October 7, 2020

Episode – 05

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Laura Anthony – The Deal Flow Show - October 8, 2020 Reply

[…] Laura AnthonyEpisode #5 : Legal Transactions With Over $2 Billion in M&A Deals Done […]

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Laura Anthony Discusses Legal Transactions With Over $2 Billion in M&A Deals Done


Description:

Laura Anthony is Founding Partner of Anthony L.G. For more than two decades Laura has focused her law practice on small and mid-cap private and public companies, the OTC markets, Nasdaq, NYSE American, going public transactions, Regulation A+, mergers and acquisitions, private placement and corporate finance transactions, Exchange Act and other regulatory reporting requirements, state and federal securities laws, general corporate law and complex business transactions.
Laura and the ALG legal team have represented buyers, sellers, underwriters, placement agents, investors, and shareholders in mergers, acquisitions and corporate finance transactions valued in excess of $1 billion.

What you’ll learn from this episode:
– Rules and regulations in the Capital Markets
– Reg As, IPOs, SPAC, and more
– The importance of building a good business model

Connect with Laura:
LinkedIn

Full Transcript:

JP Maroney:

Welcome to another edition of the deal flow show on JP Maroney, your host, along with my cohost, Paul Nicoline, regional director from Harbor city capital. And we’ve got another exciting guest today. I tell you what kudos out to our team, both of you, Paul and Daniel, [inaudible] on our team that have been lining up some excellent guests for these episodes for season one of the deal flow show. So we’ve got another exciting guest here today, and this is not just someone we invited on to share some knowledge. Although she’s going to have stacked knowledge for you. This is someone that we have actually put our money where our mouth is and hired as one of our providers and part of our team. And that person is Laura Anthony from Anthony LG. She is a law, an attorney, a lawyer out of South Florida. And we’re going to get her to tell us a little bit, bit more about herself and her firm. And then we’re going to jump into some of the dealmaker questions and talk about the deal flow process as it relates to their firm. So Paul, and we’ll let you lead off today. Well, this is an easy one to start off. Uh, what made you get into law, Laura? And then specifically, what kind of law are you?

Laura Anthony:

So I always wanted to be a lawyer since I was five years old. So then that never changed. I always knew I’d be a lawyer. And, uh, and I always knew it’d be a business lawyer, which is what I am I’m business corporate and securities. I was the kid that, although I like to have fun, I also loved the wall street journal and anything dealing with business. My father was a business owner, an entrepreneur, and I was always very interested in what was happening in his world and in the world of entrepreneurs. And so with that said, I practice corporate securities and business transactions. We have, if I was going to, to, uh, put our firm into a couple of buckets, I’d say the one bucket, which is the largest bucket probably is our securities practice. We, uh, we represent public companies, companies that intend to go public doing corporate finance and capital market transactions. We do general corporate work, which can be contracts, licensing agreements, employment agreements. Uh, and then we do, uh, we have a robust M and a merger and acquisition practice as well. But you know, our, our bread and butter I think is, is offerings and public offerings follow on offerings, private offerings, capital market transactions.

JP Maroney:

What do you think? And I don’t even know if this was on here today, but what do you think is the most exciting or a unique and really, I guess gaining momentum thing in the capital markets today in terms of y’alls law practice, but capital raising methods and programs.

Laura Anthony:

Sure. You know, interestingly, I was very concerned when Colbert first hit just like the rest of the world was I spent a couple of weeks kind of going through motions and staring into the corner, thinking, wow, what is going to happen to our world and to the business world. But very interestingly, not only did business not slow down, but I had a real uptick in calls beginning right away from really decent companies that had been planning to do an IPO say here in 2020, or [inaudible] 2021. And they’re there. They decided to pivot a little bit and look at going public in a different way, such as a reverse merger or a SPAC deal. I have never seen this back market in. I’ve been practicing since 1993. So it’s been a minute and I have never seen this back market as busy as it is right now. And I’m not, you know, in addition to the very large SPACs we hear about the, the record setting billion and $2 billion backs. There is a plethora of 30, 40, and $50 million backs. And they’re looking for acquisition opportunities and the markets are booming. I mean, you know, they have not slowed down and quite the opposite. I’ve, you know, we’re, we’re as busy as ever. And everybody I know in the capital markets is as busy as ever.

JP Maroney:

Can you give a little bit of backstory? I know we’re both excited about this topic. Well, we got into this topic with John on our conference call with John and Chad the other day from y’alls office. So I, the spec thing is very interesting to me. I, um, was exposed to it. When was Josh with us? Um, maybe last fall, late summer, last fall. I ended up in a meeting in South Florida with a guy who was doing specs and some pretty decent size, you know, I think they went out to Ray and this particular one ran out to raise like two 70 and ended up raising like 300, 310 million in 10 days in Europe. And he was talking about the appetite among the investment in banking community for the specs. I know a lot of people may know a lot about specs. I don’t know, but I know there’s a lot of myths surrounding them. Can you walk us through maybe a little bit of the background of the spec and then how you’re seeing them best use in today’s environment?

Laura Anthony:

Sure. So a SPAC it’s SBAC and it stands for a special purpose acquisition corporation. Okay. And then what happens is you have a sponsor. The sponsor has to come up with 10% of the cash. So when you see a 270 million or $300 million it’s back, you have a sponsor, someone behind it, that’s actually had, that’s quite liquid, right? That’s come up with 10% of that money. And sometimes even more, sometimes the sponsor will put extra into the kitty to help make sure that this back deal is successful. Okay. So what happens is you do an IPO with this blank check company it’s its purpose is to find an acquisition. It can be industry specific. You might have somebody, for example, that’s very successful in pharma or biotech or, or aeronautics, or, you know, it can be that kind of specific where they create a spec. They know that they a lot of contacts in that industry and that they’re hoping they can go out and acquire somebody once they’ve raised all this money, right.

Or it can be completely industry agnostic. You can have somebody which this happens a lot too, especially with bankers. A lot of bankers create specs. When I say bankers, I mean, broker dealers create specs with no specific industry or acquisition targets. You would never have an actual target, but no specific industry in mind. And you go out and you raise money, you start to trade on it, national exchange and all the money that you raise, except for that 10% that the sponsor used to cover the cost of going public sits in an escrow account. Okay. And until there is an actual acquisition now, especially spec trades and a lot of people trade on the arbitrage or potential, right? Well, that’s back is trading right where there’s no business in it. And you have a very specific amount of time in order to acquire a business.

When you find a business to acquire all of the shareholders told at the time of that act, that you acquire that business. So it may or may not be someone that was in the initial IPO, cause somebody could have traded out, but all the shareholders that are in it at the time that you’re going to make that acquisition have an opportunity to vote on the acquisition and they can vote for the acquisition and continue to be a shareholder after the acquisition, or they can vote against it and ask to have their money redeemed and they’ll get their money back right. Based on the value of the money that’s in escrow at the time that they redeem. And, uh, and then you don’t, if the, if you don’t make the acquisition within the time allotted by statue, then also all of the money goes back, the SPAC folds and it stops trading.

So phase world, there’s a lot of MNA opportunity. Pharma is very hot. Uh, there’s a lot of businesses that we’re now that we know now we know that we’re a under-capitalized or had a business model that wasn’t ready to sustain an interruption like COVID-19 has caused. And that creates buyer buying opportunities, especially, you know, if you think that you can manage the business better, or, you know, you can maybe if it’s a conglomerate, you can maybe sell off pieces, but, but there’s a lot of opportunity to purchase those business. And for the private business, that’s a way to go public, right? They, in essence, a SPAC transaction is a reverse merger transaction. You acquire that business, bringing it public. And the team that runs that private business now becomes the management and the controlling team of the SPAC entity, which, you know, was just a shell.

