CPC Acquisition Criteria

A CPC is a type of company that has no ongoing business operation of its own but goes public on the TSX-V for the sole purpose of acquiring another company. Private companies are attracted to CPC business combinations because it provides them with a fast and easy way to go public, with access to cash to be used for operating purposes.

CPCs are publicly traded companies with relatively insignificant amount of cash. When the management team identifies an attractive business to combine with, they negotiate terms, seek board approval and then require shareholder approval to close a deal (a "qualifying transaction"). Generally, a financing is structured to close concurrent with the closing.

With shareholder approval, the CPC and private company prepare financial and business disclosures to be filed with the regulators for review. Upon completion of the review process, the transaction is closed, CPC management resigns and makes way for the private company team to take over.

A CPC is valued based on the fact that it already trades on a senior stock exchange and has a team of people experienced at business, strategic transactions and capital markets. The "ready to go" nature is generally valued at a premium, since the private company can avail itself of these benefits.

Generally, CPCs are valued at between $700,000 to $1,000,000 in equity of the private company that's going public by merging into the CPC.

CPC Acquisition Criteria

The ideal candidate for a CPC transaction is: 

(i) a company run by a coachable growth-minded entrepreneur, 

(ii) already profitable (or imminently and obviously about to be),

(iii) preferably considering acquisitions as part of their own growth strategy, 

(iv) can materially change their valuation with access to additional capital (whether from organic opportunities or strategic acquisitions), and 

(v) where the deal valuation is reasonable, typically not more than 10x next-year EBITDA.

If you are interested in going public but aren't sure if you meet the CPC acquisition criteria, consider a direct listing.

CPC is a registered trademark of the TMX Group Limited