The Lexpert Special Editions profiles selected Lexpert-ranked lawyers whose focus is in Corporate, Infrastructure, Energy and Litigation law and relevant practices. It also includes feature articles on legal aspects of Canadian business issues.
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WWW.LEXPERT.CA | 2017 | LEXPERT 15 Bradley A. Freelan Fasken Martineau DuMoulin LLP bfreelan@fasken.com | (416) 865 4423 Mr. Freelan's practice is focused on corporate and securities law with an emphasis on mergers and acquisitions, shareholder activism and corporate finance. He has been involved in a significant number of contested situations, including hostile bids and proxy contests, and has significant experience advising boards and special committees in connection with such matters. Aaron J. Atkinson Fasken Martineau DuMoulin LLP aatkinson@fasken.com | (416) 865-5492 Mr. Atkinson's practice is focused on M&A, corporate governance and corporate finance. He has extensive experience advising on domestic and cross-border matters, including contested situations such as unsolicited bids and proxy contests, as well as financings, negotiated acquisitions and strategic alliances. He also advises boards and board committees in these matters and complex governance issues. IN 2013, in the wake of the high- profile proxy fight at Canadian Pacific Railway, we released our first proxy contest study, which analyzed all 87 formal board-re- lated proxy contests targeting Ca- nadian-listed companies for the five-year period ended December 31, 2012. Our findings—at least from a target's perspective—were startling but consistent with the outcome in the Canadian Pacific contest: dissidents had better- than-even odds of success (55 per cent) and had amassed a winning record in all but one of the five years studied. Our study also made clear that the number of formal board-related contests was on the rise and no company was immune from attack. Looking back over the last four years, it is clear that the landscape has shied dramatically. Aer peaking in 2012, the number of for- mal board-related proxy contests has been steadily declining. At the same time, management has turned the tables and established a winning streak of its own. 2016 was a particularly strong year for management in fighting formal board-related proxy contests: not only did the number of formal board-related contests decline to a 10-year low of seven, management also posted a near-perfect record, winning all but one of those contests. ese results are in stark con- trast to a management success rate in formal board-re- lated contests of 37 per cent in 2013 and a 50 per cent overall success rate in the past 10 years. One possible explanation for management's shi in fortunes is that more companies are engaging in ad- vance preparation by, among other things, proactively examining their businesses, engaging with sharehold- ers and addressing festering issues before they are viewed as an avenue of attack by shareholders. e data may offer some support for this thesis: in the past three years, dissidents' only success in formal board-related contests came against companies with market capital- izations of less than $50 million, being companies that might be expected to have minimal resources to devote to advance preparation or to mount a robust defence. On the other hand, we note that our studies focus only on formal proxy contests and do not capture ac- tivist activity in which a dissident solicited proxies on an exempt basis and without mailing a dissident proxy circular to shareholders or where the activist agitated PROXY CONTESTS IN CANADA: ARE WE WITNESSING A PARADIGM SHIFT? for change without soliciting proxies at all. In that regard, we note there were at least 16 addi- tional publicly disclosed activist situations involving Canadian- listed companies in 2016 and an unknown number of private ap- proaches by activists that were never publicly disclosed. Given that a formal proxy is oen the last resort when negotiations be- tween the activist and the target have failed, an alternative expla- nation to the shi in fortunes our studies have detected may be that, in many cases, management is simply settling with the activist before the dispute becomes a formal contest, and their winning re- cord in recent years is evidence of their choosing more wisely which battles to fight. We will continue to issue updates and commentary on the activist landscape in Canada. With the recent adoption of new, more board- friendly take-over bid rules in May 2016, it is possible that proxy contests will become a new avenue for hostile take-over suitors to pursue, thus potentially shiing the landscape again. You can download a copy of our 2017 Canadian proxy contest study at: http://www.fasken.com/en/canadian-proxy-contest- study-2017-update/