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Top Canadian public M&A legal developments in 2022

Author(s): Alex Gorka, Emmanuel Pressman, Jeremy Fraiberg

Jan 11, 2023

The pace of Canadian M&A activity slowed in 2022 relative to record deal activity levels in 2021. Inflation, a higher interest rate environment and geopolitical risks all contributed to volatile markets and greater macroeconomic uncertainty. However, activity levels remained robust across a range of industries and there were several notable regulatory and deal-making developments. We discuss the use of derivatives in toehold accumulation strategies, the implications of the delayed appeal of the Cineplex/Cineworld decision, recent examples of public M&A deals being announced on the basis of term sheets, modifications to dual class share structures and recent developments in Rio Tinto’s proposed take-private acquisition of Turquoise Hill Resources.

Toehold accumulation strategy

Buyers will often consider whether to acquire a “toehold” position in a target prior to making an offer or proposal to acquire it in its entirety. Toehold positions can allow the buyer to acquire the toehold shares without paying a premium. They also provide the buyer with some leverage when negotiating with a target’s management. In addition, toeholds can deter potential rival buyers and increase the possibility of recouping transaction expenses should a competing bid succeed. Further, they permit the offeror to assert rights as a shareholder under corporate law, including the right to requisition a meeting of shareholders...

Read or listen to this Legal Year in Review 2022 article