March 26, 2021
Merger and acquisition deals are still happening across all sectors, perhaps at an even higher rate than pre-COVID-19 pandemic, even if the financial terms of those COVID-era M&A deals might look a bit different. For years, large professional services corporations have sought inorganic growth strategies that has increased M&A activity in the professional services sector. But low organic growth due to the COVID-19 pandemic has accelerated this trend. Professional services industries, particularly medical and associated health professions, like dentistry, pharmacy, veterinary, and physiotherapy, chiropractic, and massage therapy, have all proven to be largely recession proof, weathering the COVID-19 pandemic better than many other sectors. And that makes them an attractive M&A target despite – and maybe even because of – the COVID-19 pandemic.
There are certain steps any business can take to position themselves as an attractive M&A target. But those in the regulated professional health services sector have unique considerations to take into account when contemplating an M&A deal. These five legal tips will help professional health services businesses position themselves as an attractive target before a live opportunity comes up, so you can move quickly when it does.
1. Regulatory Compliance
Professional regulatory requirements vary by profession, but all are typically very prescriptive. This means that you might not have a lot of flexibility in how you can structure an acquisition deal or the corporate structure that will survive the acquisition. Familiarize yourself with the applicable regulatory restrictions beforehand so when an offer comes in, you’ll be better prepared to evaluate it. For example, some Nova Scotia professional regulators allow only Nova Scotia corporations to hold professional corporation permits, and require professional corporations to be wholly owned or controlled by individuals licensed in the related service field. When parties are considering a transaction that combines two or more health specialties under one roof or involves an out-of-province acquirer, such regulatory requirements make it necessary to implement creative corporate structures and contractual arrangements to comply, and still get the deal done.
2. Owner Alignment
Professional services businesses are often comprised of multiple partners or multiple shareholders – and depending on your contractual arrangement and corporate governance structure, that could delay or even derail an M&A opportunity. You might assume you’re all on the same page when an acquirer knocks on the door, but you might be wrong. So discuss strategy and plans with all the owners ahead of time so everyone’s aligned about the game plan. And review your contractual arrangements, such as shareholders’ agreements and associate agreements, and your governance structure as a whole, now to determine whether they’ll pose any obstacle to a sale – and whether you can do anything to remove such obstacles to pave the way for a sale down the road. For example, it might be helpful to have buy-sell rights between you and your partners to force a sale between you before an external M&A deal, or to drag-along into the ultimate transaction a partner who otherwise may be unwilling to sell.
3. House Keeping
Every business looking to position itself for acquisition should get its house in order before the games begin. This applies equally to professional health services businesses. Sophisticated acquirers undertake detailed due diligence on a target company and its business. Get your minute book, contracts, and other key business records complete and up to date. And don’t forget your employees: there are steps you can take now vis-a-vis your employees to make your business more attractive to sell later.
4. Digital Records
With COVID-related travel restrictions continuing into 2021, expect more of that due diligence to take place electronically and remotely. And considering the potential cost-savings of “remote” due diligence, this trend could continue post-COVID. Ensuring all your records are already maintained in electronic form will make this process less stressful and time consuming if a potential deal comes up.
5. Foreign Investment
The Canadian government is increasingly scrutinizing foreign investments generally, and in the public health sector particularly. This could make getting an M&A deal with a non-Canadian acquirer approved by the federal government more difficult, depending on the particular health field or the acquirer’s nationality. Be prepared for the possibility the deal could take additional time, or not even conclude, as a result, and consider doing some advance homework to identify which countries are typically problematic, and which aren’t.
Please contact your McInnes Cooper lawyer or any member of our Mergers & Acquisitions Team @ McInnes Cooper to discuss this topic or any other legal issue.
McInnes Cooper has prepared this document for information only; it is not intended to be legal advice. You should consult McInnes Cooper about your unique circumstances before acting on this information. McInnes Cooper excludes all liability for anything contained in this document and any use you make of it.
© McInnes Cooper, 2021. All rights reserved. McInnes Cooper owns the copyright in this document. You may reproduce and distribute this document in its entirety as long as you do not alter the form or the content and you give McInnes Cooper credit for it. You must obtain McInnes Cooper’s consent for any other form of reproduction or distribution. Email us at [email protected] to request our consent.
Jun 23, 2023
Effective June 23, 2023, Section 45(1.1) of the Competition Act makes it a criminal offence for all unaffiliated employers to enter into…
Oct 28, 2022
Finally closing on October 27, 2022, the tumultuous Elon Musk/Twitter M&A deal drama has been unfolding for months, with both sides making…
Apr 20, 2022
If you’ve reached the stage in your financing lifecycle where you’re ready to take your company public, you might think you’ve only got…
Jun 24, 2021
Many employers use equity compensation plans like employee stock option plans to attract, motivate, and retain talent. One reason stock options…
Nov 24, 2020
An economic downturn can result in an M&A uptick: there can be more attractive targets on the market, and sellers can be more motivated to…
Sep 29, 2020
We updated this publication on December 22, 2022. It’s a forgone conclusion that diversity in thought and in leadership makes good business…
Jun 12, 2020
The financial technology (Fintech) industry uses technology to support and enhance financial and banking services.
