Canadian Lawyer InHouse

21 CANADIANLAWYERMAG.COM/INHOUSE NOVEMBER 2016 sometimes a tough pill to swallow for an inward-coming investor." Environmental and political factors are closely linked, according to Grant Mc- Glaughlin, a corporate and securities part- ner at Goodmans LLP, who warns that conditions are changing in the Canadian market. "The carbon reduction plans inter- nationally and the provincial governments who are enacting plans to deal with meeting those goals leads to political risk," he says. "And then particularly in Alberta, with the transmission and distribution regime, which means pipelines." Alberta's new car- bon reduction initiative will be one of the most stringent in Canada. Securities laws on both sides of the Canadian/U.S. border can also throw up some strange speed bumps. For example, Canadian securities law has a three-part test to determine if an acqui- sition is signifi cant. TransCanada's was, which meant that it had to get Columbia's fi nancial statement translated into French. Helping the U.S. general counsel under- stand this unfamiliar Canadian require- ment was one of many tasks. "We had to co-ordinate with the target's auditors, hire translators, fi le various consents, all of which affects the time for the prospector's fi ling," says Johnston. This compliance and due diligence to-do list was part of a two-track process, the other being fi nancing. This draws on a whole oth- er set of legal skills. TransCanada fi nanced its deal in an all-cash transaction rather than giving shares to Columbia sharehold- ers. It raised the money using a mixture of instruments including asset sales, bridge credit fi nance and also subscription receipts. Buyers of these receipts were able to convert those receipts to common TransCanada shares, but only if the Columbia deal closed. Juggling these processes can be daunting for a general counsel, even one with an ex- ternal fi rm to help, which is why it is vital to have experts in various areas of law on the team, enabling you to handle a diverse range of issues as they come up. A well-fl eshed-out team can include ev- eryone from tax and securities lawyers through to benefi t and pensions experts prepared to handle compensation issues. Typically, that team will have a quarter- back as the primary representative to the client, says John Macfarlane, corporate partner at Osler Hoskin & Harcourt LLP, who advised Emera on its acquisition of TECO Energy. "Often the longest and deepest relation- ship with the client will be through a cor- porate lawyer," says Macfarlane. This law- yer will usually be the key point of contact but will bring in other lawyers in particular practice areas as necessary. This role is crit- ical, as it will be this person who identifi es issues early on and routes them through to the right people. This team will need a central data room to help them navigate the due diligence pro- cess, enabling them to collect and evaluate the appropriate data in all of these areas. This asset should be set up early in the pro- cess, but it isn't always possible, points out Macfarlane, especially if the bid is hostile, for example. "It makes it diffi cult obviously, but you have to do the best you can, with industry resources you may have, or maybe you have someone working with the organization that was previously with the entity," he says. CLOSURE AND COMPLIANCE When the deal has been signed and the an- nouncements made, there is a period before it passes the necessary compliance hurdles and closes. This is not the point at which to relax, as other inter-jurisdictional regula- tory surprises may crop up. When negotiating an acquisition of a U.S. fi rm, for example, Canadian operators will quickly run into regulatory issues with the federal government. After the Columbia transaction closed, the U.S. fi nancial regu- lator, FINRA, sent Johnston a list of peo- ple who had traded shares prior to the an- nouncement of the deal. She had to fi nd any matches between the FINRA list and people at TransCanada that knew about the deal. "We don't do a lot of large public deals, and I was thankful that one of my outside counsel had told me from the get-go to keep a good list of everybody who knows," John- ston says. She had a list of everyone involved in the transaction, along with the dates when they became involved. "It wasn't so much of a concern about any trading violations. It was just the onerous task of putting all the information together." Things can get far more political at a local government level, says James Reid, a partner in the capital markets, M&A, cor- porate and energy practices at Davies Ward Phillips & Vineberg LLP. The U.S. is a patchwork of state-level regulations. "In Canada, those regulators are relative- ly independent of politics. In the U.S., you can fi nd a range," says Reid. Municipal pol- iticians, competitors and ratepayers groups can all get in the way, and because many regulators in the U.S. are elected offi cials, local elections can complicate the timing of a deal. The regulator who was your friend yesterday may be replaced by a tougher ne- gotiator tomorrow. "These regulatory approvals are a time for everyone to come out of the woodwork and try to get something," says Reid. So Ca- nadian lawyers need a good "ground game." Typically, they'll need to work with local lawyers who understand the formal and in- formal landscape there. This issue came up for Ontario-based renewable energy fi rm Biox Corporation, which bought a 50-million-litre biodies- el facility in Sombra, Ont. from Methes It led to a number of interesting conversations with Columbia's management on what if any impact this could have on a merger successfully closing, and in a timely manner. CHRIS JOHNSTON, TransCanada Corporation

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