It was, it was there to make an acquisition. So it’s, it’s just a different way to go public. Uh, the benefit for the private company is of course it can be faster to go public than a full IPO. And the other benefit is that there is ostensibly cash in this back. It’s raised a lot of money now, in reality, a lot of people cash out when the acquisition is made, they actually were there for the arbitrage situation itself. So in reality, there, isn’t usually as much as much cash in the, in this back, as you would think, but, you know, it’s still a very great way to go public. And then you’re trading on a national exchange. And as long as you have followed the rules properly, you traded on that national exchange. You don’t have the shell company stigma that can emanate from a company that was really truly a shell and then made an acquisition in a reverse merger.

JP Maroney:

How often do you see, um, a SPAC being used for a single acquisition versus like a roll up, which was the conversation we had this week earlier with John and Chad,

Laura Anthony:

Because, you know, it’s rare that you’re going to have a concurrent roll up, right? It’s rare that you’re going to have a closing on a SPAC deal where you’re simultaneously closing on five businesses at one time. Right? So it may be a roll up strategy, but you’re going to start with one and you’re going to get your shareholders to agree to that one, that one will meet the requirements of the value. And then you can proceed to, to roll up the rest of the business

JP Maroney:

As a public entity then right. As a public entity. That’s right. So you could go out there and swing for the fences on that first transaction. It’d be a larger transaction, gives you some momentum as well as the liquidity of being public. Right.

Laura Anthony:

And you can have, I mean, you certainly can have letters of intent with additional acquisitions. You know, maybe you close to similar simultaneously, but you know, more often you’re going to have the one that you’re closing on and then you’re going to engage in your roll up strategy.

JP Maroney: 

You had mentioned national exchanges, is this for listed and non-listed so a SPAC could be on a NASDAQ or, or on the big board,

Laura Anthony:

It can be on the NASDAQ, the NYC American, or even the big board, right? Uh, w on OTC markets, it can get onto the OTC QX tier of OTC markets though. That’s fairly rare. It does not qualify at all for the QB or the pink sheets. So you’re not, you’re not really gonna see a trading spec that is, you know, there’s, there’s another way to do it’s called rule four 19. And, and there’s another way to put some money in and escrow and some shares in escrow, on OTC markets, but those vehicles don’t trade. So, you know, it’s really as a national exchange deal,

JP Maroney:

I want to shift gears a little bit because there’s another, um, regulation that you all are well known for. I think when we talked the first time, you said maybe top three, top five firm in terms of volume of these and that’s regulation, a reggae, uh, not to be with reggae Mon, but reg a, um, talk a little bit about exactly. Talk a little bit about that and, um, how you’re seeing the velocity of that increasing staying the same, et cetera.

Laura Anthony:

It’s very hot. So when reggae regulation, a regulation that exists today, some people call it regulation a plus, but you know, regulation a, as it exists today with its two tiers, once that was passed and came into fruition from the jobs act, it was very hot, right? A lot of companies were doing reggae deals, including using them as a methodology to go public and go public on national exchanges. Everybody jumped in. And the reason everybody jumped in by the way is the same reason why it’s hot now today. And that’s because you can do testing the waters. You can really advertise and solicit, and you can build the market for your, your offering, which is the exact opposite of really what you can do when you’re doing a traditional IPO with the NASA one. Even when you are allowed to do test the waters with a traditional IPO, uh, with the [inaudible], it’s very limited.

You can only speak to qualified institutional buyers or institutional level accredited investors. So, you know, it’s very limited reggae. You can get out there and showed it from the rooftops, which is a great thing. But what people discovered is that because it’s rare that a reggae is a firm commitment offering and it closes differently than a regular IPO at closes like a private placement people write checks, they put their money into the account when it closes that money is dispersed in a traditional IPO money that it’s closed through the banker syndicate account. And it’s a T plus two closing through the DTC system and their syndicated account, just like a, a settlement of a stock trade. So there’s a bit of a difference in the closing. And I think that took the markets a little bit by surprise when they realize, and without firm commitment offerings, there was no green or over allotment.

So your bankers didn’t have the incentive nor the ability really within their parameters to support the deal in the aftermarket. So you had a situation where a lot of the deals went down in the aftermarket and everybody took a step back and they became less popular for a period of time. But now, you know, I think that people understand the way it works and it has such a great, I mean, there’s so many models that it’s great for, besides an IPO it’s now available to already public companies, when it first was enacted, it was not. And so it’s used a lot as a follow on offering method, but it’s also used a lot in, for alternative assets, real estate works of our cars. Um, you know, it’s a great way to do, to issue tokens that are on the blockchain like cryptocurrencies, you know, so it’s, it’s really great for alternative assets, you know, besides your regular common stock or, you know, regular stock, you know, debt, people use it for debt. So I think it’s fantastic.

JP Maroney: 

I was going to ask you Laura, what’s the difference between the tier one and tier two, right?

Laura Anthony:

A tier one is limited to number one 20 million, but a tier one does not preempt state law. Truthfully, I see very little use in my world for my clients for a tier one, offering it, if you want to sell, if you’re, if you’re strictly selling in one state, possibly two, then tier one may be great for you. But if you want to sell in multiple States, just the blue sky process itself would be make it cost prohibited. You might as well get your audits. And then even though the sec doesn’t require an audit for a tier one, every state has a different review process. And I find that some States they’ll look at the merits of the offering. And some States were required that you have audited financial statements or that you limit. You put a investor limits in such as, um, you know, sophistication levels or accreditation levels, which kind of takes away the benefit of going through that process with the sec anyway. Right. So, you know, I really don’t have a lot of use for tier one. I’m, you know, I’m a tier two advocate and a very, very rare circumstances. Do I think tier one has any use at all?

JP Maroney:

Paul was brought on board at Harbor city based on 25 years background in the broker dealer community and his experience as a broker dealers network and all, um, specifically to help roll out Harbor cities opportunities to that community. My question is, are you seeing the reg a being widely accepted within the BD community? I endorse RI advisor community, um, as offerings, or is this pretty much just a direct to consumer direct to investor type of opportunity? Primarily.

Laura Anthony:

Good question. Um, a lot of people do it as direct to consumer direct, you know, without a broker dealer involved or at least without a broker dealer being, uh, uh, heavily involved, you know, there there’s certain uses for broker dealer to do administrative and back office and AML, anti money laundering checks for you and things like that. But there’s a lot of people out there that are service providers to the reggae space and that provide, uh, the back, uh, provide administrative software and technology. Cause the reggae offering is really internet based. So you have to have a place where somebody can go, whether it’s a platform that exists with multiple offerings or on it, or whether or not you’ve white labeled and created your own platform. I E webpage, they have to have a way to process documents, to sign documents, to pay to wire money or, or, or put through a credit card charge to pay if they’re actually making an investment.

So there are a lot of service providers that handle that kind of thing, the technology, there’s also a lot of service providers that help you market the deal. So you don’t have to have a broker dealer, but as far as broker dealers, there are broker dealers that are very interested in the reggae space, but a lot of the traditional broker dealers that jumped in right away and then saw that it didn’t work in their own traditional way. You know, maybe they’re not as hot on the market for it and as, as others, but, but there are plenty of broker dealers that just love the reggae space, love the technology and they’re in it.

JP Maroney: 

I’m sure you, I want to shift gears just a little bit because one of the things we’re doing as a result of the content from the deal flow show is creating a book called dealmakers deal breakers. So we’re going to be talking about the strategies, the tactics, the principles, the tips, how deal-makers like yourself operate within the space and some of the things that you do in that process. So here’s my question. When you come to the table, obviously as an attorney, you’re very concerned about specific details in an opportunity, but when you’re vetting an opportunity for a client or to potentially take on a client, what are some of the things that you’re looking for, take us through your mindset and your process of identifying the, you know, the, the pimples on the deal kind of thing. And then finding out if this is a deal that y’all want to be involved with.

