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Governance Insights with Michael Bassett

by Kathleen McGuire | May 24, 2016
Michael Basset Michael Bassett
Associate Director, Governance Compliance and Risk,
The Conference Board of Canada

Mergers and Acquisitions—An Emerging Issue for Canadian Boards

The economic context in Canada is likely to see significant churn as low growth and a weak dollar make Canadian companies more attractive for merger and acquisitions initiatives. On top of these economic fundamentals, the regulatory system has also changed to “level the playing field” through the Canadian Securities Administrators (CSA) amendments in May 2016 to the rules guiding take-over bids1 and to the early warning reporting system.2 These amendments highlight the crucial roles boards play in merger and acquisitions activities.

Mergers and acquisitions are often one of the most crucial engagements of the board of directors. Directors serving companies engaged in M&A will quickly find that their role is now all consuming.

Recent research by the Conference Board of Canada as presented in our 21st Edition of the Canadian Directors’ Compensation Practices Report3 found that only 2 per cent of the 247 publicly traded companies analyzed reported having a Mergers and Acquisitions committee. Despite the low number of reported committees of this nature, given the current economic climate, it worthwhile to look at the data we found on these committees.

Merger and Acquisition committees had the highest costs of all committees surveyed at an average of $71,000 for committee related fees. This is almost twice the compensation for committee service for HR and compensation and higher than the average fees paid to Audit committees. The high costs of M&A committee service makes sense given the significant expertise needed, the high time requirements for directors and the significant mix of risk and accountability that directors on these committees face.

Boards of Directors from most organizations do not have directors on their boards with experience in M&A, and this could prove to be a serious oversight companies find themselves to be a target. It may be a worthwhile exercise for boards to review their skills matrices and board recruitment initiatives to consider adding a director with experience living through an M&A. This will allow the board to have some baked in readiness should they become a target. Directors with this skill and experience set may be difficult to locate and may come at a premium.

The economic situation in Canada will likely generate more opportunities for M&A activities and boards of directors are well served to try and recruit for this unique set of skills and experiences.

1    http://www.osc.gov.on.ca/en/SecuritiesLaw_csa_20160225_62-104_amd-take-over-bids.htm

2    http://www.osc.gov.on.ca/documents/en/Securities-Category6/csa_20160225_62-104_early-warning-system-take-over-bids.pdf

3    http://www.conferenceboard.ca/e-library/abstract.aspx?did=7751


About Michael

Michael Bassett is the Associate Director, Governance, Compliance and Risk at The Conference Board of Canada. He leads the Conference Board’s research in these areas. In addition to his research role, he manages the Conference Board’s Council for Excellence in Canadian Crown Corporations and Corporate Ethics Management Council. Prior to joining the Conference Board, Mr. Bassett worked at the Ottawa-based Institute on Governance. He has also worked in the non-profit sector and for the provincial government of British Columbia. Mr. Bassett was also a member of the Board of Directors of the Ethics Practitioners Association of Canada from 2013 to 2015. Mr. Bassett has a Master of Arts degree in Political Economy and a double honours undergraduate degree in Economics and Journalism from Carleton University.


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