Our national public affairs service leader Elizabeth Roscoe recently spoke at the Government Relations and Effective Lobbying conference in Toronto, presented by the Canadian Institute.
The topic of Elizabeth’s presentation was “Analyzing the Effects of Public Affairs and Government Relations in M&A and Big Transactions”.
Those who are involved in the M&A field having been looking carefully at the federal government Budget Implementation Bill C-60, tabled on Monday, April 29th. The bill sets out the government’s approach to changing the Investment Canada Act as it pertains to state-owned enterprises acquiring Canadian companies operating in the oil sands. The legislation follows the governments review of the CNOOC/Nexen transaction as well as the Petronas/Progress acquisition.
Here is an article that ran recently in the LobbyMonitor.ca that outlined the presentation and some key trends and issues to look at in this field going forward.
Managing timing, political risk, ‘transaction narrative’ keys to net benefit test: panel
Lobbying on acquisitions that fall under the Investment Canada Act means playing “pin the tail on the donkey” with government, Stikeman Elliott consultant Lawson Hunter said. “You really don’t know what it is you’re supposed to do.”
Hunter and Elizabeth Roscoe, a Hill+Knowlton Strategies consultant, spoke on a panel at the Canadian Institute’s “Government Relations and Effective Lobbying” conference Tuesday in Toronto. The two consultants, both of whom lobbied for Chinese state-owned oil company CNOOC in its acquisition of Calgary-based Nexen last year, agreed the government has left the act’s “net benefit” test largely undefined in order to take the political circumstances of the day into account when deciding on each proposed deal.
Companies trying to prove their deal passes the net benefit test never directly meet with the industry minister who is ultimately responsible for approving the deal, said Hunter. Instead, company officials and their lobbyists pitch strategic offers to bureaucrats and wait for political approval. Communication reports show Roscoe and Hill+Knowlton chairman and CEO Michael Coates met with senior bureaucrats in March 2012 and again in July, shortly before the deal was announced. Consultants met with a senior PMO official and Finance Minister Jim Flaherty the day before making the announcement.
Consultant lobbyists should advise clients they will face more than one set of negotiations, and political decision makers may send proposed deals back to bureaucrats, asking for more from bidding companies, said Hunter.
CNOOC told the federal government and opposition it would maintain jobs, boost investment and establish headquarters for North and Central America in Canada as part of its bid.
Consultants should help companies plan communications and analyze political risk before they announce a bid for a Canadian company, said Roscoe. Activist investors, Canadian protectionism, and media coverage need to be accounted for in these plans.
The federal government takes the broad economic impact of proposed acquisitions into account, as well as how they will resonate with voters, particularly at the party base, she said.
The federal government is driven by pragmatism, not ideology, and a government relations strategy should take government’s “risk mitigation” into account.
Provincial governments can play a key role in whether deals are approved or not, the consultants agreed. Provinces are interested in how transactions affect their employees, economic growth and industry “value” chains, Roscoe said.
Lobbying provincial governments means making the most of relationships with bureaucrats and politicians, and doing so early, said Hunter, adding BHP Billiton’s 2010 attempt to acquire Potash Corp. failed in part because of Saskatchewan Premier Brad Wall’s opposition to the deal.
Timing is another important factor, said Hunter. U.S. retailer Lowe’s’ attempt to acquire Boucherville, Que.-based Rona last year was likely abandoned in part because it was proposed during the run-up to a Quebec election, during which the province’s major parties opposed the deal, he said.
Getting the public onside requires a “transaction narrative,” a rehearsed storyline of who will benefit from the acquisition and why it is important. Communications should be tailored for each group affected by the deal without appearing to say “different things to different audiences,” Roscoe said.
Companies trying to complete a low-profile acquisition in politically sensitive industries risk being undercut by opposing voices on social and mainstream media. Instead, they should be “very proactive” getting out their message on the acquisition and countering opposing voices, she said.
Hunter also discussed the government’s Dec. 7 promise to scrutinize acquisitions by state owned enterprises (SOEs) more carefully and its updated standards for doing so in the budget implementation bill tabled Monday. The federal government said it would only approve bids for oilsands companies by state-owned enterprises in an “exceptional circumstance” going forward in a December announcement approving the CNOOC and Petronas deals.
Consultant lobbyists told The Lobby Monitor that the new guidelines on foreign acquisitions included in the announcement leave plenty of opportunity for them to work on future deals, which will continue to be negotiations between the government and bidder. The Institute for Research on Public Policy released a study earlier this month arguing the rules around foreign acquisitions remain unclear and could constrain future foreign investment into Canada.
The new standards take into account the degree to which a foreign company is “influenced, directly or indirectly” by its government, and “the implication of that is unknown,” said Hunter.
The federal government considers the degree of influence the foreign state could have on the Canadian business being acquired, its influence on the industry as a whole, and the likelihood it will exercise influence over the company, he said.
Hill+Knowlton’s Michael Coates, who lobbied on the CNOOC deal, wrote in a March posting on the firm’s website that companies looking to acquire Canadian counterparts must describe how the deal will enhance Canada’s wealth and power while also trying to bring provincial governments onside.
Bidders also need to carefully plan communications and government relations strategies before announcing their intention to make an acquisition in Canada, and make public commitments to government or regulators with that announcement “in order to mitigate potential political fallout,” he said.