G-Corp Acquisition Criteria

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

G-Corps are publicly traded companies with a meaningful amount of cash ($8 million to $15 million) sitting in a trust account. 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").

With shareholder approval, the G-Corp 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, G-Corp management resigns and makes way for the private company team to take over.

A G-Corp is valued based on the cash in trust, 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 to cash, since the private company can avail itself of these benefits.

Let's say a G-Corp has 5 million shares outstanding that are valued at $15 million ($3 per share) due to the cash held in trust, public listing, investment banking relationship and team. Let's assume the private company is realistically valued at $18 million. In a simple business combination, the G-Corp would issue six million shares to the shareholders of the private company.

G-Corp Acquisition Criteria

The ideal candidate for a G-Corp qualifying 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 $8+ million in initial 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 G-Corp acquisition criteria, consider a direct listing.

G-Corp is a registered trademark of the NEO Exchange.