A Virtual Merger is created when several independent companies enter a contractual arrangement, which is functionally, but not legally, equivalent to a merger.

In doing so, each of the companies contractually agree to become part of a larger notional group of companies to take advantage of exit opportunities that are not otherwise available to them as small individual entities. 

Despite this agreement, the underlying ownership and management of each company does not change. Unlike a traditional merger, a Virtual Merger does not integrate any of the ‘merging’ companies into a group. Instead, each of the companies remains independent of each other.

Why A Virtual Merger?

A small stand-alone company faces the challenges of achieving scale and creating a meaningfully sized exit. 

First off, there are proportionally very few buyers to acquire it. If it does happen to find a suitor, the likelihood is that the purchase price multiple (companies are usually priced at a multiple of profits or earnings) that a buyer is willing to pay for the company will be proportionately small as well.

Second, a small business is less likely to be able to raise significant amounts of capital to grow. If it does happen to find investors, the probability is that the investment will carry restrictive conditions and be expensive for the business.

Grouping several companies together in a Virtual Merger is an efficient way of quickly achieving scale. Having that increased scale will make the virtual group much more attractive to a larger pool of private investors, including larger capital providers and retail investors in a future public listing. 

Therefore, on raising investment, the owners of each company in the virtual group can expect to receive a higher valuation on their shares in both the group, and their own respective business, which might otherwise only be achieved by means of exceptional organic growth. 

Thus, the net result of the Virtual Merger is a share of group equity at a significantly higher valuation for the business and done in a fraction of the time of growing a business organically. This is especially so when the companies forming part of the Virtual Merger group are specifically ‘themed’ to attract investors. 

The next step in the evolution of the Virtual Merger is an Initial Public Offering (IPO) of the Virtual Merger Group.

Advantages Of A Virtual Merger IPO

A Virtual Merger and subsequent IPO has several advantages over standalone independent companies: 

• Ability for a relatively small company to achieve an IPO on a Nasdaq exchange (such as Nasdaq First North public market listing in Sweden) and have its underlying shares (or the shares in its holding company) become free trading.
• Attractive to a much wider investor pool, including investors at scale.
• Investors are likely to invest more and at a higher valuation for a group of themed companies seeking to IPO.
• Faster way to raise investment and fuel expansion via M&A as opposed to waiting for organic growth.
• Ability to cross-sell within the themed group.
• Shared synergies and economies of scale.

• Increased earnings and profits.

In addition to the typical advantages enjoyed by companies within a virtual group structure, partnering with us has several additional benefits:

• Access to a group of highly experienced professionals in Private Equity, M&A, Law, Tax, Capital Raising and Investment Banking, with backgrounds from Goldman Sachs, PwC, UBS, Eversheds, The CarlyleGroup, and Rothschild, among other similar companies.
• Access to public market and exchange services, investors, investor relations networks, including via an IPO on the Nasdaq First North public market in Sweden.
• Access to bespoke M&A deal flow and contract opportunities to facilitate growth.
• Access to on-demand sales and lead generation services to drive revenue growth.
• Preferred rates on accounting, legal and tax work.
• Regular networking events and opportunities.
• A clearly defined route to exit at a definitive period.
• Shareholders in the public group can control when they exit and ultimately sell down their shares post IPO.

Structure

Each company within the virtual group will sign up to a Virtual Group IPO Agreement which:

• Sets out the ethos and objectives of the Group;
• Appoints Bosa and Quadra as a management advisor and agent of the Group with a target objective of executing a private fund-raising and achieving a public listing of the Group within 12 months;

• Authorizes Bosa & Quadra to form a holding company for the virtual merger group for the purposes of facilitating the private fundraising and public listing;
• Sets out the process by which shareholders of each participating company will exchange their shares in that company for shares in the group holding company, thus making each participating company a subsidiary of the holding company;
• Stipulates a pro rata shareholding of equity in the Group that the shareholders of the underlying companies will receive, which will be based on the company’s pro rata contribution to Group’s value which will be calculated based on its EBITDA and adjusted to reflect a cash free debt free position;
• Stipulates the uniform definition of EBITDA (and other accounting principles) upon which shareholdings in the Group will be calculated and
• Authorizes Bosa & Quadra to constitute a board of directors for the Group, satisfactory to Nasdaq requirements, for the purposes of Group management, administration and oversight.

Admission Criteria

• Stable management team.
• Two full trading years of accountant prepared financial reports. Minimum annual turnover of £1,000,000.
• Minimum annual EBITDA of £200,000.¹
• Low debt levels – no borrowing other than for working capital.
• Sector fit for the Group – Participating companies must fall within one or more of the following segments: healthcare, senior care, medical spa, treatment center, medical equipment & device manufacturing or other complimentary businesses.

