Legal news and trends for Canadian in-house counsel and c-suite executives
Issue link: https://digital.canadianlawyermag.com/i/50888
the assets for a much higher price, a majority voted to approve the deal on Feb. 11. While it's impossible to know what influenced shareholders' decisions that day, experts are increasingly point- ing to the pull of the proxy advisory services in these types of battles. Although the services are making their mark on a wide range of sharehold- er votes in Canada, including mergers and acquisitions, few in-house lawyers here seem aware of what they do. These proxy advisory firms, whose services are mainly used by large institutional investors, carry out lengthy research and analysis of a full slate of issues shareholders vote on. They weigh in on everything from governance issues, such as whether to support a slate of directors, to the viability of corporate transactions. And while most experts won't say institutional investors blindly follow the proxy advisers' edicts, all agree the opinions are powerful. Leslie O'Donoghue, chief legal offi- cer and senior vice president of business development at Calgary's Agrium Inc., an agricultural products and chemical products company, says proxy adviso- ry services are playing an increasingly noticeable role in contested proxy-re- lated matters in Canada. They have a particularly loud voice when it comes to contested director battles, which often arise when the directors of a com- pany targeted for a takeover are up for nomination, and the acquirer proposes an alternate slate. This is a key step in contested mergers, says O'Donoghue, as both sides seek control of the compa- ny's decision-making structure. "You'll find that a lot of the indexed funds, and many other shareholders, really look to the advisory services, and I wouldn't say follow it routinely, but take them seriously into consideration in deter- mining the manner of their vote." That means dealing with the proxy services becomes a vital aspect of most proxy battles, but these battles are not won solely based on which side is back- ing the perceived "better directors." You'll fi nd that a lot of the indexed funds, and many other shareholders, really look to the advisory services, and I wouldn't say follow it routinely, but take them seriously into consid- eration in determining the manner of their vote. LESLIE O'DONOGHUE, Agrium Inc. Attention must also be turned to valu- ation, which creates a significant role for financial specialists in demonstrat- ing that the offer is compelling and strategic, says O'Donoghue, and the advisory services are keen to scour those details. "So your preparation is all about presenting your case, present- ing the valuation metrics, staying in very close contact with the advisory services, launching a very aggressive and compelling — from a communica- tions standpoint — campaign with the target's shareholders." McCarthy Tétrault LLP Vancouver partner Richard Balfour has been involved in a long list of deals on which proxy advisory services have weighed in and says one of the most impor- tant things on in-house counsel's to-do list during a transaction should be a meeting with representatives of such services. This will allow the company to get its story in front of the ser- vice, and hopefully help improve its view of the company and its posi- tion on the proposed deal. However, the proxy services typically guard their independence, which can make it hard to land a meeting, says Balfour. But if nothing else, he says, some face time with representatives can ensure the INHOUSE APRIL 2010 • 19