SC Capital Partners RTO


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Reverse Merger Transaction

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SC Capital Partners RTO

  1. 1. Reverse Takeovers Private to Public IMPLEMENTATION PLAN SC CAPITAL PARTNERS
  2. 2. Table of Contents <ul><li>Part I: Introduction to Reverse Takeovers (RTOs) </li></ul><ul><li>Part II: SC Capital Partners (SCCP) Approach </li></ul><ul><li>Part III: Value Creation Plan </li></ul><ul><li>Part IV: RTO Examples </li></ul>
  3. 3. Part I: Introduction to RTOs
  4. 4. Part I: Introduction to RTOs <ul><li>What is a Reverse Takeover (RTO)? </li></ul><ul><li>Why go public via RTO? </li></ul><ul><li>Who are the parties involved? </li></ul><ul><li>What is the process? </li></ul><ul><li>When does an RTO make sense? </li></ul><ul><li>Where will the company trade? </li></ul>
  5. 5. Part I: What Is an RTO? <ul><li>A publicly owned and trading shell company acquires a private company in a reverse takeover (RTO) </li></ul><ul><li>The shell company has </li></ul><ul><ul><li>little or no assets </li></ul></ul><ul><ul><li>no operations </li></ul></ul><ul><ul><li>existing shareholders </li></ul></ul><ul><ul><li>existing market-makers </li></ul></ul><ul><li>Shell company usually gets 5% to 10% of the shares in “New Co” </li></ul>
  6. 6. Part I: Why Go Public Via RTO? <ul><li>Greater access to capital </li></ul><ul><li>Increased liquidity </li></ul><ul><li>Premium valuation </li></ul><ul><li>Equity for acquisitions </li></ul><ul><li>Cost advantage over IPO </li></ul><ul><li>Significantly reduced lead time vs. IPO </li></ul>
  7. 7. Part I: Public Cos Trade at Premium Based on data from 4,528 private company transactions and 397 public company transactions across all industry groups from January 1996 to August 2002. Universe restricted to transactions under $100 million. 18.2 13.1 13.2 1.1 Public Company Median 96.2% 9.3 Price/Net Income 60.8% 8.2 Price/EBT 64.8% 8.0 Price/Gross Cash Flow 57.7% 0.7 Price/Net Sales Public Company Premium Private Company Median Valuation Ratio
  8. 8. Part I: Cost and Time Advantages 1 Year $1,000,000 1,500 AIM London 90 - 180 Varies 2,100 NASDAQ small cap 90 - 180 Varies 1,800 AMEX 60 - 120 $250 – 750,000 2,200 OTC BB 60 - 90 $1 - 200,000 4,500 Pink Sheets Timing Cost of Shell # of Cos Exchange
  9. 9. Part I: Who’s Involved? <ul><li>Private Company </li></ul><ul><ul><li>Management </li></ul></ul><ul><ul><li>Counsel </li></ul></ul><ul><ul><li>Shareholders </li></ul></ul><ul><ul><li>Investment banker </li></ul></ul><ul><li>Shell Company Management </li></ul><ul><ul><li>Management </li></ul></ul><ul><ul><li>Shareholders </li></ul></ul><ul><ul><li>Counsel </li></ul></ul><ul><li>Other </li></ul><ul><ul><li>Investor Relations, Public Relations </li></ul></ul><ul><ul><li>Market Makers </li></ul></ul><ul><ul><li>NASD </li></ul></ul><ul><ul><li>SEC (if Bulletin Board shell is used) </li></ul></ul>
  10. 10. Part I: What Is The Process? <ul><li>Phase I: Prepare company for RTO </li></ul><ul><li>Phase II: Develop and recommend strategy </li></ul><ul><li>Phase III: Execute transaction and funding </li></ul><ul><li>Phase IV: Post-transaction details </li></ul>