Laura Anthony:

Well, I mean, basics, right. Are the, is the client realistic and sophisticated? Right? So sometimes I get and more so, thankfully, you know, the longer I practice, the more my firm has been successful. We’ve been in business 20 years next year. So, you know, we have quite a reputation and a following, but you know, a lot, sometimes you get somebody that comes to the table and they really are not sophisticated. They’re never going to understand the process. They’re going to be, even if you tell them how much it’s going to cost to do an offering, they’re going to be in shock the whole way. And I just see that they don’t have a strong management team and organization. And I become very concerned at that point because I’m like, I don’t want to just take their money and have an unhappy client and have a ton of happy situation.

And you can see that it’s not likely that that offering is going to succeed, right, because they don’t have that knowledge behind them or, or really the ability to carry it for me to be. So I will, I will tell somebody that they should slow down, raise some money, privately, do some friends and family and get their business model going. Right. Um, another way that if the person can be unrealistic and you know, I hate to say this, but it’s true is I love when somebody comes in and has this hockey stick of projections and they might be middle-aged and they think that they have the greatest idea since sliced bread. And they’re going to grow this into a hundred or $200 million company in 12 months. Right? Well, of course we’ve never seen bad projections, just bad historicals. So, you know. Okay, great. But I, you know, one of the things I’ll ask them is, have you ever had a successful exit?

Have you ever run a three or $5 million business, let alone a hundred million dollar business? Do you have resources to get, see a strong C suite of executives? I mean, people may think they have a brilliant idea and it can grow, but execution requires extremely hard work. And it requires, you know, there’s a lot of times when you’re growing a business that you need to make difficult decisions and you need a strong management team and somebody that thinks that they just have a great idea, but doesn’t have that, that those other pieces in place, they’re just setting them up for failure and for themselves for failure, uh, crazy valuations are something that I keep my eye out for. Um, you know, just things, you know, I mean, there are certain things you just, you just know it’s not gonna work, right? So you look for that. You try to guide them as best you can. But the most important thing for an entrepreneur is to be able to execute on their business model. They can’t an entrepreneur is not a capital markets in the capital markets business. They’re in the business that they’re in. And if they forget that and they think that they’re in the capital markets business, their business will never succeed. They raise capital to execute on their business model. They’re not in the business of raising capital and they need to be clear about that.

Paul Nicolini:

Laura, how has the, um, the whole process, the deal making process changed in the digital era digital space compared to the traditional way?

Laura Anthony:

Well, I mean, certainly, and you’ll see, you know, I write a blog, you’ll see my blog that goes out today at two, every Tuesday at two, there’s a plug. Uh, you’ll see that I’m talking about the virtual road show in a COBIT IPO. So certainly even before COVID that the ability to have virtual meetings, zoom, and all of that really made a in technology in itself made it so you could work anywhere. You didn’t have to spend all of your day on a plane, you know, you could, uh, you can check your emails anywhere so you can be more fluid and, and that’s become even more important today where we have COVID, you know, virtual virtual road shows are exactly what’s happening. And, and although I think there will be a time when you have in person meetings again, in fact, I know I have some clients that already do, you know, but maybe not in groups like with like you wouldn’t have road show, that will be a time I think, where you’ll go back to doing some regular road show meetings. I really firmly believe that a virtual road show is going to be here to stay forever. Maybe not as the sole method, but rather than traveling, if you’re doing an IPO or a, or a, a non-deal road show or a follow on offering road show, rather than traveling to 15 cities in 15 days, I think you’re going to pick three or four of the biggest cities and maybe travel there with the biggest crowds. The rest can be virtual. Yeah.

JP Maroney:

Yes. Certainly seems more cost effective. Right.

Laura Anthony:

And it hasn’t now maybe it’s a sign of the times, but all of the deals that all of the IPO is in 2020, okay. That have got, had virtual IPO, virtual roadshows, they’ve all priced in the middle to upper end of their range. So it’s not hurting the valuations of the prices of the IPOs. It’s not slowing anything down. You know, maybe if they were the only one during a VR doing a virtual road show, you know, there might be a little more impact, but right now it’s not hurting anything. I think people are comfortable and used to zoom and are actually thinking or wring whatever technology they’re using. But, but I think that people realize that they can be very productive when they’re not spending days on a plane and living out of hotel rooms.

JP Maroney:

I agree. I think it’s a paradigm shift I’m sitting in our studio today is Jay Benoit. He’s our chief technology officer, but he’s a long time friend. And he and I both come out of the digital space together. We did a lot and I started back many, many years ago on teleseminars selling on teleseminars. Before that I spoke on a more than 2,500 stages, worldwide and seminars, keynote addresses, et cetera. And we migrated from that to tell us seminars then to webinars. I remember having a go to meeting account that was $99 for the thousand people, which now cost you hundreds and hundreds of dollars a month for that same kind of account. So that’s tells you how to far how far that back, where it was, but it requires a paradigm shift because like Jay and I know back in what 2011, I did over 300 webinars that year.

What we’re now calling virtual road shows, right? You’re just making your pitch on, in a virtual environment. And we were closing deals, selling product, taking money, um, on programs, coaching advisory, consulting services, all sorts of things and teaching a lot of other people how to do that. It’s interesting that the capital markets may be not just now catching up on it, but having are being forced to catch up and to take that. And so it’s really exciting. We’re working with wealth forge as our, um, platform, and they’re very much a technology driven platform for our managing broker dealer process with issue six. Right.

Laura Anthony:

I know. Well forge great company. Yeah.

JP Maroney:

Yeah. Great. Yeah. And we actually had Mike Roman from wealth forge on the deal flow show. So I don’t know when these will come out in what order, but he may be before after you in one of these episodes. But you know, it’s, it’s seeing all of the technology pieces fall in place, but I want to step back just a second, because you were talking about the importance you said of when we were talking about the characteristics of a deal, the importance of that entrepreneur or the sponsor to be able to pull together the C suite. And when you were talking about smacks earlier, if you’re talking about a blank check company, my assumption is that a lot is riding on the confidence in that C-suite in that because that’s all you really have in the beginning. Right, right,

Laura Anthony:

Right. The team behind it. But you know, that it’s that’s different situation, right? Because they’re not trying to execute on a particular business. They’re not trying to create a cure for COVID or be a pharmaceutical company. What they’re doing is two things. Number one, they need to be able to have the contacts to locate though. The bankers and broker dealers involved will help with that aspect. But to the context to locate valuable businesses, right. That that will hopefully bring extra value, but they also have to have the ability to do proper due diligence. Now you can hire out third parties for in-depth due diligence, right? Pharma bankers do it all the time. They have pharmaceutical companies or pharmaceutical people that will do the due diligence on the pharma side of the deal. Right. They all the bankers don’t necessarily understand all of that, but, but, you know, you need to be able to, to, uh, be able to do the due diligence and you also need to be able to negotiate a, just a, a decent deal, right? You need to understand valuations. And, and again, you have advisors to help you, but, but ultimately it’s not the people that put this back together that are gonna run the business and make it a successful business. Right. They’re just trying to get it at a, uh, an MNA transaction completed. That’s what they’re doing.

JP Maroney:

When I think about a deal maker, the ultimate consumer of this show and the content that results from it. I think negotiator, you use that term just now negotiating, when you go to the negotiating table, whether you’re sitting at the table with a team, which is likely, um, what are some of the important factors to get that deal across the finish line? Because it truly is going to be some form of a give and take, um, the best negotiators. What have you seen over the years as the characteristics of those best deal makers?

