Lexpert Magazine

www.lexpert.ca 7 Gingrich's colleague at Fasken, Sean Stevens, co-leader of the firm's corporate securities, mergers & acquisitions practice, says the uncertainty surrounding tariffs and their impact means buyers and sellers will be turning to their investment and legal advisers to find creative methods to make deals happen. Stevens says earnouts have already been used in increasing numbers to help bridge the valuation gap between buyer and seller. However, "introducing tariffs into the equa- tion means earnouts will likely be more complicated than what we typically see." He says earnouts are normally used to allow the seller to share in the business' future value, but they will now play a more complex role in determining the risks and rewards of a deal based on the potential impact of any tariffs. "ese will be more challenging to dra, given the numerous scenarios that can play out," he says, so lawyers will need to cra tools to balance those risks and rewards. Like other lawyers involved in M&A, Blake, Cassels & Graydon LLP partner Cheryl Satin says the signs for 2025 point to an uptick in dealmaking over 2024, thanks to the trend toward lower interest rates and the cash that private equity and strategic players were sitting on. But the tariff threat casts a shadow on some of that optimism, at least for the short term. "With uncertainty, it's difficult to price a deal and determine which sectors will be most affected," Satin says. Still, Satin says her optimism about M&A in 2025 hasn't taken a complete 180 turn. "We just have to have a better sense of how things will unfold so that people will be in a better position to reframe their thinking." She adds that while uncertainty can cause paralysis, it's ultimately "only for a blip of time." Whether businesses pivot their supply chains and target markets, divest non-core assets, or change geographic focus, "all these factors can breed M&A activity – businesses can't remain stagnant." Blakes partner Jacob Gofman echoes Satin in saying there are still many reasons to think M&A activity will ultimately survive whatever headwinds are caused by tariffs. "ere are still lots of Canadian buyers and sellers out there. "is isn't the first time that markets have had to deal with uncertainty and disruption," he says. "These factors may even create new opportunities and become a catalyst for companies to reas- sess things and think strategically to find growth opportunities," Gofman says. He is hopeful there will be more clarity on tariffs, but there is good reason to remain positive about mergers and acquisitions. Another trend that Gofman expects to continue in dealmaking is "go private" transactions where publicly traded enti- ties are taken off the market. "There's a general perception that public compa- nies aren't getting the valuations they deser ve in the stock market – they're not raising equity, and they still have to incur compliance costs. This will fuel the drive to go private." Elliott Greenstone, a partner with Davies Ward Phillips & Vineberg LLP, says that despite the uncertainty, he remains "the eternal optimist" when it comes to dealmaking. e world has been through tough times before, the 2008 crash and, more recently, the COVID-19 pandemic, and businesses – and the economy – managed to survive. While things might get tough, ulti- mately, the world goes on, he says, "and deals still need to be done." Greenstone also points out that the lower Canadian dollar will likely encourage foreign buyers to consider Canadian assets. e likelihood of interest rates falling to stimulate a so economy brought on by the tariffs will also help drive M&A activity as the cost of capital becomes cheaper. "I think you should expect to see slower deals, but not necessarily fewer deals," he says. "People are still craving to do transactions, and there's a good amount of dry powder there in the private equity world." "Nobody wants to pay the same price for a business that isn't as valuable as it once was" Marshall Eidinger BENNETT JONES LLP "The uncertainty concerns not only the impact of tariffs on a particular company or sector, but also the double whammy of their effects on the markets and the dollar" Sarah Gingrich FASKEN MARTINEAU DUMOULIN LLP

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