S-4 1 d792935ds4.htm S-4 S-4
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As filed with the Securities and Exchange Commission on May 11, 2020

No. 333-                    

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Leo Holdings Corp.*

(Exact name of registrant as specified in its charter)

 

 

 

Cayman Islands*   6770   98-1399727

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

21 Grosvenor Place

London SWIX 7HF

+(44) 2072012200

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Donald J. Puglisi, Esq.

Puglisi & Associates

850 Library Avenue #204

Newark, Delaware 19711

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies of all communications, including communications sent to agent for service, should be sent to:

 

Christian O. Nagler, Esq.

Peter Seligson, Esq.

Kirkland & Ellis LLP

601 Lexington Avenue

New York, New York 10022

Tel: (212) 446-4800

Fax: (212) 446-4900

 

Katherine D. Ashley, Esq.

Skadden, Arps, Slate, Meagher & Flom LLP

1440 New York Avenue, N.W.

Washington, D.C. 20005

Tel: (202) 371-7000

Fax: (202) 393-5760

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

 

 

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐


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If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-l(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Securities to be Registered

 

Amount

to be

Registered(4)

 

Proposed

Maximum
Offering Price
Per Unit

 

Proposed

Maximum
Aggregate
Offering Price (1)

 

Amount of

Registration Fee

New DMS Class A Common Stock(1)

  22,812,807   10.31(5)   $235,200,040   $30,529(8)

New DMS Class A Common Stock(2)

  14,000,000   $11.50(6)   $161,000,000   $20,898(8)

Warrants to purchase New DMS Class A Common Stock(3)

  14,000,000   0.65(7)   $9,100,000   $1,182(8)

Total

              $52,609

 

 

(1)

The number of shares of Class A common stock of New DMS (as defined below) being registered represents (i) 19,312,807 Class A ordinary shares (the “Class A Ordinary Shares”) of Leo (as defined below) (the “public shares”) and (ii) 3,500,000 Class B ordinary shares of Leo (“Class B ordinary shares” and together with the public shares, the “Leo shares”). Following the Domestication (as defined below), the public shares and the Class B ordinary shares will automatically be converted by operation of law into shares of Class A common stock of New DMS (“New DMS Class A Common Stock”).

(2)

Represents shares of New DMS Class A Common Stock to be issued upon the exercise of (i) 10,000,000 redeemable warrants to purchase Class A ordinary shares of Leo that were issued by Leo in its initial public offering (the “Leo public warrants”), (ii) 2,000,000 warrants to purchase Class A ordinary shares of Leo that were issued in a private placement concurrently with its initial public offering (the “private placement warrants” and together with the public warrants, the “Leo warrants”), and (iii) 2,000,000 warrants to purchase New DMS Class A Common Stock that will be issued at the closing of the proposed business combination (the “Seller Warrants”). The Leo warrants will automatically be converted by operation of law into warrants to acquire New DMS Class A Common Stock in the Domestication (the “New DMS warrants”).

(3)

The number of warrants to acquire shares of New DMS Class A Common Stock being registered represents (i) 10,000,000 Leo public warrants, (ii) 2,000,000 private placement warrants, and (iii) 2,000,000 Seller Warrants.

(4)

Pursuant to Rule 416(a) of Securities Act of 1933, as amended (the “Securities Act”), there are also being registered an indeterminable number of additional securities as may be issued to prevent dilution resulting from stock splits, stock dividends or similar transactions.

(5)

Estimated solely for the purpose of calculating the registration fee, based on the average of the high and low prices of the Class A Ordinary Shares of Leo on the New York Stock Exchange (the “NYSE”) on May 8, 2020 ($10.31 per Class A ordinary share). May 8, 2020 was the date for which the most recent reported high and low prices of the Class A Ordinary Shares were available prior to the initial filing of this registration statement (such date being within five business days of the date that this registration statement was first filed with the Securities and Exchange Commission (the “SEC”)). This calculation is in accordance with Rule 457(f)(1) of the Securities Act.

(6)

Represents the exercise price of the warrants.

(7)

Estimated solely for the purpose of calculating the registration fee, based on the average of the high and low prices of the Leo public warrants on the NYSE on May 5, 2020 ($0.65 per warrant). May 5, 2020 was the date for which the most recent reported high and low prices of the Leo public warrants were available prior to the initial filing of this registration statement (such date being within five business days of the date that this registration statement was first filed with the SEC). This calculation is in accordance with Rule 457(f)(1) of the Securities Act.

