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the street from you," says Hanna. This ties back to a high propensity for deals to fail as they go through due dili- gence, and is one reason why Canadian companies are successful at acquiring other Canadian companies — there's a familiarity with the market. But quality of engineering, prod- ucts and solutions, as well as a strong eral counsel for ViXS Systems Inc. for the past year, hasn't seen much M&A activity in her latest role. But she's seen plenty in her 12 years working in the semiconductor industry; one company she worked for, Tundra Semiconductor, was acquired by a U.S. firm. Over the years she says she's seen a move toward Cheryl Foy, who has served as gen- It's not something where there's a broad universe of potential buyers. It's driving more targeted M&A that has great value to one or two buyers. CRAIG HANNA, PricewaterhouseCoopers to buyers from the U.S. and around the world. As a result, we're seeing a lot of smaller (and less headline-grabbing) deals taking place, particularly around IT outsourcing and consulting. A survey earlier this year by glob- workforce for creating globally competitive businesses, are attractive al law firm Morrison & Foerster LLP and tech market intelligence firm 451 Research found that tech companies in the U.S. also seem to be focused on deals closer to home — a surprise, amidst talk of capturing China and other for- eign markets. There, more than 60 per cent of respondents said their potential acquisition targets are largely or wholly U.S.-based. Only 12 per cent says their M&A activity is either mostly or entirely occurring outside the U.S. Their biggest concern in pursuing cross-border acquisitions is integration risks with foreign firms. Other fac- tors include concerns over transaction risk and lack of visibility into overseas markets. However, over the past year we've consolidation in the sector — and every time the economy suffers it seems to be more pronounced. Tech M&A hasn't gone away, says semiconductor Chris Hewat, a partner in the Toronto office of Blake Cassels & Graydon LLP. O also seen some big deals: IBM acquired Platform Computing, Rogers bought Blink Communications and Microsoft sold its core wireless patent portfolio to MOSAID Technologies — to name a few. For a number of Canadian companies, it's a regular part of their ongoing busi- ness available for smaller companies is also recovering. But financing is still limited com- strategy. And private financing pared to the U.S. "The relative lack of private capital is still driving smaller private companies into the hands of the bigger companies," says Hewat. "They're not able to stay the course and grow their own company. the U.S. or further abroad at acquisition targets because of the relative strength of the Canadian dollar. We're also seeing a continued focus ing M&A in the tech sector. Aside from disruptive technologies, Cana- dian tech firms have looked either in on intellectual property and patents, says Frank Arnone, a partner in the Toronto Handling hostile bids and CEO of ITAC. "The issue is, if there's a hostile bid toward a public company in Canada, 99.9 per cent of the time that company would be sold." The company's board of directors has little recourse in Canada — but ne issue being tackled by the Information Technology Associa- tion of Canada is the way tech M&A is handled in Canada. "It's not that M&A is good or bad, it's part of the ecosystem we live in and it needs to happen," says Karna Gupta, president technology, but rather a delivery method that is replacing the old licensing model for software — is driving economies of scale that allow smaller companies to compete with much larger ones. That is one of many factors driv- But SaaS — which is not a new " this is not the case in the U.S. where the board and management could go to court and ask for the deal to be suspended. In the technology sector there is a significant valuation difference between the TSE and NASDAQ. Valuation is lower in Canada for tech firms, says Gupta, and there's not as much risk capital available. Together, this creates conditions that could be volatile for a public tech firm. Between 2004-2012, more than 300 tech firms were acquired, says Gupta. "If you're trying to build a knowledge economy, it creates a situ- ation where we don't have the requisite number of experienced business leaders at a CEO level. would be allowed more time to review a hostile bid, so they could look at other options rather than getting railroaded into a deal that may or may not be good for the company. ITAC is pushing to establish a framework where public companies " CANADIANLAWYERMAG.COM/INHOUSE OCTOBER/NOVEMBER 2012 • 37

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