HLB Chessboard is proud to have acted as Corporate Advisor to Batlow Apples during its investment process.

Batlow Apples has secured $10 million from AusFarm Fresh for a 63.3% stake in the newly corporatised business.

Batlow Apples is an iconic Australian brand in apples and is one of the largest apple storage and pakcing operations in the country. Collectively, its growers market and pack on average 750 cartons of apples ever year. The vertically integrated business includes orchards and nursery, packing and storage facilities, marketing operations and Batlow Brewing (a cider business).

The unanimous vote in favour of the proposal secures the future viability of the business. The Board is pleased to have a strategic partner to enhance the perofrmance and devleopment of the Company in a sustainable manner while growers continue to feature in the ownership structure and be represented on the Board as they have been for the past 96 years.

John Power, General Manager of Batlow Apples says:

"This is an historic moment in the history of Batlow Apples. The transaction will mean that one of Australia's most iconic food brands will have a financially viable future. As our corporate adviser over the last three years, HLB Chessboard provided strategic advice to gus here. From negotiating with various potential investors to assistance with strategic acquisition to maximise our value they have been a great support to us."

As part of our engagement HLB Chessboard:

Acted as Corporate Adviser to Batlow ApplesProvided strategic advice in relation to value creation M&A services in relation to juice plant acquisitionAssisted with preparation of company presentation materials and financial modelling to support value Introduction to potential investorsProvided negotiation support

We are proud to have supported Batlow Apples to maximise the outcomes of the transactions.

HLB Chessboard is proud to launch the next video in our interview series to provide our valued Investment Partners with insight from leading professionals. This interview is with John Mactaggart, an experienced investor and director. John is a non-executive chairman of Technology One Limited, Chairman of the Brisbane Angels and has extensive experience investing across many industries including export of animal products, food processing, industrial fasteners, manufacturing of building equipment and computer hardware and software.

HLB Chessboard is proud to have acted as Corporate Advisor to Animal Ethics (developer of Tri-Solfen) during its investment process.

Animal Ethics has secured a cornerstone investor; the UK based Dechra Pharmaceuticals, who has invested $18 million for a 33 percent stake in the business.

Animal Ethics is focused on delivering ethical pain relief products in animal health. Animal Ethics has successfully developed a topical product that is sprayed on to a wound which simultaneously anaesthetises, relieves pain, controls bleeding and protects against infection. Tri-Solfen has 35 patents granted across the majority of the world's major animal health markets. Its primary use and area for initial development and regulatory focus is in sheep, pigs and cattle; however, other opportunities have been identified in horses and companion animals.

The product is registered for sheep in Australia and is marketed by a global animal health company with current annualised sales for this one application achieving AUD$4.0 million per annum. The development process is underway to register the product in global markets, with initial focus being for pigs in Europe and pigs and cattle in the US. The global market potential is conservatively estimated to be c.AUD$300.0 million; however, with the increasing focus on the ethical treatment of farm animals, this target could be exceeded once multi-species approval is achieved in the major markets.

Allan Giffard, Managing Director of Animal Ethics says:

"The partnership with Dechra creates a wonderful opportunity for our company to pursue its mission. HLB Chessboard provided invaluable strategic advice. Their advice and support allowed us to maximise our value and kept us focused on the important issues” .

As part of our engagement HLB Chessboard:

Acted as Corporate Adviser to Animal Ethics Provided strategic advice in relation to value creation Assisted with preparation of company presentation materials and financial modelling to support value Provided negotiation support Planned and provided pricing advice Identified and analysed potential future funding strategies

We are proud to have supported Animal Ethics to maximise the outcome of the transaction.

Animal Ethics has announced a licensing ageement and investment in the company by the the UK based Dechra Pharmaceuticals. Dechra has invested $18 million for a 33% stake in the company.

The full announcement by Dechra Pharmaceuticals can be accessed here.

HLB Chessboard is proud to launch the next video in our interview series to provide our valued Investment Partners with insight from leading professionals. This interview is with Peter Johnstone, the CEO of The Clem Jones Group. The Clem Jones Group is a leading Philanthropic organisation in Australia which continues the vision of the great Dr Clem Jones AO. Peter shares his thoughts on the work that The Clem Jones Group is supporting, discusses their main focuses of support and the future of Philanthropy in Australia.

