Toronto Legal Blog

Insurance industry still hot with mergers and acquisitions

The insurance industry continues to be a force to be reckoned with when it comes to business transactions in the country. A company based out of the states is the latest to make news on the mergers and acquisitions front by scooping up a major consulting firm based in Ontario. Hub International Canada's latest acquisition -- GMS Insurance Inc. -- strays from its previous deals last year, which were mainly out of the western part of the country.

Hub's president said those deals weren't made specifically because they were located out west, but deals were inked simply when the favourable ones presented themselves. Basically, she said, it's timing more than anything. The president also said that Hub looks to acquire businesses that fit in with the company's niche and that have the capacity for growth in the industry. 

Mergers and acquisitions activity helps lessen trade deficit

The trade deficit in the country is getting smaller, according to government statistics. Some of that, experts believe, can be attributed to direct investment in Canada due to increased mergers and acquisitions activity, but also reflects a narrower deficit on goods, according to recent Statistics Canada numbers. The trade deficit is now at the lowest it has been since 2008.

Direct investment in Canada increased to more than $21 billion in the second quarter of last year, up from $12 billion in the first quarter. Statistics Canada said foreign mergers and acquisitions in the country is the chief reason for the increase. Much of that activity was in the insurance and finance sectors.

Commercial litigation: Federal gov't sued by software developer

The Canadian government is being sued by a software developer over allegedly not paying a user fee for using intellectual property. The commercial litigation suit between the Ontario developer and the government stems from the allegation that Employment and Social Development Canada has been using the company's source code without a proper licence -- an allegation the government disputes. The company's management team says this supposed misuse was instrumental in the company not meeting its 2019 financial projections and contributed to layoffs and shareholder problems.

Although the government would not speak to particulars of the case now before the courts, it did allege that the company is the guilty party for using government data to develop its software. The lawsuit is born out of a 2017 $500,000 contract between the government and the developer. It involved the transfer of information between databases. 

Business and commercial: High-end cannabis lounge to open in 2020

The world is changing for the well-heeled. In addition to swanky lounges where the upper crust can enjoy a high-priced designer cocktail at the end of the day, they will soon be able to order an expensive strain of marijuana edibles at a posh cannabis lounge set to open in 2020. This lounge will be the first of its kind in Ontario and with its opening, the business and commercial world will likely be bracing for more of the same. The 8,000-square-foot space will be located in downtown Toronto.

The project will be MoCanna's first major foray into the commercial cannabis world. The lounge, called byMinistry, is expected to offer its clients three separate cultural experiences. There will also be areas designated for drinking and dining, cooking classes and workshops with guest chefs. The owners say they have the opportunity of creating a flagship enterprise upon which others may be modelled, and they want to do it right.

Mergers and acquisitions: Transat, Air Canada deal tightened

The Transat/Air Canada deal continues to heat up. When it comes to mergers and acquisitions in Canada, none has been getting more press than the possible union between the two major airlines. And Air Canada has just upped the ante by $200 million to an increased offer of $720 million. The board of directors at Transat has told its shareholders they should take the deal. 

Groupe Mach Inc. had been trying to acquire a minority stake in Transat to thwart the Air Canada deal, but shareholders' heads were turned when Air Canada increased its bid. Shareholders are expected to vote positively in favour of the airline's proposal in the coming weeks. If all goes as planned, the deal will close in the early part of next year.

Mergers and acquisitions: Cybersecurity tops list of concerns

Cybersecurity is of paramount importance in today's business deals. Mergers and acquisitions in Canada fell in the first quarter of this year and much of that is being pinned on increased measures to thwart cyber theft. Both buyers and sellers of businesses are including cybersecurity as being at the top of the list when it comes to business purchases and sales. 

Cybersecurity issues concern the theft of personal data, which has reared its ugly head again as the data base of a prominent financial institution was hacked into recently. That compromised millions of Canadians' personal information. When businesses or business people are looking for businesses to buy, they want to make sure assets have been properly protected. Purchasers want to see that protections are in place for customers, suppliers and employees. 

Business and commercial: Canada wants trade reassurances from UK

Canada is looking for some reassurances regarding its overseas trade deals. Politicians here wants more than optimistic talk from the United Kingdom's new Prime Minister regarding the U.K.'s business and commercial dealings with Canada, which likely will affect Canadian entrepreneurs. Canada's business owners want to see trade continue to grow between the two countries even on the heels of the U.K.'s exit from the European Union.

Those in business worry about the economic impacts of the U.K. leaving the EU -- coined as Brexit and despite bargaining with Canadian trade negotiators, the two countries have yet to reach some formal trade deal. Since the U.K. hasn't reached an exit deal with the EU it offered other nations access to 87% of what the U.K. imports free of tariffs without the need to reciprocate when it comes to British exports. But Canada looked at that option as the U.K. undercutting its preferred trade deal with Canada. U.K. media reports indicated that the U.K. was furious with Canada, which failed to give the former Prime Minister a political win, but Canadian government officials insist this is not the case.

Mergers and acquisitions: Cybersecurity crucial during deals

With more and more insurance companies joining forces, actions are being ramped up to thwart cybertheft. News recently released shows that there have been more mergers and acquisitions in the insurance industry in Canada over the last year. In fact, a well-known mergers and acquisitions advisory firm says there were more than 625 brokerage and agency transactions made public in Canada and stateside last year -- significantly up from 2017.

Cybersecurity is of the utmost importance during deal making between insurance companies. A cybersecurity program will also help buyers know that security issues have been addressed and personal information won't be made public. Transactions could be affected if private information is leaked or stolen. This type of security is so paramount that many buyers are asking to interview members of a firm's cybersecurity team before proceeding with offers.

Business and commercial: CannTrust halts cannabis production

One of the country's major cannabis producers has stopped production amid allegations by Health Canada officials that the company was producing product illegally. The business and commercial world was sent reeling recently as CannTrust's market shares plummeted and the company voluntarily halted production at its headquarters in Vaughn, Ontario. The company is accused of growing cannabis at its Pelham, Ontario location between Oct. 2018 and this past March -- in rooms that were apparently unlicensed to do so.

The company has set up an independent committee to look into allegations of rule-breaking at the Pelham facility. Company shares have dropped 40% as a result of this recent allegation by Health Canada.  A former CannTrust employee apparently blew the whistle on the company saying that CannTrust was following Health Canada rules for a few months, then decided to move in its own direction.

Mergers and acquisitions: Transat snubs second bidder

A second bidder for one of Canada's major airlines has withdrawn its bid. On the mergers and acquisitions news front recently, Group Mach has withdrawn its offer for Transat A.T. since the company didn't acknowledge its offer despite it being higher than Air Canada's bid. Group Mach offered $14 a share, while Air Canada's offer stands at $13 per share, or $520 million.

Transat has chosen not to entertain the offer put forth by Group Mach despite the fact that agreement between Air Canada and Transat stipulates that Transat can entertain other offers of at least $14 per share plus a $15 million break fee for Air Canada. Transat shareholders vote on the Air Canada proposal currently on the table, which is on Aug. 26. Air Canada has the opportunity to match any potential competing bids for the airline.

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