Laura Anthony:

I mean, look, I I’m generally representing companies or issuers as you call them. Right. So right from the beginning on the issuer side, you’re negotiating with your underwriter and, and the things that you want to look at with your underwriter is what are their tail periods? Meaning how long can they continue to collect a commission based on introductions that they’ve made after the deal is closed. And, and, and, and I say, after the deal is closed, we want to make sure that they only have a tail if they can close the deal, unless they, or say a short tail, if they’ve made an introduction and a deal doesn’t close. And then after, uh, you know, that, that, that, that investor decides they want to invest, what are their rights of first refusal? So a lot of bankers that, that is very important to them, that they have an opportunity to have a right of first refusal for any deal that, that follows within say 12 months.

And we’ll try to ask for more than that, right? So you want maybe carve-outs from that right. Of first refusal. If the CEO brings in a relationship that he’s had, or friends and family or other, other relationships that they have to do a follow on offering after you closed the deal with a banker, will, you know, you don’t want to have to pay that banker a commission on that deal or, or give the banker a right to represent anybody on that deal, because it’s the CEO’s relationship. So you’re w it’s called Rolfers right. Ray writes the first refusal. You want to make sure that a banker only has a row for if they’ve been successful in their raise that they were hired for. You don’t want to have to give them rights, the first refusal and our abilities to hold up a second deal, if they were never successful in the first deal.

And of course, B’s FINRA does regulate a public offering fees, but they don’t regulate private offering fees. And there can be a lot of hidden fees. I mean, you’re always paying the bankers expenses. Are they accountable or non-accountable, you know, so you always want to look at the fees. Um, and so, you know, that it starts a lot with what you’re negotiating in your engagement letter or your terms with your banker, right? So that’s a big part of it. And then valuation, you know, it’s always, it’s a give and take, I get everybody, you know, CEO Ida’s right. Everybody, everybody thinks their company is worth more. Right. But at the end of the day, you know, sometimes the bankers finding that they can, they having trouble placing a deal. And so they’re going to try to push down that, that valuation. So you want it, you want to work on, you know, that’s always a negotiation finding a proper valuation and structure of the deal.

What do you, what are you selling? Right. So from a company’s perspective, the best thing that they can sell a straight common stock, but from a banker’s perspective, they want to sell a unit that has warrants. And how many warrants per share a common stock, right? Is that, is it 50% ward coverage, a hundred percent warrant coverage, 200% warrant coverage. And what’s the strike prices for those morals. So it’s always going to be above the IPO price or follow on offering price, but how far above, right. Is it a 25% kicker or is it, you know, I find a lot of times, interestingly, I find that they’ll price the deal and the warrant, well, the warrant strike price will be really high. And then the banker ends up going back to the company and saying, look, let’s reprice those warrants because I think I can get them people to exercise if they’re repriced to a lower price.

So that can happen quite often. But, you know, there’s a lot of things, you know, that, that, that you’re working on in negotiating in a, in a deal. But, you know, you’re also a team working together, but it’s mainly the relationship with your banker and the structure of the deal itself and valuation and an M and a transaction by the way is completely different. So we have a very robust MNA practice, you know, um, our firm has done in the 20 years, almost $2 billion in M and a transactions. And so there’s a lot that needs to be negotiated and appear M and a transaction that’s completely different right than a banker deal. There may or may not be a banker involved, but, but who your management is going to be and how you’re going to actually run operations and administration. And there’s a lot of moving parts in an M and a transaction. We could talk for a couple hours on that alone. So, you know, we’ll probably, shouldn’t

JP Maroney:

No, that’s good. Uh, if you’re listening to the show or watching the show, you’re listening to the deal flow show, you can get more episodes and also subscribe or follow us for future episodes@thedealflowshow.com. Our guest today is Laura Anthony from Anthony LG, and Paul is taking them to the next step. Let’s go. Um, it sounds like there’s a lot of moving parts in the whole process. What do you do if there’s a failure in it and how do you deal with that?

Laura Anthony:

Oh, there’s kinks in every deal, you know, so, and how you resolve it runs the gamut. You may take a step back and renegotiate a deal could fall apart. You might redo a deal. I mean, I had, I’m not going to mention the client, but we had a situation recently. And if anybody from that, client’s listening, they’re going to know I’m talking about them or the banker. But we had a situation where it was a cm PO, which is a confidentially marketed overnight public offering. And that’s a take down off of a shelf registration statement, and literally you’re negotiating and preparing paperwork when ultimately one of these deals closes. You’ve prepared all the paperwork and the, and it closes overnight. And the market finds out about it the next morning. And we were all set to close. It was a mid day, Sunday, and we were all set to close Monday morning.

Laura Anthony:

And we found out that there was a, there was a hiccup, right? It has, it’s a regulatory hiccup, but it had to do with one of the investors in something called regulation, M uh, which is again, you know, like getting very technical, but we had to restructure the deal literally overnight. And my team and underwriters counsel team worked all through the night, right? They started at about, uh, eight o’clock on the, on at night. And we, they literally worked throughout the whole night. I had two people on my side. They had two people on their side and the deal closed at eight o’clock the next morning with a big stack of paperwork that had to have been redone overnight.

JP Maroney: 

That’s great. Can you share something with our audience that otherwise people wouldn’t know about you?

Laura Anthony:

Um, otherwise wouldn’t know about me. I play a lot of tennis. I sit on the board of directors of the South Florida division of the American red cross. Um, you know, that’s, I work a lot. I think people do know that about me.

JP Maroney:

Wonderful. Our audience likes to give back as we wrap it up here on the deal flow show on behalf of myself and Paul Nicoline, what we would like to do is allow our audience to give back, or to be able to what would be the best way for someone to connect with you and your firm. And also what are the kinds of people that you would love to hear from that would help y’alls from move to the next level, or to be able to do more deals, um, to reach more people, to be able to serve more people?

Laura Anthony:

Yeah. So the best way I would say is email and that’s lAnthony@anthonypllcdotcomplikepaulllc.com and, uh, well, the kind of business kind of people I’d like to hear from, or either existing public companies that are looking to make a change in council or operating businesses that are looking to either go public or engage in a capital markets transaction of some sort, or do an M and a deal. You know? So those are the ideal people I would like to hear from,

JP Maroney:

As we wrap things up one final tip, deal-makers going into the deal table. What’s one piece of wisdom or advice it’s just hammered out on the anvil live experience for you. And you go, you know what, this is what you need in your arsenal. What would you say to the, the person that’s just about to go back to, or maybe the first time to the deal table? Okay.

Laura Anthony:

That’s a good question. I would say, uh, uh, be prepared when you go to the table, be prepared, know your numbers, know your burn rates, know your, if you’re a company or an entrepreneur, know your burn rates, know your projections. No, uh, no. What you can accomplish, realistically, know your valuation, know what valuations you’ve raised money at in the past. And, uh, and be very prepared, uh, also be calm and don’t lie. I mean, you know, don’t, don’t be trying to be too slick. People recognize a lie or somebody that’s just winging it, you know, very easily.

JP Maroney:

Excellent Palm Nicoline. I’m JP Maroney. This is the deal flow show. And thanks again to our special guest on this episode, Laura Anthony from Anthony LG out of South Florida. And again, you can reach her at their website or through the email that she gave out. Uh, if you’re watching the show or listening to the show, you can get more episodes and subscribe for future episodes@thedealflowshow.com. We should be able to put something up here across the screen as well on behalf of myself and the Harbor city team, the deal flow show team. We’ll see you in another episode very, very soon. Take care for more episodes, visit the deal flow, show.com and subscribe.

