Lexpert magazine features articles and columns on developments in legal practice management, deals and lawsuits of interest in Canada, the law and business issues of interest to legal professionals and businesses that purchase legal services.
Issue link: https://digital.carswellmedia.com/i/808422
12 LEXPERT MAGAZINE | APRIL/MAY 2017 | RECENT DEVELOPMENTS IN BUSINESS LAW | and legal — to tackle. From the, at times, vigorous tripartite purchase negotiation, to sourcing funding and completing an equity raise with important new investors, to employee integration, to merchant and borrower retention and communication, to managing the various product integra- tions, to successfully importing onto our platform more than 40,000 loans with a current balance of over $300 million, with more still to come, from two IT systems at TD, including scaling our system and a new build-out of all the servicing features, the deal was certainly a challenge, but at the same time was conducted with good humour by all. While the commercial ne- gotiations on a number of the aspects con- tinued for some time in parallel with the legals — in the end we got there. Karantzoulis: While the acquisition of the consumer loans by Concentra and the as- signment of the merchant dealer network to Financeit did not present unique legal issues, the asset velocity — that is, the changing nature of the loan portfolio — created challenges requiring staged clos- ings. is, along with various technical challenges with data migration, contrib- uted to a longer than expected negotiation and transition period. LEXPERT: Equity-raising for this deal in- cluded existing shareholders such as Gold- man Sachs, and new investors such as e Pritzker Organization. Why do you think Canadian fintech is attracting so much capital right now? Magid: Fintechs are nimble and can adapt quickly to a rapidly changing consumer en- vironment. Combine this with an online marketing platform that can reach a much broader and diverse customer base, fintechs become very attractive to banks and other financial institutions in search of new ways to diversify their financing and investment solutions and needs. Epp: I think this shows the strong confi- dence the investment community has in the innovative solutions Canadian fintech companies are bringing to the market. LEXPERT: In the debate between whether fintech is "disruptive" or "enabling" to the traditional banking system, where do you think this deal falls on the spectrum? Magid: I think it is fair to say it is both. It is enabling for consumers, and it is also dis- ruptive as traditional financial institutions work to come to terms with the new tech- nology platforms. Epp: While we've seen fintechs portrayed as disruptors shaking-up the Canadian bank- ing industry or as targets for acquisition, this acquisition from TD represented a role reversal and a shi in expectations. Now that we've laid the groundwork and dem- onstrated that fintechs can make major acquisitions from "Big Banks" it's possible others may follow suit. LEXPERT: What would you say was the most memorable or unusual aspect of this deal? What will you take away with you? Karantzoulis: Acquiring, migrating and transitioning over 50,000 consumer loans is an amazing accomplishment. However, Concentra's negotiation team would not give any resistance should Concentra de- cide to reduce its ambitions on any future portfolio acquisition — perhaps targeting a more modest 35,000 loans! Epp: For me, it was that the deal represented a major milestone for Financeit. We are now a larger company, a more important player in our space and with more oppor- tunities ahead of us. While there were, of course, the usual challenges and hiccups during the deal, all parties acted collabora- tively and the outcome was structured and executed more smoothly than might have been expected for a company taking its first crack at acquiring a business — especially a deal with this many moving parts. ON THE TREND Could Toronto be a global fintech hub? According to a study out of Lucerne University in Switzerland, Canada's financial hub also has the potential of becoming a global fintech hub. Cities were scored on four criteria: political/legal stability; social adoption; technological capacity; and economic wellbeing. Taking these into account, Toronto ranks fourth, behind Singapore, Zurich and Geneva. GRAPHIC BY DAVID DIAS; SOURCE: HOCHSCHULE LUZERN