Lexpert Magazine

LEXPERT MAGAZINE | JANUARY/FEBRUARY 2018 59 | GOING PUBLIC | to do an initial public offering — and oc- casionally too soon. In those cases, Weinstein points out, her counsel is of the "tough love" variety. "Most of the time I will tell them straight out, 'Your business is not ready. If you are a company not generating consistent revenue growth — and I would say that revenue better be growing at 30 per cent or more per year — that will be a very unsuccessful public company.'" Sometimes clients will argue they can do it as a reverse takeover and they have someone who will help them raise the money, but Weinstein is blunt in her ap- proach. "I tell them, 'Your business will not survive one quarter.' I will absolutely come right out and tell them that. e business needs to have sustainability as a public company. "I'll also say — and I'll say it gently if I think the person is not ad- equately equipped because of their toolset — 'Look, you're going to be on the road almost all the time, and you're going to be going from one customer base to two. at second base is investors, investment bank- ers and analysts, and if you're not comfortable talking about the strategy and how you're go- ing to grow the business, and if you can't deliver on what you say you can, becoming a public company is the worst thing you can do.'" Weinstein has taken more than 20 of her clients' companies public. e lawyers have oen worked with the company much longer than the invest- ment bankers and accountants brought in, so she sees one of their main roles as mak- ing sure the prospectus — the company's story and its strategy — is not exagger- ated. "Oen bankers try to pull you in to, 'Where is your business going?' whereas we want to keep it factual. So our role is to make sure there's a balance between what the bankers want to do, which is hype the company, and what we want to do, which is protect from liability." Not every lawyer working on an initial public offering is advising a client new to public markets. Going public is also a com- mon exit strategy for private-equity firms. Other times, law firms aren't working for the issuer, but rather the underwriters in- volved in the IPO. Each brings its own set of stresses, says Desmond Lee of Osler, who has worked on at least seven IPOs including for the underwriters of Canada Goose Holdings Inc., which was taken public in 2017 by US private equity firm Bain Capital in a dual listing on the NYSE and TSX in March, raising about $340 million. Stikeman El- liott acted for the company, as well as more recently for the underwriters on the min- ing IPO of Nexa Resources S.A. Grewal of Stikeman Elliott says a large part of what the banks do is build and test financial models, the "basis upon which they and sophisticated investors determine pricing and how attractive the investment is in terms of their own and market needs." Once the right model has been deter- mined, Lee of Osler, which also advised the underwriters on the Kinder Morgan and Jamieson IPOs, says underwriters' coun- sel need to help make sure the company is "preparing itself and focusing on effective investor relations." at means helping ev- eryone get ready for road shows — rehears- ing, preparing for questions, working on ef- fective marketing materials and telling that story on the road. "As underwriters' coun- sel we're typically reviewing the materials, making sure the materials are consistent with what we say in the prospectus." So what keeps a business person do- ing an IPO up at night? Probably just about everything. What keeps the lawyers up? Is it overs- pinning the company's story to the market- place? Lee says no, it's bigger and more basic than that: "In terms of what keeps me up at night, it tends to be focused on making sure we have a successful deal and a success- ful marketing process." Sandra Rubin is a Toronto-based writer and strategic consultant. ANDREW PARKER > MCCARTHY TÉTRAULT LLP "Sometimes businesses have an expectation of where they're going [on pricing] because of what underwriters have said to them at pitch meetings and all of a sudden that changes halfway through the deal. It's inevitable that it happens but sometimes it gets very discouraging …" TSX TSX-V TOTAL Year # $bil # $mil # $bil 2017 17 4.7 10 327.1 38 5.1 2016 3 0.5 0 2.7 8 0.5 2015 13 3.9 2 3.9 22 3.9 2014 8 3.4 5 1.6 14 3.5 2013 18 2.7 10 1.1 30 2.7 2012 12 1.7 44 2.6 62 1.8 IPO RESURGENCE > In 2017, after years of inactivity, Canada witnessed the begin- nings of a comeback for initial public offerings. Overall, equity markets saw 38 IPOs worth $5.1 billion. That represents a major turnaround from the $500 million in new issuances for 2016. NUMBER AND GROSS VALUE OF IPOS: 2012 TO 2017 SOURCE: PWC SURVEY OF CANADIAN IPO CAPITAL MARKETS

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