Lexpert magazine features articles and columns on developments in legal practice management, deals and lawsuits of interest in Canada, the law and business issues of interest to legal professionals and businesses that purchase legal services.
Issue link: https://digital.carswellmedia.com/i/834783
12 LEXPERT MAGAZINE | JUNE 2017 | RECENT DEVELOPMENTS IN BUSINESS LAW | and call option at the time of a qualifying acquisition, and if they wish to do so can re- deem their shares and keep their warrants. e additional $82 million in committed funds via an institutional private place- ment before announcing the transaction was a solid show of support from sophis- ticated investors, with Alignvest sponsor participation, and was a key part of manag- ing the redemption risk. In addition, how- ever, an extensive "re-marketing campaign" to both current Alignvest shareholders and interested new institutional shareholders was key, such that there was a good deal of liquidity as institutions that liked the busi- ness bought from those that might have otherwise chosen to redeem their shares. A 23-per-cent redemption rate, with no founder share give-up, is a very good result. LEXPERT: e due diligence process for this deal was described as "private-equity style." What was involved? Did it take a long time to complete the process? Slusarchuk: e due diligence process was thorough and more extensive than what we understand is the typical US SPAC due diligence process. While that made it more burdensome on Trilogy during the process, it was also reassuring, because it meant that Alignvest was a knowledgeable investor and was making a long-term investment de- cision. Also, as a result of that extensive due diligence process, which included Align- vest travelling to the countries in which the business operates, the new board members from Alignvest had a good appreciation of Trilogy's business and the local New Zea- land and Bolivian mobile markets. Romano: It was intense. Bolivia is not a country for the uneducated, and New Zea- land has very stringent foreign-ownership restrictions. It took several months. In ad- dition to legal due diligence, seller-side le- gal opinions, and financial and tax due dili- gence, there were also several other expert consultants involved in the process. LEXPERT: What was the most memorable or satisfying aspect of this deal? What will you take away with you? Romano: is was the first Canadian SPAC to complete its transaction with a low re- demption rate, the first with committed private placement capital before deal an- nouncement, the first with a US "up-C" structure, the first involving an emerging markets business, the first with high-yield financing in place that needed to be con- temporaneously renegotiated, and the first done by way of a plan of arrangement — and without dissent rights and with a 50-per-cent voting threshold, I might add — among other firsts. It was highly chal- lenging and was closed in a time of great market volatility. It was a new product that Stikeman Elliott was instrumental in designing. All of the parties involved were extremely sophisticated. It was both very stressful and very rewarding. Slusarchuk: e most satisfying aspect of the deal was successfully closing a compli- cated cross-border deal involving the very first Canadian SPAC qualifying transac- tion by way of a plan of arrangement and just the second ever Canadian SPAC quali- fying transaction. As SPAC qualifying transactions were relatively novel in Cana- da, the legal teams had to develop mecha- nisms and approaches that complied with regulatory requirements as well as meeting the business and deal needs. Morris: In addition to the SPAC qualifying transaction with Alignvest, that is, the Ar- rangement Agreement, Plan, Non-Offer- ing Prospectus, Voting Trust and Support Agreements, there were also a number of other counter-parties and regulators whose participation was integral to the overall deal. is deal required expertise and cre- ativity from a variety of legal and business groups on both sides of the table, and both sides of the border, all working together to achieve a closing. (For a summary and full list of legal advisors, visit lexpert.ca) ON THE TREND Investment M&A: Bulwark Against Decline A 10-year survey of Canadian M&A deals (over US$50 million) reveals that, while the number of transactions has fallen, investment plays — where acquirers in the financial sector pick up non- financial assets — have remained stable. In 2016, as a result, investor acquisitions made up 30 per cent of all M&A in the country, a 10-year high. GRAPHIC BY DAVID DIAS; SOURCE: THOMSON REUTERS