CERTAIN TERMS
Unless otherwise stated in this Annual Report on Form 10-K (this “Annual Report”), references to:
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report, including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continue,” or “should,” or, in each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations. Such statements include, but are not limited to, any statements relating to our ability to consummate any acquisition or other business combination and any other statements that are not statements of current or historical facts. These statements are based on management’s current expectations, but actual results may differ materially due to various factors, including, but not limited to:
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The forward-looking statements contained in this Annual Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These risks and others described under “Risk Factors” may not be exhaustive.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Annual Report. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Annual Report, those results or developments may not be indicative of results or developments in subsequent periods.
Introduction
We are a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this Annual Report as our initial business combination. Although we may pursue an acquisition opportunity in any business or industry, we intend to capitalize on the ability of our management team to identify, acquire and operate a business in the financial services industry and, in particular, the commercial banking industry, that may provide opportunities for attractive risk-adjusted returns.
We intend to identify and acquire a business that could benefit from a hands-on owner with extensive operational experience in the financial sector and that presents potential for an attractive risk-adjusted return profile under our stewardship. Even fundamentally sound companies can often under-perform their potential due to a temporary period of dislocation in the markets in which they operate, inefficient capital allocation, over-levered capital structures, excessive cost structures, incomplete management teams and/or inappropriate business strategies. Our management team has extensive experience in identifying and executing such full-potential investments. In addition, our team has significant hands-on experience working with private companies in preparing to become a publicly traded company and serving as active owners and directors by working closely with these companies to continue their transformations and help create value in the public markets.
We believe that our management team is well positioned to identify attractive risk-adjusted returns in the marketplace and that their contacts and transaction sources, ranging from industry executives, private owners, private equity funds, and investment bankers, will enable us to pursue a broad range of opportunities. Our management believes that its ability to identify and implement value creation initiatives will remain central to its differentiated acquisition strategy.
Our management team’s objective is to generate attractive returns and create value for our shareholders by applying a disciplined strategy of identifying attractive investment platforms which could benefit from the addition of capital, management expertise, and strategic insight. Our management team is applying a disciplined approach focused on (i) identifying a legacy banking (or other financial services-related) asset that can be used as a platform to develop additional value; (ii) unlocking value through the application of improved cost and balance sheet management; (iii) enhanced profitability driven by both geographic and customer segment expansion (through a combination of organic growth and acquisitions); and (iv) the leveraging of technology. We favor opportunities with certain elements which will allow us to (i) expand legacy corporate-oriented (primarily small and medium sized) businesses lines; and (ii) transform retail business lines into a high-growth, high cross-sell businesses that generate cost-effective funding for the organization, and (over time) provide substantial non-interest income and profits, consistent with current regulatory guidance and prudent risk management. We believe that these strategies, in combination, will position the organization to trade at a premium valuation multiple relative to other financial services companies. While we will review a wide range of potential platforms in order to execute our strategy, it is currently our intention to
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pursue a combination with a legacy community bank that can benefit from the application of capital, expertise, and technology in order to transform its business model. We do not intend to purchase multiple businesses in unrelated industries in conjunction with our initial business combination. As believers in the long-term viability of the relationship-oriented business model prevalent in the community banking space, we look for an opportunity to improve (as opposed to replace) the traditional community bank model (through the application of technology). Our management team and board have demonstrated a track record on digital transformation in the financial sector and expects to be able to access and implement a technology platform which is an integrated digital eco-system for community banks which will facilitate our proposed digital transformation. This platform was developed based on our team’s extensive experience in helping many of the most sophisticated financial institutions in the world develop and implement their digital banking strategies (including the development of the initial digital banking strategy offing Direct). Our management team’s differentiated combination of i) community bank investment experience, ii) extensive banking industry expertise (particularly in the digital banking arena), and iii) access to unique digital technology positions the organization to identify an appropriate target which can be used to create significant shareholder value.