October 7, 2020

Laura Anthony Discusses Legal Transactions With Over $2 Billion in M&A Deals Done


Description:

Laura Anthony is Founding Partner of Anthony L.G. For more than two decades Laura has focused her law practice on small and mid-cap private and public companies, the OTC markets, Nasdaq, NYSE American, going public transactions, Regulation A+, mergers and acquisitions, private placement and corporate finance transactions, Exchange Act and other regulatory reporting requirements, state and federal securities laws, general corporate law and complex business transactions.
Laura and the ALG legal team have represented buyers, sellers, underwriters, placement agents, investors, and shareholders in mergers, acquisitions and corporate finance transactions valued in excess of $1 billion.

What you’ll learn from this episode:
– Rules and regulations in the Capital Markets
– Reg As, IPOs, SPAC, and more
– The importance of building a good business model

Connect with Laura:
LinkedIn

Full Transcript:

JP Maroney:

Welcome to another edition of the deal flow show on JP Maroney, your host, along with my cohost, Paul Nicoline, regional director from Harbor city capital. And we’ve got another exciting guest today. I tell you what kudos out to our team, both of you, Paul and Daniel, [inaudible] on our team that have been lining up some excellent guests for these episodes for season one of the deal flow show. So we’ve got another exciting guest here today, and this is not just someone we invited on to share some knowledge. Although she’s going to have stacked knowledge for you. This is someone that we have actually put our money where our mouth is and hired as one of our providers and part of our team. And that person is Laura Anthony from Anthony LG. She is a law, an attorney, a lawyer out of South Florida. And we’re going to get her to tell us a little bit, bit more about herself and her firm. And then we’re going to jump into some of the dealmaker questions and talk about the deal flow process as it relates to their firm. So Paul, and we’ll let you lead off today. Well, this is an easy one to start off. Uh, what made you get into law, Laura? And then specifically, what kind of law are you?

Laura Anthony:

So I always wanted to be a lawyer since I was five years old. So then that never changed. I always knew I’d be a lawyer. And, uh, and I always knew it’d be a business lawyer, which is what I am I’m business corporate and securities. I was the kid that, although I like to have fun, I also loved the wall street journal and anything dealing with business. My father was a business owner, an entrepreneur, and I was always very interested in what was happening in his world and in the world of entrepreneurs. And so with that said, I practice corporate securities and business transactions. We have, if I was going to, to, uh, put our firm into a couple of buckets, I’d say the one bucket, which is the largest bucket probably is our securities practice. We, uh, we represent public companies, companies that intend to go public doing corporate finance and capital market transactions. We do general corporate work, which can be contracts, licensing agreements, employment agreements. Uh, and then we do, uh, we have a robust M and a merger and acquisition practice as well. But you know, our, our bread and butter I think is, is offerings and public offerings follow on offerings, private offerings, capital market transactions.

JP Maroney:

What do you think? And I don’t even know if this was on here today, but what do you think is the most exciting or a unique and really, I guess gaining momentum thing in the capital markets today in terms of y’alls law practice, but capital raising methods and programs.

Laura Anthony:

Sure. You know, interestingly, I was very concerned when Colbert first hit just like the rest of the world was I spent a couple of weeks kind of going through motions and staring into the corner, thinking, wow, what is going to happen to our world and to the business world. But very interestingly, not only did business not slow down, but I had a real uptick in calls beginning right away from really decent companies that had been planning to do an IPO say here in 2020, or [inaudible] 2021. And they’re there. They decided to pivot a little bit and look at going public in a different way, such as a reverse merger or a SPAC deal. I have never seen this back market in. I’ve been practicing since 1993. So it’s been a minute and I have never seen this back market as busy as it is right now. And I’m not, you know, in addition to the very large SPACs we hear about the, the record setting billion and $2 billion backs. There is a plethora of 30, 40, and $50 million backs. And they’re looking for acquisition opportunities and the markets are booming. I mean, you know, they have not slowed down and quite the opposite. I’ve, you know, we’re, we’re as busy as ever. And everybody I know in the capital markets is as busy as ever.

JP Maroney:

Can you give a little bit of backstory? I know we’re both excited about this topic. Well, we got into this topic with John on our conference call with John and Chad the other day from y’alls office. So I, the spec thing is very interesting to me. I, um, was exposed to it. When was Josh with us? Um, maybe last fall, late summer, last fall. I ended up in a meeting in South Florida with a guy who was doing specs and some pretty decent size, you know, I think they went out to Ray and this particular one ran out to raise like two 70 and ended up raising like 300, 310 million in 10 days in Europe. And he was talking about the appetite among the investment in banking community for the specs. I know a lot of people may know a lot about specs. I don’t know, but I know there’s a lot of myths surrounding them. Can you walk us through maybe a little bit of the background of the spec and then how you’re seeing them best use in today’s environment?

Laura Anthony:

Sure. So a SPAC it’s SBAC and it stands for a special purpose acquisition corporation. Okay. And then what happens is you have a sponsor. The sponsor has to come up with 10% of the cash. So when you see a 270 million or $300 million it’s back, you have a sponsor, someone behind it, that’s actually had, that’s quite liquid, right? That’s come up with 10% of that money. And sometimes even more, sometimes the sponsor will put extra into the kitty to help make sure that this back deal is successful. Okay. So what happens is you do an IPO with this blank check company it’s its purpose is to find an acquisition. It can be industry specific. You might have somebody, for example, that’s very successful in pharma or biotech or, or aeronautics, or, you know, it can be that kind of specific where they create a spec. They know that they a lot of contacts in that industry and that they’re hoping they can go out and acquire somebody once they’ve raised all this money, right.

Or it can be completely industry agnostic. You can have somebody which this happens a lot too, especially with bankers. A lot of bankers create specs. When I say bankers, I mean, broker dealers create specs with no specific industry or acquisition targets. You would never have an actual target, but no specific industry in mind. And you go out and you raise money, you start to trade on it, national exchange and all the money that you raise, except for that 10% that the sponsor used to cover the cost of going public sits in an escrow account. Okay. And until there is an actual acquisition now, especially spec trades and a lot of people trade on the arbitrage or potential, right? Well, that’s back is trading right where there’s no business in it. And you have a very specific amount of time in order to acquire a business.

When you find a business to acquire all of the shareholders told at the time of that act, that you acquire that business. So it may or may not be someone that was in the initial IPO, cause somebody could have traded out, but all the shareholders that are in it at the time that you’re going to make that acquisition have an opportunity to vote on the acquisition and they can vote for the acquisition and continue to be a shareholder after the acquisition, or they can vote against it and ask to have their money redeemed and they’ll get their money back right. Based on the value of the money that’s in escrow at the time that they redeem. And, uh, and then you don’t, if the, if you don’t make the acquisition within the time allotted by statue, then also all of the money goes back, the SPAC folds and it stops trading.

So phase world, there’s a lot of MNA opportunity. Pharma is very hot. Uh, there’s a lot of businesses that we’re now that we know now we know that we’re a under-capitalized or had a business model that wasn’t ready to sustain an interruption like COVID-19 has caused. And that creates buyer buying opportunities, especially, you know, if you think that you can manage the business better, or, you know, you can maybe if it’s a conglomerate, you can maybe sell off pieces, but, but there’s a lot of opportunity to purchase those business. And for the private business, that’s a way to go public, right? They, in essence, a SPAC transaction is a reverse merger transaction. You acquire that business, bringing it public. And the team that runs that private business now becomes the management and the controlling team of the SPAC entity, which, you know, was just a shell.

