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.
A Virtual Merger and subsequent IPO has several advantages over standalone independent companies:
In addition to the typical advantages enjoyed by companies within a virtual group structure, partnering with us has several additional benefits:
Each company within the virtual group will sign up to a Virtual Group IPO Agreement which:
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:
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.
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:
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:
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.
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:
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:
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.
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.
Our team will charge the following success fees to each member of the Virtual Group: