How Do You Structure A Reverse Takeover In Canada?
Mergers And Acquisitions Newsletter™
Hey Legends !
Below are some of the key considerations and steps a company should take early on to prepare for an IPO and maximize its chances of success.
A company can “go public” and proceed to obtain a listing on a Canadian stock exchange through a variety of methods, including an initial public offering (“IPO”), a reverse take-over (“RTO”), the TSX-V's capital pool company program (“CPC”) or the TSX's special purpose acquisition corporation program (“SPAC”).
In an RTO, a private company is acquired by a listed company. RTO is a process whereby private companies can become publicly-traded companies without going through an initial public offering (IPO).
I personally interviewed a few IPO Advisors based in Toronto focusing on RTOs, lets see hows the process:
1. Advisor will review the target/issuer deck and cap table.
2. If all is good, They will establish a call with management to discuss how things work.
3. Establish engagement with target usually is something like 10k retainer to establish they meet criteria and then its an agreed upon price for the shell paid upon successful RTO.
4. Source shell, sign LOI.
5. Reorg Company and work on prepping for listing and filing Statement or non offering prospectus. Depends how involved the advisor needs to be here. They may have to charge depending on the scope of work.
6. Target hires and completes an audit by a cpab auditor with a satellite auditor in the target country. They'll need to convert current financials to IFRS.
7. Go definitive and work towards completing share purchase or Amalgamation into shell.
8. Complete RTO and list with NON offering prospectus or filing Statement (depending on shell structure).
9. Overall cost can be from 500K to 3MM.
The biggest risk is usually some legal costs. Hire a lawyer when the shell is identified. Usually a retainer. 10k to the advisor.
So those are the risks.
Assuming the advisor gets transparency from day 1...it makes everything go smoother. They can't help if the auditor finds fraud or lawyers say the target lied on due diligence items. If so, they will likely be screwed for a listing.
Also, if there's financing, it's good to do it between shell LOI and audit.
Hope this helps to get started doing RTO-IPOs in Canada!
See ya in the inbox!
Sebastian Amieva
Mergers And Acquisitions Newsletter™
PS Want to structure a reverse takeover in Canada? Or exit via IPO?
Your business need 1MM EBITDA or 5MM revenues per year. Location: Anywhere.
If you serious about this route Contact Me to put you in touch with a trusted advisor.