(8)

Calculated by multiplying the proposed maximum aggregate offering price of securities to be registered by 0.0001298.

*

Immediately prior to the consummation of the Business Combination described in the proxy statement/prospectus forming part of this registration statement (the “proxy statement/prospectus”), Leo Holdings Corp., a Cayman Islands exempted company (“Leo”), intends to effect a deregistration under the Cayman Islands Companies Law (2020 Revision) and a domestication under Section 388 of the Delaware General Corporation Law, pursuant to which Leo’s jurisdiction of incorporation will be changed from the Cayman Islands to the State of Delaware (the “Domestication”). All securities being registered will be issued by the continuing entity following the Domestication, which will be renamed “Digital Media Solutions, Inc.” upon the consummation of the Domestication. As used herein, “New DMS” refers to Leo after the Domestication.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the SEC, acting pursuant to Section 8(a), may determine.

 

 

 


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The information in this preliminary proxy statement/prospectus is not complete and may be changed. The registrant may not sell the securities described in this preliminary proxy statement/prospectus until the registration statement filed with the Securities and Exchange Commission is declared effective. This preliminary proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY—SUBJECT TO COMPLETION, DATED MAY 11, 2020

PROXY STATEMENT FOR

EXTRAORDINARY GENERAL MEETING OF LEO HOLDINGS CORP.

PROSPECTUS FOR

36,812,807 SHARES OF CLASS A COMMON STOCK AND 14,000,000 WARRANTS OF LEO HOLDINGS CORP.

(AFTER ITS DOMESTICATION AS A CORPORATION INCORPORATED IN THE STATE OF DELAWARE,

WHICH WILL BE RENAMED DIGITAL MEDIA SOLUTIONS, INC. IN CONNECTION WITH THE

DOMESTICATION DESCRIBED HEREIN)

 

 

The board of directors of Leo Holdings Corp., a Cayman Islands exempted company (“Leo”), has unanimously approved the transactions (collectively, the “Business Combination”) contemplated by the Business Combination Agreement, dated April 23, 2020, by and among Leo, Digital Media Solutions Holdings, LLC (“DMS”), certain selling stockholders (the “Sellers”) and the other parties thereto (as hereafter amended, the “Business Combination Agreement”), a copy of which is attached to this proxy statement/prospectus as Annex A, including (a) the domestication of Leo as a Delaware corporation (the “Domestication”) and (b) the reorganization of the combined post-business combination company in an umbrella partnership-C corporation (or “Up-C”) structure. In connection with the Domestication, Leo will change its name to “Digital Media Solutions, Inc.” and, as used in this proxy statement/prospectus, “New DMS” refers to Leo after the Business Combination. As described in this proxy statement/prospectus, Leo’s shareholders are being asked to consider a vote upon (among other things) the Business Combination.

Immediately prior to the consummation of the Closing, (1) the issued and outstanding Class A ordinary shares, par value $0.0001 per share (the “Class A ordinary shares”), of Leo will convert automatically by operation of law, on a one-for-one basis, into shares of Class A common stock, par value $0.0001 per share, of New DMS (the “New DMS Class A Common Stock”); (2) the issued and outstanding redeemable warrants that were registered pursuant to the Registration Statement on Form S-1 (333-222599) of Leo (the “IPO registration statement”) will become automatically redeemable warrants to acquire shares of New DMS Class A Common Stock (no other changes will be made to the terms of any issued and outstanding public warrants as a result of the Domestication); (3) each issued and outstanding unit of Leo that has not been previously separated into the underlying Class A ordinary share and underlying warrant upon the request of the holder thereof, will be cancelled and will entitle the holder thereof to one share of New DMS Class A Common Stock and one-half of one redeemable warrant to acquire one share of New DMS Class A Common Stock; (4) each issued and outstanding Class B ordinary share, par value $0.0001 per share (the “Class B ordinary shares”), of Leo will convert automatically by operation of law, on a one-for-one basis without giving effect to any rights of adjustment or other anti-dilution protections, into shares of New DMS Class A Common Stock; and (5) the issued and outstanding warrants of Leo issued in a private placement will automatically become warrants to acquire shares of New DMS Class A Common Stock (no other changes will be made to the terms of any issued and outstanding private placement warrants as a result of the Domestication). As used herein, “public warrants” shall mean the redeemable warrants to acquire Class A ordinary shares, in each case, that were registered pursuant to the IPO registration statement and the shares of New DMS Class A Common Stock issued on the effective date of the Domestication. As used herein, “Class B ordinary shares” shall mean the 5,000,000 Class B ordinary shares, par value $0.0001 per share, of Leo, of which 1,500,000 will be forfeited and surrendered pursuant to the Sponsor Shares and Warrant Surrender Agreement between Sponsor, Leo and certain holders of Class B ordinary shares (the “Surrender Agreement”), and “private placement warrants” shall mean the 4,000,000 private placement warrants outstanding as of the date of this proxy statement/prospectus (of which 2,000,000 will be forfeited and surrendered pursuant to the Surrender Agreement and 2,000,000 will be issued to the Sellers) which will be automatically converted by operation of law into warrants to acquire shares of New DMS Class A Common Stock in the Domestication.

