Hi friends,

The largest merger in history took place in 1999, when Vodafone Group Plc, a British multinational telecommunications company, bought Mannesmann, a German telecom company. The deal was valued at $202 billion USD, making it the biggest merger ever.

For context, the entirety of the value of Canadian M&A was $90.5 billion in the first quarter of 2023. More on that later.

In today’s email:

1. Transactional: M&A activity improving in Canada, but the future remains unclear.  

2. Recent Developments: Canada is witnessing an increase in penalties for "greenwashing".

3. International: NYC law requires that companies prove their AI isn’t sexist or racist.

TRANSACTIONAL

M&A activity improving in Canada, but the future remains unclear.

Canadian mergers and acquisitions (M&A) activity sees increases in the second quarter: Canadian M&A value rose to $90.5 billion in the second quarter of 2023, from $69.4 in the second quarter of 2022. But investors are still cautious on what this means for the rest of the year, with economics concerns and potential interest rate hikes looming.

These increases in M&A volume were mostly driven by some large proposed transactions, like the one we saw from Glencore’s (GLEN.L) $22.5 billion bid for Teck Resources (TECKb.TO). Trond Lossius, the head of Canadian M&A at Barclays, noted that it is deals like this one that are “making up some lost ground as opposed to a general recovery”.

The Bank of Canada to decide whether to tighten policy by next week: it is unclear whether the central bank will raise interest rates by another 25 points or hold them steady, with possible further challenges for large corporations seeking to finance acquisitions. With higher interest rates, we can expect more uncertainty and caution over the trajectory of M&A activity.

RECENT DEVELOPMENTS

Canada is witnessing an increase in penalties for "greenwashing".

As the demand for eco-friendly products surges, "greenwashing" - misleading consumers about a product's environmental credentials - has become more prevalent. Canadian courts and regulatory bodies have started penalizing organizations for such practices, with one of the most significant cases being a $196.5 million fine against Volkswagen AG for importing vehicles with “defeat devices” that circumvented emissions regulations.

Canada's Competition Bureau, which investigates alleged violations of false or misleading representations and deceptive marketing practices, has also begun taking on greenwashing cases. It concluded that Keurig made false claims about the recyclability of its coffee pods, resulting in a $3 million penalty, a charitable donation, and costs covering the investigation.

The Bureau has launched ongoing inquiries into the Canadian Gas Association, one of Canada's largest banks, and has received complaints against the Sustainable Forestry Initiative, Gazoduq Inc., and Shell Canada. As laws and policies addressing greenwashing evolve globally, businesses must tread carefully with environmental claims, ensuring accuracy, substantiation, and relevance.

INTERNATIONAL

NYC law requires that companies prove their AI isn’t sexist or racist.

New York City has introduced a pioneering law requiring businesses that use artificial intelligence (AI) in their hiring processes to demonstrate that their systems are free from sexist and racist bias.

The legislation, which mandates an audit by a third-party company for any automatic employment decision tool (AEDT) reliant on AI or machine learning, also stipulates that businesses using third-party AEDT software cannot use it unless it has been audited and the results published.

However, the law has been criticized for its potentially limited scope and lack of clarity around enforcement, with some legal firms advising clients they do not have to comply, based on the letter of the law. The law does not address biases such as age discrimination or disabilities, and it doesn't cover potentially ineffective screening methods that aren't necessarily biased.