When a public company wants to purchase another public company it faces a number of hurdles. The first is the Federal requirement that the purchasing company file a public notice that indicates it has bought five percent or more of the target company and requires it to declare what is the purpose of the purchase. This alerts other shareholders and the investing public and institutions that someone is interested in the target company. Such action usually pushes up the price of the stock and forces the buyer to pay a “premium” over the past trading price in order to get owners of the common stock to sell.
By contrast, the Autumnwood Approach gives a public company the opportunity to purchase a large minority block of stock in a target company that intends to go public before it does so, and to make that investment without the normal risks of venture capital investing. The investor then has the opportunity to watch the target company grow. If the target completes its own public offering, the investor benefits from the rise in value of its shareholding, and since the investor already owns a large minority position, it can easily offer to purchase a control block or the entire balance of shares of the target company. If it does not complete a public offering, our approach offers an automatic mechanism to allow the investor to either acquire ownership of control or the whole company, or to withdraw its investment.
This approach thus offers safe guards for both the investor and the target and benefits both.
The costs of applying our Autumnwood Approach may be considerably less that a more traditional multi-layered private equity funding, and the time to realizing gains may be shorter.
Details of our program are available to both private companies looking for capital and to public companies wanting to make venture capital type investments without the associated risk.