C HAPTER 3: A NGEL T RANSACTIONS : I N S EARCH O F T HE I DEAL S TRUCTURE
Preparing for the Vote • For acquisitions with a non-arm’s length component, the approved information circular is mailed to the CPC’s shareholders, who vote at a shareholders’ meeting on whether to approve the qualifying transaction. • Following shareholder approval, the qualifying transaction closes and the business is acquired. • Shortly thereafter, the “resulting issuer” – no longer a CPC – begins trading as a regular listing on TSX Venture Exchange. Maximum Cash Pre-Deal
Minimum Maximum $100,000 $500,000 $200,000 $1,900,000
Seed Financing Range
Prospectus Financing Range Pre-Listing Gross Cash Maximum
$2,000,000
Additional financing usually occurs at the time of the qualifying transection through a private placement. There is no limit on the amount of money that can be raised in this “side car” financing. THINGS TO CONSIDER There are three sets of criteria to consider when examining the feasibility of the capital pool structure. These are the needs and wants of the private company, the current market conditions and the critical success factors. Understanding and satisfying all three is critical in achieving a successful CPC. • To be a public company and understand the benefits and consequences. • Greater flexibility in the going public process than is possible with an IPO. • Reduced risk and greater certainty than with an IPO. • To maintain greater control of company. (In a CPC, only 20 per cent of the float needs to be held by the public). • A simple and clean way to go public versus an RTO. • Prefer the less restricted terms sometimes offered by venture capitalists. 2. Market Conditions The following market conditions are likely to be present: • Company is at too early a stage or doesn’t have the financial history for a broadly distributed IPO. • A weak IPO market. • VC financing is not viable or management prefers not to use it. 1. Private Company The private company should want or require the following: • Alternative access to capital.
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