities and corporate law compliance.Maxine has advised public and private companies of varying sizes in the oil and gas industry, oilfield services sector,technology sector and real estate sector.Steve Will,Senior AssociateCorporate Finance and M&A403email@example.comSteve Will is a senior associate in Gowlings Calgary office. He practises primarily in the areas of mergers and acquisitions,private equity, corporate finance and securities.Steve has experience in public offerings, private placements, mergers and acquisitions of both public and private companies,capital pool transactions, debt financing transactions for both lenders and borrowers, securities enforcement and compliancematters, stock exchange listings and compliance matters (Toronto Stock Exchange and TSX Venture Exchange), corporatereorganization, limited partnership matters, corporate governance and continuous disclosure matters.Kristina Athanasopoulos is an associate in Gowlings Calgary office, practising in the Corporate Finance and M&A Group.Her practice includes mergers and acquisitions, securities law, as well as general corporate and commercial law matters.Prior to joining Gowlings in 2010, Kristina completed the NAFTA Leaders Program at The Washington Centre for Internshipsand Academic Seminars. She also was an intern and volunteer at the Embassy of Greece and a program assistant with theHuman Rights Task Force at The United Nations Association in Washington, D.C. She also served as a short-term researchassistant at Queens University, School of Business.Kristina Athanasopoulos, AssociateCorporate Finance and M&A403firstname.lastname@example.org
Appendix 5 – Biographies17Brian Lee, PartnerIntellectual Property604email@example.comBrian Lee is a partner in Gowlings’ Vancouver office, and is head of the office’s Intellectual Property Department and co-chairof the offices Technology Industry Group. Brian practises exclusively in the area of intellectual property with an emphasis onpatent matters. His patent and technology law practice focuses on mechanical and materials engineering, electrochemistry, andcomputer-implemented and software technologies.Brian has extensive expertise on obtaining patent and industrial design protection, conducting intellectual property due diligenceand technology audits, managing patent disputes including assessing patent infringement and validity risks and directing orsupporting patent litigation, and assisting companies in managing their intellectual property portfolios.Birch Miller, Senior AssociateEmployment Law403firstname.lastname@example.orgDarren Taylor, PartnerReal Estate Law403email@example.comDarren Taylor is a partner in Gowlings’ Calgary office, practising in the areas of commercial real estate, business law andmortgage enforcement and recovery services.Darren acts for a number of developers and business clients with respect to their real estate matters. He has representedclients with respect to the acquisition, financing and disposition of various real estate assets including bare land, industrialbuildings, office towers and shopping centers. In addition to the acquisition of properties, he advises clients with respect to thedevelopment of the properties.Laurie Livingstone is a partner in Gowlings’ Calgary office, practising in the areas of commercial litigation and administrativelaw.Her practice includes matters heard in the traditional court system as well as matters before private arbitration panels. In hercomplex commercial litigation practice, Laurie has acted for large utilities and other regulated companies in product liabilityactions, complex contractual disputes and disputes revolving around legislative interpretation.Laurie Livingstone, PartnerLitigation403firstname.lastname@example.orgBirch Miller is an associate in Gowlings Calgary office in the advocacy department. Her practice focuses on employment,labour and privacy law.Birch has assisted employers on human resource, labour relations and human rights issues, including accommodations in theworkplace, alcohol and drug testing policies, ill and disabled employees and harassment in the workplace. She has alsoassisted employers in developing privacy policies and procedures for dealing with privacy access, requests and complaints.Jennifer Hanna is an associate at Gowlings Calgary office, practising in the area of tax law.Jennifer has extensive experience with structuring and implementing numerous domestic and cross-border public and privatemergers, acquisitions, financings and complex reorganizations.Prior to joining Gowlings, Jennifer practised tax law with the international tax and M&A tax practice groups in the Calgary officeof a Big-4 accounting firm, and was previously with the tax group of a national law firm in Calgary and Toronto.Jennifer Hanna, Senior AssociateTax403email@example.com