It was, it was there to make an acquisition. So it’s, it’s just a different way to go public. Uh, the benefit for the private company is of course it can be faster to go public than a full IPO. And the other benefit is that there is ostensibly cash in this back. It’s raised a lot of money now, in reality, a lot of people cash out when the acquisition is made, they actually were there for the arbitrage situation itself. So in reality, there, isn’t usually as much as much cash in the, in this back, as you would think, but, you know, it’s still a very great way to go public. And then you’re trading on a national exchange. And as long as you have followed the rules properly, you traded on that national exchange. You don’t have the shell company stigma that can emanate from a company that was really truly a shell and then made an acquisition in a reverse merger.

JP Maroney:

How often do you see, um, a SPAC being used for a single acquisition versus like a roll up, which was the conversation we had this week earlier with John and Chad,

Laura Anthony:

Because, you know, it’s rare that you’re going to have a concurrent roll up, right? It’s rare that you’re going to have a closing on a SPAC deal where you’re simultaneously closing on five businesses at one time. Right? So it may be a roll up strategy, but you’re going to start with one and you’re going to get your shareholders to agree to that one, that one will meet the requirements of the value. And then you can proceed to, to roll up the rest of the business

JP Maroney:

As a public entity then right. As a public entity. That’s right. So you could go out there and swing for the fences on that first transaction. It’d be a larger transaction, gives you some momentum as well as the liquidity of being public. Right.

Laura Anthony:

And you can have, I mean, you certainly can have letters of intent with additional acquisitions. You know, maybe you close to similar simultaneously, but you know, more often you’re going to have the one that you’re closing on and then you’re going to engage in your roll up strategy.

JP Maroney: 

You had mentioned national exchanges, is this for listed and non-listed so a SPAC could be on a NASDAQ or, or on the big board,

Laura Anthony:

It can be on the NASDAQ, the NYC American, or even the big board, right? Uh, w on OTC markets, it can get onto the OTC QX tier of OTC markets though. That’s fairly rare. It does not qualify at all for the QB or the pink sheets. So you’re not, you’re not really gonna see a trading spec that is, you know, there’s, there’s another way to do it’s called rule four 19. And, and there’s another way to put some money in and escrow and some shares in escrow, on OTC markets, but those vehicles don’t trade. So, you know, it’s really as a national exchange deal,

JP Maroney:

I want to shift gears a little bit because there’s another, um, regulation that you all are well known for. I think when we talked the first time, you said maybe top three, top five firm in terms of volume of these and that’s regulation, a reggae, uh, not to be with reggae Mon, but reg a, um, talk a little bit about exactly. Talk a little bit about that and, um, how you’re seeing the velocity of that increasing staying the same, et cetera.

Laura Anthony:

It’s very hot. So when reggae regulation, a regulation that exists today, some people call it regulation a plus, but you know, regulation a, as it exists today with its two tiers, once that was passed and came into fruition from the jobs act, it was very hot, right? A lot of companies were doing reggae deals, including using them as a methodology to go public and go public on national exchanges. Everybody jumped in. And the reason everybody jumped in by the way is the same reason why it’s hot now today. And that’s because you can do testing the waters. You can really advertise and solicit, and you can build the market for your, your offering, which is the exact opposite of really what you can do when you’re doing a traditional IPO with the NASA one. Even when you are allowed to do test the waters with a traditional IPO, uh, with the [inaudible], it’s very limited.

You can only speak to qualified institutional buyers or institutional level accredited investors. So, you know, it’s very limited reggae. You can get out there and showed it from the rooftops, which is a great thing. But what people discovered is that because it’s rare that a reggae is a firm commitment offering and it closes differently than a regular IPO at closes like a private placement people write checks, they put their money into the account when it closes that money is dispersed in a traditional IPO money that it’s closed through the banker syndicate account. And it’s a T plus two closing through the DTC system and their syndicated account, just like a, a settlement of a stock trade. So there’s a bit of a difference in the closing. And I think that took the markets a little bit by surprise when they realize, and without firm commitment offerings, there was no green or over allotment.

So your bankers didn’t have the incentive nor the ability really within their parameters to support the deal in the aftermarket. So you had a situation where a lot of the deals went down in the aftermarket and everybody took a step back and they became less popular for a period of time. But now, you know, I think that people understand the way it works and it has such a great, I mean, there’s so many models that it’s great for, besides an IPO it’s now available to already public companies, when it first was enacted, it was not. And so it’s used a lot as a follow on offering method, but it’s also used a lot in, for alternative assets, real estate works of our cars. Um, you know, it’s a great way to do, to issue tokens that are on the blockchain like cryptocurrencies, you know, so it’s, it’s really great for alternative assets, you know, besides your regular common stock or, you know, regular stock, you know, debt, people use it for debt. So I think it’s fantastic.

JP Maroney: 

I was going to ask you Laura, what’s the difference between the tier one and tier two, right?

Laura Anthony:

A tier one is limited to number one 20 million, but a tier one does not preempt state law. Truthfully, I see very little use in my world for my clients for a tier one, offering it, if you want to sell, if you’re, if you’re strictly selling in one state, possibly two, then tier one may be great for you. But if you want to sell in multiple States, just the blue sky process itself would be make it cost prohibited. You might as well get your audits. And then even though the sec doesn’t require an audit for a tier one, every state has a different review process. And I find that some States they’ll look at the merits of the offering. And some States were required that you have audited financial statements or that you limit. You put a investor limits in such as, um, you know, sophistication levels or accreditation levels, which kind of takes away the benefit of going through that process with the sec anyway. Right. So, you know, I really don’t have a lot of use for tier one. I’m, you know, I’m a tier two advocate and a very, very rare circumstances. Do I think tier one has any use at all?

JP Maroney:

Paul was brought on board at Harbor city based on 25 years background in the broker dealer community and his experience as a broker dealers network and all, um, specifically to help roll out Harbor cities opportunities to that community. My question is, are you seeing the reg a being widely accepted within the BD community? I endorse RI advisor community, um, as offerings, or is this pretty much just a direct to consumer direct to investor type of opportunity? Primarily.

Laura Anthony:

Good question. Um, a lot of people do it as direct to consumer direct, you know, without a broker dealer involved or at least without a broker dealer being, uh, uh, heavily involved, you know, there there’s certain uses for broker dealer to do administrative and back office and AML, anti money laundering checks for you and things like that. But there’s a lot of people out there that are service providers to the reggae space and that provide, uh, the back, uh, provide administrative software and technology. Cause the reggae offering is really internet based. So you have to have a place where somebody can go, whether it’s a platform that exists with multiple offerings or on it, or whether or not you’ve white labeled and created your own platform. I E webpage, they have to have a way to process documents, to sign documents, to pay to wire money or, or, or put through a credit card charge to pay if they’re actually making an investment.

So there are a lot of service providers that handle that kind of thing, the technology, there’s also a lot of service providers that help you market the deal. So you don’t have to have a broker dealer, but as far as broker dealers, there are broker dealers that are very interested in the reggae space, but a lot of the traditional broker dealers that jumped in right away and then saw that it didn’t work in their own traditional way. You know, maybe they’re not as hot on the market for it and as, as others, but, but there are plenty of broker dealers that just love the reggae space, love the technology and they’re in it.

JP Maroney: 

I’m sure you, I want to shift gears just a little bit because one of the things we’re doing as a result of the content from the deal flow show is creating a book called dealmakers deal breakers. So we’re going to be talking about the strategies, the tactics, the principles, the tips, how deal-makers like yourself operate within the space and some of the things that you do in that process. So here’s my question. When you come to the table, obviously as an attorney, you’re very concerned about specific details in an opportunity, but when you’re vetting an opportunity for a client or to potentially take on a client, what are some of the things that you’re looking for, take us through your mindset and your process of identifying the, you know, the, the pimples on the deal kind of thing. And then finding out if this is a deal that y’all want to be involved with.