• Full contractual commitment to the merger, fundraise and IPO from allexisting shareholders.
• Full alignment with time frame to raise capital and execute a public listing within a 12-month period.
• Payment of a contribution towards costs, calculated pro rata to the valuation of each company admitted to the group. These costs will be reimbursed back to each respective company via shares in the IPO entity upon completion, making this cost-neutral to each company.

Following Admission

Following the admission of a company to the Virtual Merger Group, Quadra and Bosa will work closely with the Group to maximize its capital, cash flow and profits. This work will include:

• Working with the Group and each respective company through its partners and networks to raise investment via an equity share placement with private investors, followed by a public IPO listing on the Nasdaq First North public market in Sweden.
• Exploring the introduction of more efficient business models, structures and tools;
• Exploring the possibility of obtaining debt financing and/or refinancing existing debt through our team’s capital market contacts and connections;
• Reviewing existing financial management process and recommending improvements;
• Exploring cross-selling opportunities and synergies within the wider group
• Monitoring financial performance.

Maximizing An Exit

Quadra and Bosa will work together with contacts in its extended network to procure a significant private equity placement and investment in the Group, followed by a Nasdaq First North public market listing in Sweden.

Benefits Of A NASDAQ First North Listing

Based in Stockholm, the Nasdaq First North is a highly visible market which attracts investors from around the world. Some of the key benefits include:

• Global Nasdaq brand association, which brings immediate exposure and credibility.
• One of the most liquid and efficient cash equities markets in Europe.
• Has strong investor demand from a large investor base of Nordic retail investors seeking investment into growth companies.
• The market caters to smaller cap companies who may use it as a ‘spring board’ platform to dual-list into other global Nasdaq exchanges.
• Has a less demanding and flexible listing process compared to other exchanges.
• Certified Advisors are involved to collaborate with both issuers and Nasdaq to ensure high market quality.
• Listed companies get access to the Nasdaq Corporate Solutions suite, including news distributor Globe Newswire and Director’s Desk.
• Very cost effective to list compared with alternate US and UK exchanges.

The Set Up

We will execute a set of IPO procedures to ensure that the Group is prepared and can make the application for a Nasdaq listing in a timely, efficient, and compliant manner. There are several key mandatory, legal and optional procedures, assets and requirements that must be fulfilled for the Group to create the best opportunity for a successful listing.

A key part of preparing for a successful listing will be to raise an amount of pre-IPO capital from private investors. The capital that is raised in a pre-IPO will give the Group several significant advantages when the Group makes its public listing:

• It will increase the valuation of each company and of the Group as a whole.
• Private investors will be attracted to invest in a business that could see their investment increase immediately via a public listing.
• The capital raised will be protected from any future fluctuations in the public markets.
• Public investors will be attracted to the public listing as the Group will already have a sum of private capital available to fuel growth and M&A expansion.

Pre-IPO Costings To The Group

The costs to take the Group through the capital raising and Nasdaq IPO process will be circa £350,000.

These costs, which will be fully transparent, will be shared among all members of the Group on a pro rata basis in proportion to the value of each respective company. That valuation will be based on their previous 2-year financials. However, any upfront fees paid will be credited back to each respective company in the form of shares post completion of the IPO, making this cost neutral to each company. 

The Capital Raise

Our Team will be engaged to execute a pre-IPO capital raise on behalf of the Group prior to the application for the IPO listing. 

Quadra and Bosa will ensure that the Group is prepared with:

• A coherent and attractive investor proposition.
• Investor sales, marketing and outreach messaging, branding, and materials.
• Satisfactory company structures including board constitution and an executive team.
• A set of prepared financial reports and projections, including a Group valuation.
• Investor research, discovery and a sufficient due diligence process to establish relevancy and appetite for investment.

Pre-IPO Success Fees

There are no pre-IPO fees charged in advance to the Group. 

We will charge the following success fees for the capital raise to the Group:

• For capital investment up to GBP £500,000 = 8.0%.
• For all capital investment above GBP £500,000 = 6.5%.

These success fees will be deducted off the gross amount of the capital raise and the Group will benefit from the net proceeds of the raise.

The IPO Event

At the public listing, each company in the Group will receive a pro rata % of the available Group shares calculated on EBITDA for each company.

A share option pool will be set up post IPO to reward employees and management of the group.

There will be a “lock-up” period restricting the sale of Group shares by the company or major shareholders of between 90-180 days from the date of the IPO listing.

Growth for the collective Group post IPO will come from M&A by bolting-on accretive revenue and profits into the Group. These M&A transactions will be done via a combination of cash from the capital raised and stock in the public entity. The Group will reserve the right to seek, merge, acquire or admit other themed or synergistic businesses into the Group.

Success Fees

Our team will charge the following success fees to each member of the Virtual Group:

• A value creation success fee of 20% of the shares at the outset of the combined Group entity.
• For any new capital coming into the Group entity, Quadra and Bosa will be diluted down in parallel with all other members of the Group to ensure full alignment and an equal and level playing field.