  11. 11. Part I: When To Do an RTO? <ul><li>Need additional capital for growth or liquidity </li></ul><ul><li>Sufficient milestones met </li></ul><ul><ul><li>Appropriate revenues </li></ul></ul><ul><ul><li>Profitability on horizon </li></ul></ul><ul><li>Current capital market ideal for RTOs </li></ul>
  12. 12. Part I: Where Will the Co Trade? <ul><li>Pink Sheets </li></ul><ul><li>Over the Counter Bulletin Board (OTCBB) </li></ul><ul><li>AMEX </li></ul><ul><li>NASDAQ </li></ul>
  13. 13. Part II: SCCP Approach
  14. 14. Part II: SCCP Approach <ul><li>We construct a custom-designed financial program to help the new public company effectively compete in the capital markets </li></ul><ul><li>Services offered include: </li></ul><ul><ul><li>Manage the RTO process </li></ul></ul><ul><ul><li>Sponsorship at investor conferences </li></ul></ul><ul><ul><li>Introductions to IR, legal and accounting firms </li></ul></ul>
  15. 15. Part II: SCCP Value Creation <ul><li>The RTO is a key component of the SC Capital value creation process </li></ul><ul><ul><li>120 day process </li></ul></ul><ul><li>Beyond the RTO </li></ul><ul><ul><li>Engineer a series of accretive financings </li></ul></ul><ul><ul><li>Obtain a broad investor base </li></ul></ul><ul><ul><li>Positioned to progress to bigger markets </li></ul></ul>
  16. 16. Part III: Value Creation Plan
  17. 17. Part III: RTO Process Phase I <ul><li>Prepare company for RTO </li></ul><ul><ul><li>Due diligence on acquiring company </li></ul></ul><ul><ul><li>Prepare Investment Memorandum </li></ul></ul><ul><ul><li>Prepare list of available shells </li></ul></ul><ul><ul><li>Retain auditor and legal counsel </li></ul></ul><ul><ul><li>Begin audit </li></ul></ul>
  18. 18. Part III: RTO Process Phase II <ul><li>Develop and recommend strategy </li></ul><ul><ul><li>Financing plan </li></ul></ul><ul><ul><li>Listing roadmap </li></ul></ul><ul><ul><li>Finish audit </li></ul></ul><ul><ul><li>Recommendation for RTO target and transaction structure </li></ul></ul><ul><ul><li>Letter of Intent </li></ul></ul><ul><ul><li>Trial balloon for institutional funding </li></ul></ul>
  19. 19. Part III: RTO Process Phase III <ul><li>Execute transaction and funding </li></ul><ul><ul><li>Due diligence on shell </li></ul></ul><ul><ul><li>Reorganization plan </li></ul></ul><ul><ul><li>Shareholder approvals (acquirer and shell) </li></ul></ul><ul><ul><li>Negotiation with institutional investor </li></ul></ul><ul><ul><li>Closing of RTO and institutional funding </li></ul></ul>
  20. 20. Part III: RTO Process Phase IV <ul><li>Post transaction details </li></ul><ul><ul><li>Filings (e.g. 8-K, SB-2, 14C, 10-Q) if OTCBB and press release issued </li></ul></ul><ul><ul><li>File 15C211 </li></ul></ul><ul><ul><li>Add market makers </li></ul></ul><ul><ul><li>Introduction of IR/PR and research firms </li></ul></ul><ul><ul><li>Schedule conferences </li></ul></ul><ul><ul><li>Trading begins </li></ul></ul>
  21. 21. Part IV: RTO Examples
  22. 22. Part IV: RTO Examples <ul><li>Some of today’s leading companies had their roots in shell mergers </li></ul><ul><ul><li>New York Stock Exchange </li></ul></ul><ul><ul><li>Berkshire Hathaway </li></ul></ul><ul><ul><li>Turner Broadcasting System </li></ul></ul><ul><ul><li>Occidental Petroleum </li></ul></ul><ul><ul><li>Blockbuster Entertainment </li></ul></ul><ul><ul><li>Radio Shack </li></ul></ul>