HLB Chessboard is proud to launch the first video in our interview series to provide our valued Investment Partners with insight from leading professionals. Our first interview is with Professor Matt Brown, a world leading geneticist & rheumatologist. Matt Brown is at the pinnacle of his profession, rated in the top 1% in the world, and provides us with an interesting view on the state of Australian innovation and how Australia is positioned for medical research on a global scale.

One of the routine steps that organisations include in planning for major corporate events such as listings, mergers and acquisitions is to develop a stakeholder management plan. This is usually the vehicle for controlling communications with all major groups ahead of the looming event. These stakeholders may include customers, staff, suppliers, current and future shareholders, industry organisations and – depending on your industry – neighbours or nearby residents who can be affected by your activities.

Too often however, organisations lose sight of the fact that their “stakeholders” are not large, amorphous groups. They are individuals, and they are human beings. And failing to treat them as such is a recipe for trouble.

You need to ask whether your stakeholder management plan takes account of the human traits that dictate our actions and reactions, particularly in stressful situations. Does it fully consider their perspective of the issue and their likely response? When we view our stakeholders through the corporate lens, we can be guilty of seeing them as corporate entities – independent, rational and devoid of emotion.

Some years ago I was engaged to work for a resources company which was already in the throes of a “stakeholder management process”. This involved distributing a letter to landowners advising them that the company had a legal right to access their property, and they would be there on Monday morning to conduct drilling.

From a technical point of view, it was truthful and forthright. It told the affected parties what they needed to know, and how they would be affected. From a people-management point of view, it was like a red rag to a bull. Thankfully the letter – drafted by the engineering department – came across my desk before it went in the post. We were able to reword it with a far more sympathetic tone, and explaining the grievance procedures.

I’ve seen examples of construction companies telling neighbouring residents that their bore water pumps would probably run dry as a result of a building project, and that if they had a problem they should probably take them back to the shop to get a better one.

The problem with this approach is that a difficult situation is not only escalated into a highly emotive one, but that the affected “stakeholder” now has highly news-worthy material to take to the media, which will thrive on highlighting the personal elements of their story. (Of course this means both traditional media and social media; these days everyone is a publisher and a potential tormentor of companies that do not treat them with basic courtesy and respect.)

In the corporate context, particularly with mergers, acquisitions or demutualisations, there are almost always going to be stakeholders – people – who are opposed and believe, rightly or wrongly, that they will be worse off as a result. These disgruntled stakeholders will not be persuaded simply because you keep them well informed of a situation they distrust or dislike. On the contrary, communications that they perceive to be blunt or dismissive of their concerns will only inflame their opposition. These people then become lightning rods for other disgruntled stakeholders, and possibly the mainstream media. And their fears and emotions regarding the proposed activity will absolutely swamp any rational argument you try to advance.

People-specific stakeholder relations, however, can remove the heat from a situation, blunt the news angles and in fact lower the chances of an issue making into the media at all. Tailor your messages and actions not for “stakeholders”, but for people. It’s not only good manners and a sign of basic human decency, it can make good business sense as well. If your communications strategy result in people feeling ignored, isolated or misled, they won’t react as stakeholders. They will react as human beings. And as human being generally do, they will vent their frustration and anger through any available outlet.

If however, your communications plan recognises and engages human beings, rather than “stakeholders”, then you will be far more likely to elicit human responses – sympathy, understanding and support. So – does your organisation have a stakeholder plan? And if so, do you need a people plan instead?

Malcolm Cole is the Director of Media and Communications at The SAS Group.

Congratulations to Apiam Animal Health for their recently announced acquisition of Quirindi Veterinary Group for $11.57 million. Apiam's announcement describes the acquisition as further strengthening the company's production animal and rural veterinary service capabilities.

ASX Announcement can be found here.

We are very pleased to welcome the Honourable Larry Anthony to our Advisory Board.

The Advisory Board, comprising Michael Hawkins, Darren Lockyer, John Mactaggart and Colin McKenzie will be further strengthened by the addition of Larry’s considerable experience and expertise.

