Third party challenges grow

Author: Danielle Myles | Published: 6 Oct 2010
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Third party challenges are becoming larger stumbling blocks to M&A in North America. Speakers Martine Turcotte and Markus Koehnen brought the topic to life yesterday morning by reflecting on a recent court battle in which they appeared opposite one another.

Koehnen represented bondholders who challenged the proposed sale of Bell Canada Enterprises (BCE), where Turcotte is the chief legal officer, on the grounds the debt levels introduced by the leveraged buyout would lose their bonds’ investment grade rating.

The case was eventually decided in favour of BCE (“you dragged me through three levels of Canadian courts over nine months,” said Turcotte, shaking her finger at Koehnen), but it raised questions over directors’ fiduciary obligations to shareholders.

The ruling made clear that in M&A transactions the board’s overarching duty is still to act in shareholders’ best interests, but that it must also act in the best interest of the company as a whole.

This means that getting the best price is not always the preeminent factor; and certainly not if the sale jeopardises the company’s future by overloading it with debt.

Co-chair Sánchez Solé joked that it was necessary to seat the panellists apart and they played along by shaking hands at the session’s start, but it didn’t stop them jibing at each other throughout the morning.