Accordingly, this prospectus covers 36,812,807 shares of New DMS Class A Common Stock (including shares issuable upon exercise of the warrants described above) and 14,000,000 warrants to acquire shares of New DMS Class A Common Stock to be issued in the Domestication.

Leo’s units, Class A ordinary shares, public warrants and private placement warrants are currently listed on the New York Stock Exchange (the “NYSE”) under the symbols “LHC.U,” “LHC” and “LHC WS,” respectively. Leo will apply for listing, to be effective at the time of the Business Combination, of New DMS’s Class A Common Stock and warrants on the NYSE under the proposed symbols “                    ” and “                     WS,” respectively. It is a condition of the consummation of the Business Combination that Leo receive confirmation from the NYSE that New DMS has been conditionally approved for listing on the NYSE but there can be no assurance such listing condition will be met or that Leo will obtain such confirmation from the NYSE. If such listing condition is not met or if such confirmation is not obtained, the Business Combination will not be consummated unless the NYSE condition set forth in the Business Combination Agreement is waived by the applicable parties.

 

 

The accompanying proxy statement/prospectus provides shareholders of Leo with detailed information about the Business Combination and other matters to be considered at the extraordinary general meeting of Leo. We encourage you to read the entire accompanying proxy statement/prospectus, including the Annexes and other documents referred to therein, carefully and in their entirety. You should also carefully consider the risk factors described in “Risk Factors” beginning on page 39 of the accompanying proxy statement/prospectus.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.

The accompanying proxy statement/prospectus is dated                 , 2020, and

is first being mailed to Leo’s shareholders on or about                 , 2020.


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LEO HOLDINGS CORP.

A CAYMAN ISLANDS EXEMPTED COMPANY

(COMPANY NUMBER 329879)

21 GROSVENOR PLACE

LONDON SW1X 7HF, UNITED KINGDOM

Dear Leo Holdings Corp. Shareholders:

You are cordially invited to attend the extraordinary general meeting in lieu of the annual meeting (the “extraordinary general meeting”) of Leo Holdings Corp., a Cayman Islands exempted company (“Leo”), at 9:00 a.m., Eastern Time, on                , 2020, at the offices of Kirkland & Ellis LLP located at 601 Lexington Avenue, New York, New York 10022, or at such other time, on such other date and at such other place to which the meeting may be adjourned.

At the extraordinary general meeting, Leo shareholders will be asked to consider and vote upon a proposal, which is referred to herein as the “BCA Proposal,” to approve and adopt the Business Combination Agreement, dated as of April 23, 2020, by and among Leo, Digital Media Solutions Holdings, LLC (“DMS”), CEP V DMS US Blocker Company, a Delaware corporation (“Blocker Corp”), Prism Data, LLC, a Delaware limited liability company (“Prism”), CEP V-A DMS AIV Limited Partnership, a Delaware limited partnership (“Clairvest Direct Seller”), Clairvest Equity Partners V Limited Partnership, an Ontario, Canada limited partnership (“Blocker Seller 1”), CEP V Co-Investment Limited Partnership, a Manitoba, Canada limited partnership (“Blocker Seller 2,” and together with Prism, Clairvest Direct Seller and Blocker Seller 1, the “Sellers”), Clairvest GP Manageco Inc., an Ontario corporation (“Clairvest GP”) as a Seller Representative, and, solely for the limited purposes set forth therein, Leo Investors Limited Partnership, a Cayman Islands exempted limited partnership (“Sponsor”) (as hereafter amended, the “Business Combination Agreement”), a copy of which is attached to the accompanying proxy statement/prospectus as Annex A, certain related agreements (including the Subscription Agreements (as defined below), the Amended Partnership Agreement (as defined below), the Tax Receivable Agreement (as defined below) and the Surrender Agreement (as defined below)) and the transactions contemplated thereby.