Laura Anthony:

Well, I mean, basics, right. Are the, is the client realistic and sophisticated? Right? So sometimes I get and more so, thankfully, you know, the longer I practice, the more my firm has been successful. We’ve been in business 20 years next year. So, you know, we have quite a reputation and a following, but you know, a lot, sometimes you get somebody that comes to the table and they really are not sophisticated. They’re never going to understand the process. They’re going to be, even if you tell them how much it’s going to cost to do an offering, they’re going to be in shock the whole way. And I just see that they don’t have a strong management team and organization. And I become very concerned at that point because I’m like, I don’t want to just take their money and have an unhappy client and have a ton of happy situation.

And you can see that it’s not likely that that offering is going to succeed, right, because they don’t have that knowledge behind them or, or really the ability to carry it for me to be. So I will, I will tell somebody that they should slow down, raise some money, privately, do some friends and family and get their business model going. Right. Um, another way that if the person can be unrealistic and you know, I hate to say this, but it’s true is I love when somebody comes in and has this hockey stick of projections and they might be middle-aged and they think that they have the greatest idea since sliced bread. And they’re going to grow this into a hundred or $200 million company in 12 months. Right? Well, of course we’ve never seen bad projections, just bad historicals. So, you know. Okay, great. But I, you know, one of the things I’ll ask them is, have you ever had a successful exit?

Have you ever run a three or $5 million business, let alone a hundred million dollar business? Do you have resources to get, see a strong C suite of executives? I mean, people may think they have a brilliant idea and it can grow, but execution requires extremely hard work. And it requires, you know, there’s a lot of times when you’re growing a business that you need to make difficult decisions and you need a strong management team and somebody that thinks that they just have a great idea, but doesn’t have that, that those other pieces in place, they’re just setting them up for failure and for themselves for failure, uh, crazy valuations are something that I keep my eye out for. Um, you know, just things, you know, I mean, there are certain things you just, you just know it’s not gonna work, right? So you look for that. You try to guide them as best you can. But the most important thing for an entrepreneur is to be able to execute on their business model. They can’t an entrepreneur is not a capital markets in the capital markets business. They’re in the business that they’re in. And if they forget that and they think that they’re in the capital markets business, their business will never succeed. They raise capital to execute on their business model. They’re not in the business of raising capital and they need to be clear about that.

Paul Nicolini:

Laura, how has the, um, the whole process, the deal making process changed in the digital era digital space compared to the traditional way?

Laura Anthony:

Well, I mean, certainly, and you’ll see, you know, I write a blog, you’ll see my blog that goes out today at two, every Tuesday at two, there’s a plug. Uh, you’ll see that I’m talking about the virtual road show in a COBIT IPO. So certainly even before COVID that the ability to have virtual meetings, zoom, and all of that really made a in technology in itself made it so you could work anywhere. You didn’t have to spend all of your day on a plane, you know, you could, uh, you can check your emails anywhere so you can be more fluid and, and that’s become even more important today where we have COVID, you know, virtual virtual road shows are exactly what’s happening. And, and although I think there will be a time when you have in person meetings again, in fact, I know I have some clients that already do, you know, but maybe not in groups like with like you wouldn’t have road show, that will be a time I think, where you’ll go back to doing some regular road show meetings. I really firmly believe that a virtual road show is going to be here to stay forever. Maybe not as the sole method, but rather than traveling, if you’re doing an IPO or a, or a, a non-deal road show or a follow on offering road show, rather than traveling to 15 cities in 15 days, I think you’re going to pick three or four of the biggest cities and maybe travel there with the biggest crowds. The rest can be virtual. Yeah.

JP Maroney:

Yes. Certainly seems more cost effective. Right.

Laura Anthony:

And it hasn’t now maybe it’s a sign of the times, but all of the deals that all of the IPO is in 2020, okay. That have got, had virtual IPO, virtual roadshows, they’ve all priced in the middle to upper end of their range. So it’s not hurting the valuations of the prices of the IPOs. It’s not slowing anything down. You know, maybe if they were the only one during a VR doing a virtual road show, you know, there might be a little more impact, but right now it’s not hurting anything. I think people are comfortable and used to zoom and are actually thinking or wring whatever technology they’re using. But, but I think that people realize that they can be very productive when they’re not spending days on a plane and living out of hotel rooms.

JP Maroney:

I agree. I think it’s a paradigm shift I’m sitting in our studio today is Jay Benoit. He’s our chief technology officer, but he’s a long time friend. And he and I both come out of the digital space together. We did a lot and I started back many, many years ago on teleseminars selling on teleseminars. Before that I spoke on a more than 2,500 stages, worldwide and seminars, keynote addresses, et cetera. And we migrated from that to tell us seminars then to webinars. I remember having a go to meeting account that was $99 for the thousand people, which now cost you hundreds and hundreds of dollars a month for that same kind of account. So that’s tells you how to far how far that back, where it was, but it requires a paradigm shift because like Jay and I know back in what 2011, I did over 300 webinars that year.

What we’re now calling virtual road shows, right? You’re just making your pitch on, in a virtual environment. And we were closing deals, selling product, taking money, um, on programs, coaching advisory, consulting services, all sorts of things and teaching a lot of other people how to do that. It’s interesting that the capital markets may be not just now catching up on it, but having are being forced to catch up and to take that. And so it’s really exciting. We’re working with wealth forge as our, um, platform, and they’re very much a technology driven platform for our managing broker dealer process with issue six. Right.

Laura Anthony:

I know. Well forge great company. Yeah.

JP Maroney:

Yeah. Great. Yeah. And we actually had Mike Roman from wealth forge on the deal flow show. So I don’t know when these will come out in what order, but he may be before after you in one of these episodes. But you know, it’s, it’s seeing all of the technology pieces fall in place, but I want to step back just a second, because you were talking about the importance you said of when we were talking about the characteristics of a deal, the importance of that entrepreneur or the sponsor to be able to pull together the C suite. And when you were talking about smacks earlier, if you’re talking about a blank check company, my assumption is that a lot is riding on the confidence in that C-suite in that because that’s all you really have in the beginning. Right, right,

Laura Anthony:

Right. The team behind it. But you know, that it’s that’s different situation, right? Because they’re not trying to execute on a particular business. They’re not trying to create a cure for COVID or be a pharmaceutical company. What they’re doing is two things. Number one, they need to be able to have the contacts to locate though. The bankers and broker dealers involved will help with that aspect. But to the context to locate valuable businesses, right. That that will hopefully bring extra value, but they also have to have the ability to do proper due diligence. Now you can hire out third parties for in-depth due diligence, right? Pharma bankers do it all the time. They have pharmaceutical companies or pharmaceutical people that will do the due diligence on the pharma side of the deal. Right. They all the bankers don’t necessarily understand all of that, but, but, you know, you need to be able to, to, uh, be able to do the due diligence and you also need to be able to negotiate a, just a, a decent deal, right? You need to understand valuations. And, and again, you have advisors to help you, but, but ultimately it’s not the people that put this back together that are gonna run the business and make it a successful business. Right. They’re just trying to get it at a, uh, an MNA transaction completed. That’s what they’re doing.

JP Maroney:

When I think about a deal maker, the ultimate consumer of this show and the content that results from it. I think negotiator, you use that term just now negotiating, when you go to the negotiating table, whether you’re sitting at the table with a team, which is likely, um, what are some of the important factors to get that deal across the finish line? Because it truly is going to be some form of a give and take, um, the best negotiators. What have you seen over the years as the characteristics of those best deal makers?