Larry held the seat of Richmond in New South Wales from 1996 until 2004. During that time, he served in the Howard Government as Minister for Children and Youth Affairs, Minister for Community Services and Parliamentary Secretary for Trade. Larry was responsible for an annual budget of over $60 billion and is widely regarded for his achievements in social policy reforms. He holds a keen interest in the information technology, finance, property, media and human services sectors. Larry is the current President of The Nationals.

The addition of Larry to the Board not only provides HLB Chessboard with valuable experience, but through SAS Group, also provides access to an experienced team in media relationships and training and Stakeholder Engagement.

Larry replaces John Woodhouse on the Advisory Board. John has been a valuable contributor to HLB Chessboard. We thank John very much for his input and support and wish him well in the future.

We look forward to Larry’s input and insight into the HLB Chessboard business.

We are pleased to launch our new Investment Partner Portal.

Investment Partners of HLB Chessboard would have recently received their invitation and Password to access the Portal.

The three areas of the Portal are:

In our experience, the efficient and cost-effective access to capital is at the forefront of the minds of small business owners who are looking to expand. Under the current regulatory framework, if a company intended to raise funds other than from wholesale investors, a lengthy disclosure process is required including the preparation of a prospectus (or similar disclosure document) and, more than likely, an audit of their financial statements. This is an expensive proposition for any small business, however this is set to change.

In December 2015, the Turnbull Government introduced a bill into Parliament and released an Exposure Draft of proposed regulations which, if passed into law, will allow certain small businesses the ability to raise funds from “the crowd” with reduced disclosure obligations. A component of the Turnbull Government’s National Innovation and Science Agenda, the aim of this Bill is to provide a framework for crowd-sourced equity funding to encourage Australians to innovate and invest.

The Crowd - What is it?

The crowd is a term which refers to raising funds over the internet from both wholesale and retail investors. Under the proposed legislation, companies will be able to raise investment capital with a reduced disclosure document in an online format. Accessing these investors via the internet will allow a company raising funds quick and efficient access to a large pool of potential investors.

Eligibility Criteria to Raise Capital

In order to raise funds through the proposed CSEF measures, a company must first meet certain criteria. These include:

The company raising capital must be an unlisted public company (and cannot be a private company).Gross assets not in excess of $5 millionRevenue not in excess of $5 millionThe company may only raise $5 million via CSEF in any 12 month period. We note funds raised via other means (such as directly from sophisticated investors) will not count towards the cap.An offer document must be prepared and circulated (via the internet) to investors. We note the exact requirements of this offer document have not yet been released.The equity must be raised through an intermediary

Process for Making the Offer

For a company to make an offer under the crowd-sourced equity funding framework, it must:

Ensure it is eligible to make the offer including conversion to a public company, if necessaryPublish an offer document compliant with CSEF requirement via a single intermediary. We note a company may only have one offer document published at a timeObtain consents from any persons named or associated with the offer documentThe CSF offer is open from the time the offer document is first published and may be open for no longer than three months.The offer will be closed once the offer is fully subscribedOnce the offer is complete and the minimum subscription amount reached, the intermediary can liaise with the company to transfer the funds

The Offer Document

An Exposure Draft of the proposed content requirements for the offer document has been released for comment which shows the Government’s intentions for the CSEF offer document. This Exposure Draft reveals that the offer document may require sections laid out as follows:

Risk Warnings including a warning matching the wording prescribed in the regulationsInformation about the Investor Rights including a description of the reduced disclosure requirements available to the Company and the cooling off rights available to retail investors.

The Gatekeeper

In order for a company to raise funds through the proposed CSEF regulatory framework, it must go through an appropriately licenced intermediary operating a crowd-funding platform. This intermediary will act as a ‘gatekeeper’, whereby they will be required to undertake checks on companies and their disclosure documents prior to marketing their offer.

