Use of Funds from Bought DealI'm sure it won't come as any surprise to long time shareholders of VHI, but the expected use of funds is exclusively for additional acquisitions. I found the description of the proceeds to be refreshingly clearly written.
If their acquisition targets are typically in the $1M - 15M range, and they are sitting on ~$60M in cash, it's shaping up to be a very busy year. The compounding should be fantastic.
Following is a snip from page 10 of the short form prospectus:
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The Board of Directors is specifically contemplating the need to allocate capital in the following areas and therefore anticipates the estimated net proceeds of the Offering, assuming no exercise of the Over-Allotment Option, will be used to fund the following:
Use Allocation Growth initiative(1) $28,081,316.15
Note: (1) The Company’s growth initiative is focused on the acquisition of third-party enterprises in the health care industry which provide synergistic opportunity for the Company. At any given time, the Company may be engaged in discussions and activities in respect of potential acquisitions and while, as of the date of this Prospectus, the Company has identified and is evaluating certain potential acquisition targets, discussions with such targets are of a preliminary nature only and none of such potential acquisitions are “probable” or “significant” within the meaning of applicable Canadian securities laws. The Company has not executed any definitive agreements to acquire any business and there can be no assurances that any such agreements will be entered into. The Company believes it to be in its best interests to have access to capital if, and when, acquisition opportunities arise. As such, given continuing favourable market conditions, the Company believes it is an opportune time to complete the Offering in order to increase the Company’s cash on hand. Given that the Company identifies and evaluates potential acquisition opportunities on an ongoing basis, in the event the Company determines that such opportunities may be limited, the Company may from time to time reallocate a portion of the net proceeds obtained from the Offering primarily for working capital and general corporate purposes having regard to the Company’s circumstances at the relevant time.
The Company identifies target companies (“Targets”) that are synergistic with the Company’s own product and service offerings and that have annual revenues typically between $1M-$7M, are profitable with limited growth, and have not adopted a mobile strategy. Consideration for these acquisitions is typically composed of a combination of cash and Common Shares at approximately 1.0x-2.5x revenue multiple, although this remains subject to analysis on a case-bycase basis which may vary from the foregoing. The acquisition strategy is principally to reduce costs at the Targets through synergistic reductions and utilization of cost-effective offshore resources. The Company targets improved EBITDA with cross-selling and synergistic cost reductions including effective offshore development work. Such synergies must be examined on a case-by-case basis and are difficult to set out generally.