What Is A Virtual Merger?

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.
• 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.