When accepting an offer from retail investors, the Gatekeeper must ensure that whilst not having a cap on the total amount of investment they can make via CSEF, they are limited to only $10,000 per company per 12 month period. Retail investors must also be made aware of their 5-day cooling off right during which they can cancel their investment

Reduced Disclosure Requirements

Private companies which convert to a public company for the purposes of raising capital through CSEF will be entitled to reduced disclosure requirements for the first five years, including:

Exemption from an audit until after $1 million has been raised via CSEFExemption from the requirement to hold an Annual General Meeting (AGM)Financial reports will only be required to be provided electronically and not via paper.

Review

The proposed changes to the Corporations Act will provide companies seeking to grow, expand and innovate, a cost-effective way to tap in to both wholesale and retail investors. We see the pros and cons of the crowd-sourced equity funding framework for growing companies as:

Pros:

Open access to a wider distribution network by leveraging the internet.Capital can be sought from wide pool of retail investors without the added disclosure requirements of a listing and/or full prospectus.Growth can be funded more efficiently than via prospectus marketed to retail investorsReduced requirements to disclosure historical financial information than via a prospectusBusiness can operate as a public company but with reduced overhead and disclosure for five years.Should the company seek a listing on the stock exchange in the future, operating as an audited public company may provide the market with more confidence in the financials of the business.Investment and funding from other means does not inhibit the cap on CSEF raises.

Cons:

If required, the conversion process to a public company generally includes a conversion waiting period.Some small companies may already be above the $5 million gross assets threshold. In the future we may see the cap lifted to encompass the full range of non-large companies.Requirement for an audit after raising $1 million may decrease efficiency to businesses seeking growth.The commercial and practical implications of this framework has not be tested in Australia as yet.

HLB Chessboard is enthusiastic about the proposed changes which may allow small businesses to access capital more efficiently. We wait in anticipation for this legislation and associated regulations to be implemented.

This article is not intended to be advice and is solely HLB Chessboard’s summary of recent announcements. The reader should seek appropriate advice on the full effects of this Bill before taking any action.

HLB Chessboard is proud to announce the successful listing of Apiam Animal Health.

HLB Chessboard acted as Corporate Adviser to the IPO which started trading on 15th December 2015.

Apiam Animal Health is a vertically integrated animal health business providing a range of products and services to support the health and well being of production animal and companian and other animal species. These products and services include: Veterinary consulting, product sales both prescription and non-prescription and ancilliary and support services such as genetics sourcing.

The company estimates that it will provide Veterinary services to approxmiately 35% of the pig industry, 50% of the beef cattle feedlot industry and 25% of the dairy cattle industry in Australia.

The company was founded in 1998 focused on the pig industry and now incorporates over 100 veterenarians, four warehouses, an 18 vehicles fleet and operates from 25 locations.

As part of our engagement HLB Chessboard:

Provided M&A advice regarding 12 acquisitions to increase earnings to proforma FY16 to $12.09m. Provided pricing advice to maximise value at IPO. Provided financial support during IPO process including financial modelling of the IPO Arranged the $33.5 million banking facility Supported management during capital raising roadshow Member of the Due Diligence Committee

Our main role was to assist with Value Creation. This was done through financial structuring, pricing advice not only on the IPO but for the individual acquisitions. Overall we are proud to have provided the company support to maximise the outcome of the IPO.

In today’s environment a corporate valuation expert is integral to a corporate board, whether it has external shareholders or not. Quite often boards neglect the need to keep someone with these skills close by whether it is:

- On the board,

- On an advisory board, or

- As a corporate advisor.

I believe that it is a fundamental skill that needs to be kept close to the board’s heart. Here’s why:

Value – pure and simple Corporate Governance is the system by which companies are directed and managed. Good corporate governance structures encourage companies to create value and provide accountability and controls systems commensurate with the risks involved. One of your primary objectives as a profit-seeking organisation will be to maximise shareholders’ wealth. Therefore, one of the fundamental measures of a board’s success will be whether they will have actually created more value for shareholders.

Size doesn’t matter Good governance principles, corporate advisers and fair value accounting have traditionally been the territory of ASX listed or larger companies. However, the fundamental principles behind these topics apply to all companies. It can be expected that shareholders of any sized business will want to create value in that business. If a board doesn’t first take the time to understand what its value is and what the drivers of that value are, it will be only through good fortune that it is increased, rather than diligent planning and execution.

