- What type of Pubco should we look for? The Pubco who can benefit the most from the application provided by the Beneficiary is generally the best choice. 8. - What are the terms for the investment into the Pubco? Very similar to a PIPE transaction, so typically convertible debt or preferred with warrant coverage or an equity line with a substantial up front advance. - Is the cost of the PassThrough Structure higher to the Beneficiary private company? No, it would not make sense for a Beneficiary to accept a PassThrough Structure if the cost of capital was less from another alternative. About Author Alvin Donovan :. Following agreement with Pubco on terms, the institutional investor writes term sheet to Beneficiary. The Institutional Investor writes term sheet to Pubco. Beneficiary and Pubco sign terms sheet, sign engagement letter, and The institutional Investor attorneys draft closing documents. The simplest way to explain the structure of the investment into the Pubco is a PIPE with a specialized use of proceeds.

Who finds the Pubco? The Beneficiary private company should initiate the relationship with the Pubco strategic partner or can retain an investment banker to do so. The Pubco is typically motivated by the opportunity to acquire an asset or an application that enhances its core business. The PassThrough Structure suits a company that has noteworthy management or proprietary assets, seeks to raise growth capital without selling a controlling interest, yet is not ready for a public stock market. Who performs due diligence on the Beneficiary? The Pubco as an expert in the industry is generally the most qualified to perform people, industry, and operational due diligence. - What are the steps to closing? 1. Beneficiary and Pubco negotiate specific terms for Pubco's investment into Beneficiary. A Pass Through Investment Structure is an ideal mechanism to fund certain private companies. Frequently Asked Questions - What is in it for the Pubco? The Pubco generally agrees to the transaction because it can acquire an asset or application that it considers important to its core businesses. 2. - How does the Pubco react when approached? We have received these 4 responses in the past.

No way" (the application is of little value to them) c) 'Yes, but can we get additional cash for ourselves?" (typically the answer is "yes"), d) "Yes and we like the deal so much we will just invest our own money". - Which Pubcos qualify? Pubcos that have established business models and whose viability is not in question because of operating losses, fundamental operating issues, or capital structure. 5. The Pubco agrees to enter into a financing transaction similar to a PIPE transaction with the use, or partial use, of proceeds to be dedicated to the Beneficiary. 3. This application can often be a carveout of the Beneficiary's core product line. The Pubco may be listed on any exchange worldwide. Final documents executed, escrow funded, and transaction closes. The Pass Through Structure simply places a publicly traded company ("Pubco") in the middle between an institutional investor and the private company and enables them to invest in and to use their global resources to support the private company. If the Pubco is not acquiring a majority interest in the Beneficiary, it is generally best to carve out an application or distribution channel that can be exclusively owned by the Pubco. The Pubco's CFO normally immediately understands the transaction when presented in this format and will recommend it if he thinks they can control an important asset or application. The Institutional Investor indicates how much financing it will provide to Pubco. The transaction can close very quickly once all parties agree to terms. 9. When a Pubco strategic partner is available, the PassThrough Structure is CPVC Pipes Factory generally the least expensive form of financing because a strategic partner will always charge less than a financial investor. The PassThrough Structure thus works to the benefit of all parties.

The Beneficiary private company receives growth capital while staying private and maintaining ownership control. - Can the Beneficiary later become publicly traded on a European, Asian, or other stock exchange? Yes, the PassThrough Structure does not affect a subsequent public listing. The Pubco and Beneficiary agree that there is a potential working relationship and outline terms.Many institutional investors only invest into listed public companies. A strategic partner in most cases has a deeper understanding of the industry, the competition, the distribution channels, and the risk facing the private company and because of this certainty will provide more favorable pricing to the private company. The key is having the Pubco understand the benefits of the application that they can control. 4. 6. Logical choices include existing or potential distributors, suppliers, or customers. How Do You Approach the Pubco? The Beneficiary tells the Pubco that an institutional investor wants to invest in the Beneficiary but has a charter restriction that only permits it to invest in publicly traded companies. The Institutional Investor confirms the Pubco's investment intent in a phone call with Pubco. - Investor benefits by putting their capital to work in promising investment opportunities that would otherwise be unavailable to investors restricted to public market transactions. The Beneficiary also benefits by having the Pubco as a strategic partner/investor. - The Public Company benefits by acquiring an asset, product, service, or application that it believes enhances its core business. 7