The Business Combination Agreement provides for the consummation of the following transactions in the following order (collectively, the “Business Combination”), in each case conditional upon each prior transaction having been consummated:

 

  a)

pursuant to the Sponsor Shares and Warrant Surrender Agreement between Sponsor, Leo and certain holders of Class B ordinary shares of Leo (the “Surrender Agreement”), Sponsor will surrender and forfeit to Leo 2,000,000 private placement warrants of Leo and, together with certain other holders, an aggregate of 1,500,000 Class B ordinary shares of Leo (collectively, the “Surrender”);

 

  b)

Leo will change its jurisdiction of incorporation by deregistering as an exempted company in the Cayman Islands and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware (the “Domestication”), upon which Leo will change its name to “Digital Media Solutions, Inc.” (“New DMS”) (for further details, see “Proposal No. 2—The Domestication Proposal”);

 

  c)

Leo will consummate the PIPE Investment (as defined below); and

 

  d)

Leo will purchase the equity interests of Blocker Corp and a portion of the units of DMS held by Prism and Clairvest Direct Seller (which units will be immediately contributed to the capital of Blocker Corp) in exchange for a combination of cash consideration, 2,000,000 private placement warrants of Leo that shall be issued to Sellers (the “Seller Warrants”), shares of Class B common stock, par value $0.0001 per share, of New DMS, which will have no economic value but will entitle the holder thereof to one vote per share (the “New DMS Class B Common Stock”), and shares of Class C common stock, par value $0.0001 per share, of New DMS (the “New DMS Class C Common Stock”), which are convertible into shares of Class A common stock, par value $0.0001 per share, of New DMS (the “New DMS Class A Common Stock”) pursuant to a conversion ratio to be determined at the closing of the transactions contemplated by the Business Combination Agreement (the “Closing”) (the “Business Combination Consideration”).


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Immediately prior to the consummation of the Closing, (1) the issued and outstanding Class A ordinary shares, par value $0.0001 per share (the “Class A ordinary shares”), of Leo will convert automatically by operation of law, on a one-for-one basis, into shares of New DMS Class A Common Stock, par value $0.0001 per share, of New DMS; (2) the issued and outstanding redeemable warrants that were registered pursuant to the Registration Statement on Form S-1 (333-222599) of Leo (the “IPO registration statement”) will become automatically redeemable warrants to acquire shares of New DMS Class A Common Stock (no other changes will be made to the terms of any issued and outstanding public warrants as a result of the Domestication); (3) each issued and outstanding unit of Leo that has not been previously separated into the underlying Class A ordinary share and underlying warrant upon the request of the holder thereof, will be cancelled and will entitle the holder thereof to one share of New DMS Class A Common Stock and one-half of one redeemable warrant to acquire one share of New DMS Class A Common Stock; (4) each issued and outstanding Class B ordinary share, par value $0.0001 per share (the “Class B ordinary shares” and, together with the Class A ordinary shares, the “ordinary shares”), of Leo will convert automatically by operation of law, on a one-for-one basis without giving effect to any rights of adjustment or other anti-dilution protections, into shares of New DMS Class A Common Stock; and (5) the issued and outstanding warrants of Leo issued in a private placement will automatically become warrants to acquire shares of New DMS Class A Common Stock (no other changes will be made to the terms of any issued and outstanding private placement warrants as a result of the Domestication). As used herein, “public shares” shall mean the Class A ordinary shares and “public warrants” shall mean the redeemable warrants to acquire Class A ordinary shares, in each case, that were registered pursuant to the IPO registration statement and the shares of New DMS Class A Common Stock issued as a matter of law upon the conversion thereof on the effective date of the Domestication. As used herein, “Class B ordinary shares” shall mean the 5,000,000 Class B ordinary shares, par value $0.0001 per share, of Leo, of which 1,500,000 will be forfeited and surrendered pursuant to the Surrender Agreement, and “private placement warrants” shall mean the 4,000,000 private placement warrants outstanding as of the date of this proxy statement/prospectus (of which 2,000,000 will be forfeited and surrendered pursuant to the Surrender Agreement and 2,000,000 will be the Seller Warrants issued to the Sellers as part of the Business Combination Consideration) which will be automatically converted by operation of law into warrants to acquire shares of New DMS Class A Common Stock in the Domestication. For further details, see “Proposal No. 2—The Domestication Proposal.