Responsible decision-making

If a board is to execute responsible decision-making, it could be argued that by not first considering the impact of that decision on value, it is not making the decision responsibly. Whether the decision will directly impact the company’s income or expenses, or alter the risk profile of the business, they will all have a potential impact on value.

Brass in pocket With one eye always on the valuation of the business, it follows that an up-to-date financial model should always exist for the company. Having a focus on the future cash flow of the business and the drivers of those cash flows, the board will be able to assess strategy, focus on key areas of risk and prioritise projects to improve earnings in a more structured way than before.

Friends forever Good governance and corporate valuation are intimately entwined. Many studies have concluded that good governance can improve the value of a company. This is based on the facts that with better controls, risk mitigation and transparency, valuations are enhanced. A fundamental aspect of the ASX Good Governance principles is to implement systems and structures which will ultimately enhance the value of a company.

Everyone’s doing it…or should be A Board’s need to consider valuation is becoming more and more common. Whether large listed companies or small owner representative boards, consideration of value should be part of the decision-making. There are obvious occasions such as when considering a potential acquisition or divestment. However, there are a lot more circumstances in which value should be considered.

These include:

Any new financing arrangements to understand their potential impact on valueFor taxation purposesStrategic decisions to ensure focus is given to value creation activities, andWith an increased emphasis on fair value accounting, valuation is a more essential part of the accounting process.

Therefore, valuation should not be set apart from the day-to-day functions of a Board but rather an integral part of not only good governance, but the day-to-day role of the Board. Whether it’s to help set strategy, review potential outcomes of a proposed decision, or help prioritise the Board’s focus, valuation should be considered essential to the operations of a Board.

I have read many articles discussing the potential funding options for junior explorers. The basis of these articles has been that junior explorers are finding it difficult to stay viable; that there are various options available to them to survive and the authors make commentary on recent IPO’s or M&A activity. It is my belief that businesses know that their possible funding options, depending on their stage of life, include:

1. Pre-IPO and IPO

2. Sale of non-core assets

3. Strategic alliances with a major

4. M&A activity with other explorers

5. Placements

6. Royalty financing

7. Convertible bonds.

The need to rationalise costs and seek any available government incentives would also be second nature to the junior explorers that I have met.

The need to bring the topic to the forefront of debate is valid, considering the tight capital markets that we have seen in recent years. However, the proportion of listed explorers, against the number of businesses in the sector, proves the traditional funding method is listed equity. With this avenue particularly difficult, at the present time, advisers are pondering alternatives.

We know there is no silver bullet. It is a daily struggle to rein in costs, meet with potential investors, and assess other projects that may complement yours, or even better, provide cash flow sooner. The question is, however, do you continue to use resources to pursue various options or put your head down and work as hard as you can for the listing.

My advice is to sit down now with your adviser and get to the nuts and bolts of what is required for a broker to be happy to distribute your capital raising. Once you commit to the tried and proven method of listing, you can seek clarity from your capital markets advisers on the hurdles they want jumped before they sign you up. You may then focus your full attention in this direction.

Look for relationships Entities and people looking to help the organisation should also be assessed on their ability to bring relationships to your business. Whether it is potential investors, brokers to sound out a listing, other like-minded business that could potentially merge or become alliances, it is their relationships that are crucial to their ability to help.

Be prepared Ensuring that a comprehensive financial model exists, so that discussions and negotiations can be had early with one set of forecasts. Time and adviser dollars can be wasted with various sets of numbers being used to highlight the potential of the business not to mention the less than professional image presented to investors or partners. Having an orderly set of financials, one forecast, key documents to the business, and a summary of the business are essential.

Be flexible It is the determined nature of junior explorers and their dogged vision for the potential of their project that can also see them pass up viable alternatives to keeping the business moving forward. A group may have confidence in their resource and are not prepared to compromise either value or strategy in order to help ensure its viability.

Valuation expertise Due to the early stage of the venture, the valuation of the assets becomes subjective. It is important to have a very good grasp on the valuation of the assets and how variables change the outcome. This is important to be able to negotiate and quickly assess financial outcomes during your listing conversations.