Laura Anthony:

I mean, look, I I’m generally representing companies or issuers as you call them. Right. So right from the beginning on the issuer side, you’re negotiating with your underwriter and, and the things that you want to look at with your underwriter is what are their tail periods? Meaning how long can they continue to collect a commission based on introductions that they’ve made after the deal is closed. And, and, and, and I say, after the deal is closed, we want to make sure that they only have a tail if they can close the deal, unless they, or say a short tail, if they’ve made an introduction and a deal doesn’t close. And then after, uh, you know, that, that, that, that investor decides they want to invest, what are their rights of first refusal? So a lot of bankers that, that is very important to them, that they have an opportunity to have a right of first refusal for any deal that, that follows within say 12 months.

And we’ll try to ask for more than that, right? So you want maybe carve-outs from that right. Of first refusal. If the CEO brings in a relationship that he’s had, or friends and family or other, other relationships that they have to do a follow on offering after you closed the deal with a banker, will, you know, you don’t want to have to pay that banker a commission on that deal or, or give the banker a right to represent anybody on that deal, because it’s the CEO’s relationship. So you’re w it’s called Rolfers right. Ray writes the first refusal. You want to make sure that a banker only has a row for if they’ve been successful in their raise that they were hired for. You don’t want to have to give them rights, the first refusal and our abilities to hold up a second deal, if they were never successful in the first deal.

And of course, B’s FINRA does regulate a public offering fees, but they don’t regulate private offering fees. And there can be a lot of hidden fees. I mean, you’re always paying the bankers expenses. Are they accountable or non-accountable, you know, so you always want to look at the fees. Um, and so, you know, that it starts a lot with what you’re negotiating in your engagement letter or your terms with your banker, right? So that’s a big part of it. And then valuation, you know, it’s always, it’s a give and take, I get everybody, you know, CEO Ida’s right. Everybody, everybody thinks their company is worth more. Right. But at the end of the day, you know, sometimes the bankers finding that they can, they having trouble placing a deal. And so they’re going to try to push down that, that valuation. So you want it, you want to work on, you know, that’s always a negotiation finding a proper valuation and structure of the deal.

What do you, what are you selling? Right. So from a company’s perspective, the best thing that they can sell a straight common stock, but from a banker’s perspective, they want to sell a unit that has warrants. And how many warrants per share a common stock, right? Is that, is it 50% ward coverage, a hundred percent warrant coverage, 200% warrant coverage. And what’s the strike prices for those morals. So it’s always going to be above the IPO price or follow on offering price, but how far above, right. Is it a 25% kicker or is it, you know, I find a lot of times, interestingly, I find that they’ll price the deal and the warrant, well, the warrant strike price will be really high. And then the banker ends up going back to the company and saying, look, let’s reprice those warrants because I think I can get them people to exercise if they’re repriced to a lower price.

So that can happen quite often. But, you know, there’s a lot of things, you know, that, that, that you’re working on in negotiating in a, in a deal. But, you know, you’re also a team working together, but it’s mainly the relationship with your banker and the structure of the deal itself and valuation and an M and a transaction by the way is completely different. So we have a very robust MNA practice, you know, um, our firm has done in the 20 years, almost $2 billion in M and a transactions. And so there’s a lot that needs to be negotiated and appear M and a transaction that’s completely different right than a banker deal. There may or may not be a banker involved, but, but who your management is going to be and how you’re going to actually run operations and administration. And there’s a lot of moving parts in an M and a transaction. We could talk for a couple hours on that alone. So, you know, we’ll probably, shouldn’t

JP Maroney:

No, that’s good. Uh, if you’re listening to the show or watching the show, you’re listening to the deal flow show, you can get more episodes and also subscribe or follow us for future episodes@thedealflowshow.com. Our guest today is Laura Anthony from Anthony LG, and Paul is taking them to the next step. Let’s go. Um, it sounds like there’s a lot of moving parts in the whole process. What do you do if there’s a failure in it and how do you deal with that?

Laura Anthony:

Oh, there’s kinks in every deal, you know, so, and how you resolve it runs the gamut. You may take a step back and renegotiate a deal could fall apart. You might redo a deal. I mean, I had, I’m not going to mention the client, but we had a situation recently. And if anybody from that, client’s listening, they’re going to know I’m talking about them or the banker. But we had a situation where it was a cm PO, which is a confidentially marketed overnight public offering. And that’s a take down off of a shelf registration statement, and literally you’re negotiating and preparing paperwork when ultimately one of these deals closes. You’ve prepared all the paperwork and the, and it closes overnight. And the market finds out about it the next morning. And we were all set to close. It was a mid day, Sunday, and we were all set to close Monday morning.

Laura Anthony:

And we found out that there was a, there was a hiccup, right? It has, it’s a regulatory hiccup, but it had to do with one of the investors in something called regulation, M uh, which is again, you know, like getting very technical, but we had to restructure the deal literally overnight. And my team and underwriters counsel team worked all through the night, right? They started at about, uh, eight o’clock on the, on at night. And we, they literally worked throughout the whole night. I had two people on my side. They had two people on their side and the deal closed at eight o’clock the next morning with a big stack of paperwork that had to have been redone overnight.

JP Maroney: 

That’s great. Can you share something with our audience that otherwise people wouldn’t know about you?

Laura Anthony:

Um, otherwise wouldn’t know about me. I play a lot of tennis. I sit on the board of directors of the South Florida division of the American red cross. Um, you know, that’s, I work a lot. I think people do know that about me.

JP Maroney:

Wonderful. Our audience likes to give back as we wrap it up here on the deal flow show on behalf of myself and Paul Nicoline, what we would like to do is allow our audience to give back, or to be able to what would be the best way for someone to connect with you and your firm. And also what are the kinds of people that you would love to hear from that would help y’alls from move to the next level, or to be able to do more deals, um, to reach more people, to be able to serve more people?

Laura Anthony:

Yeah. So the best way I would say is email and that’s lAnthony@anthonypllcdotcomplikepaulllc.com and, uh, well, the kind of business kind of people I’d like to hear from, or either existing public companies that are looking to make a change in council or operating businesses that are looking to either go public or engage in a capital markets transaction of some sort, or do an M and a deal. You know? So those are the ideal people I would like to hear from,

JP Maroney:

As we wrap things up one final tip, deal-makers going into the deal table. What’s one piece of wisdom or advice it’s just hammered out on the anvil live experience for you. And you go, you know what, this is what you need in your arsenal. What would you say to the, the person that’s just about to go back to, or maybe the first time to the deal table? Okay.

Laura Anthony:

That’s a good question. I would say, uh, uh, be prepared when you go to the table, be prepared, know your numbers, know your burn rates, know your, if you’re a company or an entrepreneur, know your burn rates, know your projections. No, uh, no. What you can accomplish, realistically, know your valuation, know what valuations you’ve raised money at in the past. And, uh, and be very prepared, uh, also be calm and don’t lie. I mean, you know, don’t, don’t be trying to be too slick. People recognize a lie or somebody that’s just winging it, you know, very easily.

JP Maroney:

Excellent Palm Nicoline. I’m JP Maroney. This is the deal flow show. And thanks again to our special guest on this episode, Laura Anthony from Anthony LG out of South Florida. And again, you can reach her at their website or through the email that she gave out. Uh, if you’re watching the show or listening to the show, you can get more episodes and subscribe for future episodes@thedealflowshow.com. We should be able to put something up here across the screen as well on behalf of myself and the Harbor city team, the deal flow show team. We’ll see you in another episode very, very soon. Take care for more episodes, visit the deal flow, show.com and subscribe.

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