Complexity, tighter deadlines all part of increased M&A activity

As mergers and acquisitions in Canada continue their upward trajectory, lawyers are finding clients are anxious to close their deals, lawyers told attendees at a webinar on complexity in the M&A process.

“The deal frenzy continues,” says Alysha Manji-Knight, senior associate with Davies Ward Phillips and Vineberg LLP in the firm’s foreign investment law group practice. “We don’t see anything on the horizon that’s indicating it is going to be slowing down,” she told attendees at a webinar on Nov. 9, put on by the Legal Innovation Forum.

Manji-Knight added that clients — perhaps because things had slowed down during the early part of the COVID-19 pandemic, are “gung-ho” about closing these matters as quickly as possible, and that includes obtaining regulatory clearances.

“What we’ve noticed is that in some purchase agreements, there is an inclusion [related to] completing what we would call a second-phase review,” she told those attending the webinar. “That is, if the Competition Bureau would like to get further information about [a] deal, they can issue something called a supplementary information request.”

Typically, the time for such a request is 90 days, “but in agreements, we’re noticing clients are including shorter timeframes, so 60 days, 75 days. This might not seem significant, Manji-Knight says, but “it compresses the timeline, and can raise challenges.” So, for those transactions where notice must be given to the Competition Bureau, notification must go out as soon as possible, perhaps as soon as five days after the deal is signed.

Maura Grossman, a research professor at the University of Waterloo as well as principal of Maura Grossman Law, said that over the course of the pandemic, businesses involved in transactions have been using many different platforms to conduct business related to M&A - Zoom, Slack, Microsoft Teams are just a few examples.

“All of these different tools have led to a proliferation of sources,” she said, and the definition of what is a “document” has changed. “So is a document an entire Slack channel, is it a certain conversation within the Slack channel and so forth. These are decisions that we didn’t have to make before.” . . . So, you’ve got that complication of additional new and challenging sources, with volumes of data, and this data, including personal information, and privileged information, and all kinds of other stuff.

Manji-Knight pointed out the competition bureau “defines what they call a record very broadly.” She added “record” means emails or other correspondences, mobile phone text messages, messages using third-party messaging applications, memorandums, pictorial or graphic work, spreadsheets or other machine-readable records, and any other document-sharing material regardless of physical form or characteristics.

Carolyn Anger, a senior director at Consilio, which provides eDiscovery, document review, risk management and legal consulting service, noted that the volume of work and information in this area has been “ballooning.” In the world of data, she said, “we just keep generating more and more data and this is a trend that we will continue to see going forward.”

Without a thorough document review, Manji-Knight noted that if a matter ends up going to court, there could be emails put on the public record that may not be relevant to the case but could implicate some personal things about an employee they would not want out there. “It is a risk analysis that each client needs to consider. “You have to weigh out the cost and the time [for document review] versus possibly incurring even more costs” if an investigation were launched.

Regardless of size, the panellists noted that the bureau could investigate or review any deal under the Competition Act. “It could be two small companies that are merging that don’t trip the threshold for formal notification,” Manji-Knight said. “As far as the bureau is concerned, if that merger could cause a lessening or substantial lessening of competition, they do have the tools to request significant amounts of information.

“It’s important to be mindful that even smaller companies do need to be aware of where their data is, and to be prepared to the extent that the Bureau [may] come and request information.”

Once the competition bureau is notified about a merger, it has 30 days to clear the matter. It may also ask for a supplementary information request, giving the parties to a merger or acquisition 90 days to comply. “As well, if there are any questions that have not been complied with during that 90-day framework, there are also ‘refresh’ obligations,” Manji-Knight said, which could mean pulling put a fresh set of data.

Once both parties to a merger comply with the supplementary information request, the Bureau has an additional 30 days to consider the information and make a decision. It could then file an application to the court to prevent the merger or to clear it.

Grossman said a review of data can be done by computer software that is “trained to make a distinction between relevant and non-relevant information.” Typically, there are two phases, a training phase and a review phase. There are two phases: a training phase and then a distinct and separate review phase.

There are also ways in which not every document has to be reviewed, “though most of current protocols require that.”

“That’s a decision that a client and the law firm is going to have to make,” Grossman said, in addition to deciding what keywords or search terms to use.

Anger said clients and lawyers must consider what vendor is used to provide these services and what methods they employ. “If you are going to have documents and data rolling into your database continuously, so say over a month time,” she said, “you have to make sure everyone understands.”

As the data come in, “the system will pick it up and move it into move it into the algorithm that easily accommodates rolling data.”