Law Times

Page 8 March 6, 2017 • Law TiMes www.lawtimesnews.com Protectionist rhetoric could help Canadian companies BY SHANNON KARI For Law Times D onald Trump has not been shy about ex- pressing his views on a wide range of topics since he took office as president of the United States. Relatively little has been said, however, about the business re- lationship with the largest trad- ing partner of the United States, other than a comment last month about wishing to "tweak" the Canadian part of the North American Free Trade Agree- ment. The election of Trump comes, though, as merger and acquisition activity is on the rise again in North America com- bined with steady improvements in stock markets. Still, the unpredictability of the new U.S. president creates a measure of wariness in the M&A field, even if the overall outlook is positive. For example, the global Eco- nomic Policy Uncertainty Index, calculated by three U.S.-based academics, has spiked since the election of Trump. He has also raised the pos- sibility of trade wars with other countries and promised to re- negotiate existing trade deals that he does not believe are suf- ficiently beneficial to the U.S. Cornell Wright, a partner at Torys LLP in Toronto, says that certainty and stability are what the business community in Canada and the U.S. are always seeking. "It certainly is a volatile time south of the border," says Wright, co-head of the M&A practice at Torys, in terms of the political situation. "At the same time, key drivers of deals such as the performance of the markets is quite bullish. On a macro level, all of the con- ditions are favourable," he notes. The U.S. economy under for- mer president Barack Obama had six straight years of job growth. Currently, unemployment and inf lation rates are also rela- tively low. A report issued earlier this year by Norton Rose Fulbright LLP indicated that cross-border M&A activity increased sharply last year with a greater volume of outbound transactions. The largest was Enbridge's $61-billion offer to acquire Spec- tra Energy, a Texas-based pipe- line company. As well, within a few days of taking office, Trump signed an executive order permitting TransCanada Corporation to resubmit its proposal for the Keystone XL pipeline. "The M&A market has been good the past couple of years. I think there is still a signifi- cant amount of optimism," says Wright. Regardless of who is presi- dent, there are other factors that determine whether it is a favour- able climate for commercial transactions, says Stephen Kerr, senior partner in the Finan- cial Institutions and Mergers & Acquisitions groups at Fasken Martineau LLP in Toronto. "What drives M&A in Can- ada are two things, commod- ity prices and foreign exchange," says Kerr. Recoveries in the re- source sector and more pipeline projects could create a lot of ac- tivity in terms of transactions, he suggests. The uncertainty over the be- haviour of Trump and his pro- tectionist rhetoric is something that may actually benefit Cana- dian companies, says Kerr. "There may be companies that want to invest in North America and, instead of the U.S., it may direct more traffic here in terms of foreign investment," he says. The oil and gas sector is an area that should benefit un- der a Trump presidency, agrees Wright. "That sector was strength- ening, even before the election. The conditions are favourable," he adds. Trump and Canadian Prime Minister Justin Trudeau both made positive comments about the trading relationship between the two countries dur- ing the prime minister's recent trip to Washington. Trudeau also declined to make any criti- cisms of some of Trump's more controversial actions, such as the attempted travel ban. Given the level of trade be- tween the two countries, it is not surprising that the prime min- ister did not want to offend his U.S. counterpart. Total goods and services trade was US$663 billion be- tween the two countries in 2015, according to statistics issued by the Office of the United States Trade Representative. The U.S. had a slight goods and services trade surplus with Canada that year, in contrast to Mexico, where Trump has been critical of that part of NAFTA. He has also threatened to punish U.S. companies that move jobs to Mexico. The fact that much of the U.S. president's trade comments have been directed at Mexico and other countries is a good thing for Canadian businesses, sug- gests Kerr. "I think there will be in- creased cross-border opportu- nities. We are sufficiently below the radar," he notes. As well, the private equity sector is set to be more active soon after "hoarding" its funds in recent years, says Kerr. "There will be more pressure to make deals," he believes. While the U.S. president has spoken about a focus on protect- ing the jobs of domestic workers, it is unlikely he can obtain the political support in Congress to make any dramatic changes to the trade relationship between the two countries, says Kerr. The unpredictability of Trump, though, is still a wild card. Despite an overall opti- mism about the potential for an increase in M&A activity for Canadian companies, both law- yers agree that predictions are difficult. "These are early days," says Wright. Kerr echoes that view. "The mood on Bay Street on M&A is let's wait and see," he says. LT FOCUS ON Corporate & Commercial Law Cornell Wright says certainty and stability are what the business community in Canada and the U.S. are always seeking. FOCUS Integrated Legal Marketing Solutions LawyerMarketingCanada.com/solutions Put Your Digital Marketing Tactics into High Gear Untitled-3 1 2017-03-01 10:43 AM

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