Mar 17, 2020
Business corporations laws and stock exchange policies mandate that issuers hold annual general meetings (AGM) and set requirements for when and…
Jan 30, 2020
NOTE: The new tax rules for employee stock option plans take effect on July 1, 2021. Learn more at Limited Options: New Employee Stock Option…
Jan 22, 2020
All issuers must comply with both periodic and ongoing securities law corporate governance (and other) disclosure requirements. This can,…
May 21, 2019
We updated this publication on February 17, 2023. As of June 13, 2019, private companies incorporated under the Canada Business Corporations…
Apr 29, 2019
The growing global population is feeding global demand for seafood. Growing demand is likely to drive investment, particularly mergers and…
Nov 16, 2018
Companies engaged in the cannabis supply chain are highly regulated by federal and provincial cannabis-specific laws as well as a myriad of…
Jun 12, 2018
This publication has been updated as at July 8, 2022. Changes to the Canada Business Corporations Act (CBCA) over the past several years have…
Apr 2, 2018
Equity compensation plans are a valuable and versatile tool for many corporations, from early-stage startups to established blue-chips.…
Dec 22, 2017
Blockchain technology has already been a transformative force in a number of sectors. Its most prominent use to date has been as the…
Nov 17, 2017
It’s official: as of October 31, 2017, “facilitation payments” contravene Canada’s Corruption of Foreign Public Officials Act (CFPOA).…
Nov 2, 2017
On October 19, 2017, the Toronto Stock Exchange (TSX) announced it had adopted amendments to its Company Manual. Originally proposed in Spring…
Aug 16, 2017
In the not-so-distant past, Canadian enforcement of its anti-corruption and anti-bribery legal regime has been relatively laid-back. But the…
Jul 17, 2017
A corporation does not always sail in calm or safe waters. Cash shortages, unattainable or unmet goals, Board disagreements over the best course…
May 11, 2017
The Extractive Sector Transparency Measures Act is one of several anti-bribery and anti-corruption laws aimed at fighting corruption in the…
Apr 20, 2017
On April 13, 2017, Canada’s federal government introduced legislation that, if passed into law, will legalize recreational cannabis in Canada.…
Mar 30, 2017
Social media platforms, like Instagram, Twitter, LinkedIn, YouTube, Facebook and GooglePlus, arguably have more followers and are more closely…
Feb 24, 2017
This publication has been updated as at January 12, 2023. Many organization (66%) store the personal information of customers. employees,…
Aug 15, 2016
The standards expected of market participants are steadily increasing in response to demand to address white collar crime – including…
Jun 6, 2016
On June 30, 2016, amendments to National Instrument 45-106 Prospectus Exemptions and related changes to Companion Policy 45-106 Prospectus…
May 31, 2016
You’re on a tight timeline to issue a press release. You finish your draft and ‘cut & paste’ your standard “forward-looking…
May 10, 2016
This publication has been updated as at April 18, 2022. Access to sufficient capital is always a business issue, from the startup stage right…
May 2, 2016
Amendments changing the early warning reporting system take effect on May 9, 2016, provided all necessary approvals are obtained (except in…
May 2, 2016
Amendments changing the early warning reporting system take effect on May 9, 2016, provided all necessary approvals are obtained (except in…
Apr 21, 2016
On April 15, 2016, Bill No. 149, The Mineral Resources Act (2016) (2016 Act), passed its second reading in the NS House of Assembly. Although…
Jan 18, 2016
Things have gotten a bit easier for venture issuers, such as those listed on the TSX Venture Exchange, with recent changes to their obligations.…
Oct 19, 2015
Access to sufficient capital to fund operations, research and development, and other costs is a key challenge for start-ups and for some small…
Dec 10, 2014
“Corporate Social Responsibility” (CSR) as a concept has been floating around in business-speak for years – but stakeholders in the mining…
Sep 16, 2014
This publication has been updated as at August 25, 2022. Many believe that only public companies or large, established companies with many…
Jun 11, 2014
Note: For an update on Crowdfunding, read: New Kid on the Block – Crowdfunding Joins Traditional Equity-Based Funding Options for Start-ups…
Nov 1, 2013
Recent decisions of securities regulators and amendments to Canadian securities laws demonstrate regulators' lowered tolerance for insiders who…
May 21, 2013
In its April 2013 decision in Re Stan, the Alberta Securities Commission provides issuers with a practical approach to the assessment of both a…
Feb 8, 2013
While much of the developed world struggles with debt and chronically low growth, Canada, one of the best-performing members of the G-7,…
Aug 27, 2012
Introduction and Purpose Staff of the Canadian Securities Administrators (CSA Staff or we) are publishing this Staff Notice (the Notice) to…
Jun 1, 2012
Multilateral Instrument 51-105, Issuers Quoted in the U.S. Over-the-Counter Markets will come into effect on July 31, 2012. Once effective,…
Dec 22, 2011
On May 26, 2010, the Canadian federal government released the proposed Canadian Securities Act (the Act) which would, among other things, create…
Nov 1, 2011
Entrepreneurs need to be ready for due diligence, so it’s essential to involve legal advisors and accountants early in the process. Click…
Oct 6, 2011
In 2009 Canadian securities regulators changed the rules relating to securities “registration” – these rules determine who is required to…
Subscribe to McInnes Cooper to stay current with our leading insights on legal updates, trends, news, events, and services.