Real-time take-over bid litigation

In the time-sensitive world of mergers and acquisitions, real-time litigation is playing a vital role in maximizing the value of investments and reducing the negative impact of lawsuits as a negotiating tool, top legal experts say.

Far better to have courts decide issues while transactions are in progress than to spend years after the fact picking over the bones of a done deal.

“On the whole, it is much fairer for the parties involved and the shareholders,” says Kent Thomson, head of litigation at Davies Ward Phillips & Vineberg LLP in Toronto. “Real-time litigation diminishes the potential for unjust benefit gained through protracted litigation.”

And in Ontario especially, relatively new commercial courts are proving masters at dealing with such issues, adds Jim Douglas, head of the securities litigation group at Borden Ladner Gervais LLP in Toronto. “Ontario courts have shown great strength in the past couple of years providing support for real-time litigation,” he says. “There is an understanding that all stakeholders in a transaction need speedy efficient decisions because of the issues at stake.”

While after-the-fact lawsuits – autopsy litigation in Mr. Thomson’s words – can easily take six or seven years to resolve issues, recent examples of real-time litigation have taken as little as eight days.

He cites the case of Osprey Media where Quebecor made a takeover bid only to find Black Media enter the fray with a rival bid. Quebecor moved to block Black Media in the courts. Resolution took a little more than a week, Mr. Thomson says. He also cited a case where U.S. majority holders of Sears Canada shares attempted to buy out the minority interests and a group of investors were able to block the deal. The case went to trial before the Ontario Securities Commission and in less than three months saw two levels of appeal.

“The need for effective, efficient, real-time litigation has become more pressing because of the rising role played by investors such as U.S. hedge funds,” says Mr. Douglas. “They are very sophisticated, have very deep pockets and know how to use litigation as a negotiating tool to obtain results to their own benefit.”

The streamlining of high stakes commercial case began about a decade ago with the creation of the Commercial List in Toronto and the appointment of highly sophisticated judges to preside over them, says Mr. Thomson. “They understand the issues and work incredibly hard to resolve them fairly and efficiently,” he says.

“Importantly, those judges agree that the best interests of all parties are served by effective real-time litigation,” says Mr. Douglas. “It tends to resolve issues fairly without letting the litigation process impede the completion of a transaction that may be in the best interest of all stakeholders.”