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Finance Law Memorandum

Answer the following questions with reference to the number of marks allocated for each. The
more marks available, the greater depth of analysis I am looking for on a particular question.
Your answers may be as long or as short as you feel is necessary to properly and fully answer the
questions that are posed, just like in the real world.
Note that I am not grading the responses based on a “longer-is-better grading scheme”. Quite the
opposite, in fact. Writing a bunch of run-on discussions articulating every idea that you can
think that does not answer the actual question posed will result in deductions, as will being too
brief and not giving proper details and analysis to your answers. Be as brief as you feel is
appropriate while fully answering the question, but not so brief as to miss out on important
nuances in your answer.
Also like the real world, the clarity, articulation, presentation and organization of your thoughts
will matter in the grading of this Final Assessment. How you express yourself and convey your
answers is important. …Remember that I am reviewing this assignment as a member of the
Griffin firm who has given you these importants task, not just a professor reading an exam
answer.
The fact that I have given you a lot of time to complete this Final Assessment does not indicate
that I expect you to take weeks to write your answer. You should be able to complete this entire
Final Assessment in not more than two days of solid effort if you remain focused. You will find
that this Final Assessment is going to make you apply all that you have learned in this course and
take positions by providing advice. ….Good luck!
Facts Applicable to all Questions in this Exam
Once again (as was the case in the earlier Due Diligence Assignment), in each of the fact pattern
situations set out below, assume that you have just graduated with your B.Comm from MacEwan
and have been hired into your first job as Assistant Corporate Finance Analyst at Griffin
Financial Advisors Inc. (“Griffin”). You want to make a good impression, so you are keen to
show the higher-ups in the company that you can provide valuable and insightful analysis when
given the opportunity.
Fun Bonus Question (2 Points)
When reading the questions ask yourself: What is the one common career thread that is shared by
all of Griffin Financial Advisors character names used in the three different parts of this Final
Assessment? Be specific in your answer (ie., don’t just tell me they all appear to be actors).
Final Assessment Question I- (20 Marks Total)
You receive a call to come down to the office of Toby Stephens, a junior partner in the
institutional sales division of Griffin. When you arrive, Toby advises you that he has been asked
to join the Board of Directors of a company that is run by an old college friend. The company
that he has been asked to join as a director is a public company based in southwest Ontario called
Aphria Inc. (“Aprhia”), which trades on the TSX under the symbol “APHA”.
Toby tells you that he never took any introduction to law courses during business school, but that
he has heard rumours that there may be some liabilities associated with being a director of a
public company. Toby further advises you that he has recently inherited a lot of money from his
parents, and is cautious about exposing his inherited wealth to any unnecessary liability. Toby
discloses to you that he read your resume, back when you were originally applying for the job at
Griffin, and remembers that you have taken a couple of different legal courses while at
MacEwan. You tell Toby that he should be consulting with a real lawyer on this topic, but he
responds that he just wants to get your opinion to validate his decision.
Toby asks you to write him a memo advising as to the potential personal liabilities associated
with joining as a director of a public company in Canada, generally, and the unique risks of
joining the Board of Directors of Aphria, specifically. Toby requests that you finish off the
memo with a recommendation as to whether he should join the Board of Aphria or not.
Please write the memo that Toby has requested (20 marks).
Final Assessment Question II (40 Marks Total)
While you are sitting in your office gathering information to write your memo for Toby, you get
an email marked “Urgent” from Luciana Paluzzi, one of the senior investment banking partners
in Griffin.
Luciana writes in her email that she is negotiating with ONCAP III Private Equity Fund to take
one of their portfolio companies public on the TSX, with Griffin as the leader investment banker
on the deal. She advises ONCAP have owned this particular portfolio company for five years,
and are looking to realize their significant equity gains in this investment.
The particular portfolio company that they are talking about taking public is currently a
successful private operating company that runs a string of boutique hair salons across Canada.
This company, Chatters Canada Limited (“Chatters”), has 115 stores across Canada and operates
under the brands “Chatters Salon”, “Green Apple Hair Salon” and “Tommy Gun’s Original
Barbershop”. Chatters also distributes, directly through its salons and via its online portals, a
number of exclusive hair care products.
Chatters generates $20 million per year in free cash-flow and does not need any additional
financing to build its Canadian operations, and therefore would need significant additional
capital only if it decides to expand into the competitive American market.
Luciana notes that the principals of ONCAP III have not yet been sold on the idea of taking
Chatters public in the current market, and they are also considering selling their investment out
to a larger private equity fund in the U.S. Only if you can convince ONCAP to pursue an IPO in
Canada will Griffin get the chance to make significant fees on the IPO. As such, Luciana is
going to have to make a solid sales-pitch to the ONCAP III team about the relative advantages of
taking Chatters public in Canada versus selling out to another private equity firm. She knows
that the public markets in Canada have seen few new IPO’s in recent years, so she advises you
that she is relying on you to help her make a good business case to seal the deal and secure this
key opportunity for Griffin.
Luciana further reports to you that she has been considering recommending to ONCAP III that, if
they do proceed with an IPO in Canada, that they amend the capital structure of Chatters in
conjunction with the IPO to adopt a dual-class share structure in which ONCAP’s shares have 10
votes per share and the new shares issued to the public in the IPO only have one vote per share.
Luciana ask you to write her a memo focused on the following topics:
1. Please lay for Luciana the best arguments you can come up with that she can relay to the
principals of ONCAP III as to why they should take Chatters public in an IPO on the TSX, rather
than look at alternative means of securing liquidity for their investment in Chatters. (10 marks)
2. To anticipate the counter-arguments that are likely to be raised by others during the
upcoming discussions with the ONCAP III principals, advise Luciana what arguments are likely
to be raised by those who will try to convince ONCAP III not to pursue a TSX IPO, and how she
can counter those objections. (10 marks)
3. Advise Luciana as to what the benefits and disadvantages are of adopting a dual-class
share structure for Chatters if they pursue an IPO, and make a recommendation as to whether
adopting a dual-class share structure is appropriate in these circumstances (and your rationale as
to why you have arrived at that conclusion). (10 marks)
4. Lay out for Luciana the business and legal steps that will be required at various stages to
properly prepare Chatters for an IPO and to complete an IPO up to the point in time where the
shares of Chatter begin trading on the TSX (10 marks)
Please write the memo for Luciana addressing the four specific topics specified above

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