Canadian Lawyer

w w w . C A N A D I A N L a w y e r m a g . c o m J U N E 2 0 1 7 43 all it the big sister-little sister effect, but trends in deal making in the United States have been creeping up to Canada. Develop- ments in M&A in the U.S. that have made their way northward include mate- riality scrapes, representa- tion and warranty insurance and sandbagging provisions — in a large part due to more open trade bor- ders. But the migration of U.S. prac- tices to Canada hasn't been wholesale, either; sandbagging, for example, has not picked up anywhere near the steam here as it has south of the border. "Now, all deals are cross-border in the M&A field," says Sharon Geraghty, who practises M&A with Torys LLP in Toronto. "It's rare that you're not hunting out buyers from other jurisdictions; and so we're across the table from U.S. parties all the time, and they're introducing as a result the trends and the concepts that they use to Canada . . . We're also seeing Canadian players becoming much more active in the U.S." The convergence of Canadian deal terms to more closely match American styles has been happening for a number of years, says Geraghty, but it has accelerated greatly in the past few years. "When I first started practising, most M&A deals were local," says Alan Litwack, who practises with Dickinson Wright LLP in Toronto. "Most M&A was east-west; now, it's mostly north-south." Many buy- ers are large private equity funds, he says, and businesses in Canada have grown to such an extent that there just aren't the Canadian buyers out there for them. Representation and warranty insurance The increase in the use of representation and warranty insurance in Canadian deals is one example of a U.S. (and U.K.) practice that has become more popular in Canadian deals. Representation and warranty insurance is used for the most part to protect the insured party from losses and liabilities incurred as a result of breaches of representations and war- ranties contained in a purchase and sale agreement. If there are breaches, the buyer looks to the insurer and not to the seller, Litwack explains, and it serves two functions, he says: to serve as due diligence and to allocate the risk for something that comes up after the fact for something that no one knew about. "Rep and warranty insurance is not a brainchild of the U.S. market," says Stefan Stauder, who practises M&A, largely on the private side, with Torys in New York. "It was kicking around [in L E G A L R E P O RT \ M E R G E R S A N D A C Q U I S I T I O N S ALEXI VELLA Cross-border deals now the norm With M&A increasingly global, American trends are finding their way into Canadian deals By Elizabeth Raymer C

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