Our management team is led by Baudouin Prot, Philippe De Backer and Scott Reed. Members of our management team have been responsible for a wide range of notable transactions in the financial services industry around the world. These include Baudouin Prot, who during his tenure as Chairman and CEO of BNP Paribas SA, implemented a successful expansion strategy to enter the U.S. market. Additionally, our CEO (Philippe De Backer), as the former global head of the Financial Services practice at Bain & Company, has been a business and thought leader in the development of digital banking strategies throughout the world (including the development of the initial ING Direct strategy). Finally, our President (Scott Reed), as the founder of BankCap Partners (a bank-oriented private equity firm), has been responsible for several successful growth-oriented investments in the community banking space in the U.S., including Atlanta, Georgia-based Atlantic Capital Bancshares, Inc., a large de novo bank. Mr. Reed, through BankCap Partners, has invested in three banks, Atlantic Capital Bancshares, Inc., TriState Capital Holdings, Inc. and Xenith Bankshares Inc., which became publicly listed entities. On January 1, 2018, Xenith Bankshares, Inc. was acquired by Union Bankshares Corporation. With respect to the foregoing examples, past performance of our management team, is not a guarantee either (i) of success with respect to any business combination we may consummate or (ii) that we will be able to identify a suitable candidate for our initial business combination. Our management team has not had experience with blank check companies in the past.
Business Strategy
Our acquisition and value creation strategy is to identify, acquire and, after our initial business combination, build a company in the financial services industry that reflects the experience of our management team and can benefit from their financial, operational and strategic expertise. Our acquisition strategy leverages
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our team’s network of potential proprietary and public transaction sources where we believe a combination of our relationships, knowledge and experience in the financial services industry could affect a positive transformation or augmentation of existing businesses or properties to improve their overall value proposition.
We utilize the network and industry experience of our management team in seeking an initial business combination and employing our acquisition strategy. Over the course of their careers, the members of our management team and their affiliates have developed a broad network of contacts and corporate relationships that we believe will serve as a useful source of acquisition opportunities. This network has been developed through our management team’s extensive experience in both investing in and operating in the financial services industry. We expect these networks will provide our management team with a robust flow of acquisition opportunities. In addition, we anticipate that target business candidates will be brought to our attention from various unaffiliated sources, which may include investment market participants, private equity groups, investment banking firms, consultants, accounting firms and large business enterprises. Members of our management team communicate with their networks of relationships to articulate the parameters for our search for a target company and a potential business combination and are pursuing and reviewing potentially interesting leads.
Acquisition Criteria
Consistent with this strategy, we have identified the following general criteria and guidelines that we believe are important in evaluating prospective target businesses. We use these criteria and guidelines in evaluating acquisition opportunities, but we may decide to enter into our initial business combination with a target business that does not meet these criteria and guidelines. We intend to acquire companies or assets that we believe:
These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management may deem relevant. In the event that we decide to enter into our initial business combination with a target business that does not meet the above criteria and guidelines, we will disclose that the target business does not meet the above criteria in our stockholder
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communications related to our initial business combination, which, as discussed in this Annual Report would be in the form of tender offer documents or proxy solicitation materials that we would file with the SEC.
Initial Business Combination
Our initial business combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the income earned on the trust account) at the time of the agreement to enter into the initial business combination. If our board is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm that is a member of FINRA or an independent accounting firm with respect to the satisfaction of such criteria.
We may raise additional proceeds to complete an acquisition opportunity by making a specified future issuance. The amount and other terms and conditions of any such specified future issuance would be determined at the time thereof. We are not obligated to make any specified future issuance and may determine not to do so. Pursuant to the anti-dilution provisions of our Class B common stock, any such specified future issuance would result in an adjustment to the conversion ratio such that our initial stockholders and their permitted transferees, if any, would retain their aggregate percentage ownership at 20% of the sum of the total number of all shares of common stock outstanding upon completion of our public offering plus all shares issued in the specified future issuance, unless the holders of a majority of the then-outstanding shares of Class B common stock agreed to waive such adjustment with respect to the specified future issuance at the time thereof. We cannot determine at this time whether a majority of the holders of our Class B common stock at the time of any such specified future issuance would agree to waive such adjustment to the conversion ratio. If such adjustment is not waived, the specified future issuance would not reduce the percentage ownership of holders of our Class B common stock, but would reduce the percentage ownership of holders of our Class A common stock. If such adjustment is waived, the specified future issuance would reduce the percentage ownership of holders of both classes of our common stock.
We anticipate structuring our initial business combination so that the post-transaction company in which our public stockholders own shares will comply with all applicable regulatory requirements and own or acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial business combination such that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders or for other reasons. However, we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires an interest in the target sufficient for the post-transaction company not to be required to register as an investment company under the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination transaction. For example, we could pursue a