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ARTICLE · 01 JUNE 2020

"Failing Firm" Claims In Merger Review – New Canadian Developments

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"Failing firm" claims may become more common in merger reviews in the age of COVID-19, when companies must enter into transactions quickly...

CanadaAntitrust/Competition Law
Calvin S. Goldman, K.C.
Calvin S. Goldman, K.C.
Justine Johnston
Justine Johnston
Michael Koch
Michael Koch
David Rosner
David Rosner
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Summary

“Failing firm” claims may become more common in merger reviews in the age of COVID-19, when companies must enter into transactions quickly to continue as a going concern due to recent financial challenges. The Canadian Competition Bureau (“Bureau”) provided important new guidance for how it assesses failing firm claims in merger reviews under the Competition Act (“Act”) following its review of two recent mergers.  Key takeaways:

  • The Bureau expressly indicated that its examination of a firm's solvency is dynamic and the analysis may be updated as the effects of COVID-19 develop. 
  •  The Bureau demonstrated the ability to analyze failing firm claims quickly.
  • The Bureau described the financial and statistical methodologies it will apply in assessing a firm's solvency and whether bankruptcy is likely (i.e., whether a firm is in fact failing).

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