Clairvest Direct Seller and Prism will continue to hold membership interests in DMS (“DMS Units”) subject to and in accordance with the Amended Partnership Agreement (as defined below). Following the Business Combination, the combined company will be organized in an umbrella partnership-C corporation (or “Up-C”) structure, in which substantially all of the assets and business of New DMS will be held by DMS and continue to operate through the subsidiaries of DMS and New DMS’s sole material asset will be equity interests of DMS indirectly held by it. At the Closing, DMS and its current equity holders will amend and restate the limited liability company agreement of DMS (the “Amended Partnership Agreement”) in its entirety to, among other things, provide Clairvest Direct Seller and Prism the right to redeem their DMS Units for cash or, at New DMS’s option, New DMS may acquire such DMS Units (which DMS Units are expected to be contributed to Blocker Corp) in exchange for cash or shares of New DMS Class A Common Stock, in each case subject to certain restrictions set forth therein. DMS Units acquired by New DMS are expected to be contributed to Blocker Corp.

Concurrent with the Closing, New DMS and Blocker Corp will enter into the tax receivable agreement (the “Tax Receivable Agreement”) with the Sellers. Pursuant to the Tax Receivable Agreement, New DMS will be required to pay the Sellers (i) 85% of the amount of savings, if any, in U.S. federal, state and local income tax that New DMS and Blocker Corp actually realize as a result of (A) certain existing tax attributes of Blocker Corp acquired in the Business Combination, and (B) increases in Blocker Corp’s allocable share of the tax basis of the tangible and intangible assets of DMS and certain other tax benefits related to the payment of the cash consideration pursuant to the Business Combination Agreement and any redemptions of DMS Units or exchanges of DMS Units for cash or shares of New DMS Class A Common Stock after the Business Combination and (ii) 100% of certain refunds of pre-Closing taxes of DMS and Blocker Corp received during a taxable year beginning within two years after the Closing. All such payments to the Sellers will be New DMS’s obligation, and not that of DMS.


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Leo has entered into subscription agreements (the “Subscription Agreements”) with certain investors, pursuant to which, among other things, such investors agreed to subscribe for and purchase, and Leo agreed to issue and sell to such investors, including funds managed by Lion Capital LLP, an affiliate of Sponsor, immediately following the Domestication, an aggregate of 10,000,000 shares of New DMS Class A Common Stock for $10.00 per share, which will generate aggregate proceeds of $100.0 million (the “PIPE Investment”). The closing of the PIPE Investment is contingent upon, among other things, the substantially concurrent consummation of the Business Combination.

You will also be asked to consider and vote upon (a) six separate proposals to approve material differences between Leo’s existing amended and restated memorandum and articles of association (the “Existing Organizational Documents”) and the proposed new certificate of incorporation of New DMS (“Proposed Certificate of Incorporation”) and the proposed new bylaws of New DMS upon the Domestication, which are referred to herein as the “Organizational Documents Proposals,” (b) a proposal to approve for purposes of complying with applicable provisions of NYSE Listing Rule 312.03, the issuance of New DMS Class A Common Stock in the PIPE Investment and the issuance of the Seller Warrants, New DMS Class B Common Stock, including the New DMS Class A Common Stock into which the DMS Units are redeemable in accordance with the Amended Partnership Agreement, and New DMS Class C Common Stock, including the New DMS Class A Common Stock into which the New DMS Class C Common Stock is convertible in accordance with the Proposed Certificate of Incorporation, to the Sellers to the extent such issuance would require a shareholder vote under NYSE Listing Rule 312.03, which is referred to herein as the “Security Issuance Proposal,” (c) a proposal to approve and adopt the Digital Media Solutions, Inc. 2020 Omnibus Incentive Plan, a copy of which is attached to the accompanying proxy statement/prospectus as Annex E, which is referred to herein as the “Incentive Award Plan Proposal,” (d) a proposal to appoint Robbie Isenberg, James Miller, Fernando Borghese and Mary Minnick to the New DMS Board as of the Closing in accordance with Section 9.14(g) of the Business Combination Agreement, which is referred to herein as the “Seller Nominee Appointment Proposal” and (e) a proposal to approve by ordinary resolution the adjournment of the extraordinary general meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for the approval of one or more proposals at the extraordinary general meeting, which is referred to herein as the “Adjournment Proposal.”

The Business Combination will be consummated only if the BCA Proposal, the Domestication Proposal, certain of the Organizational Documents Proposals (the “Required Organizational Documents Proposals”) and, the Security Issuance Proposal (collectively, the “Condition Precedent Proposals”) are approved at the extraordinary general meeting. Each of the Condition Precedent Proposals is cross-conditioned on the approval of each other. The Organizational Documents Proposals that are not Required Organizational Documents Proposals, the Seller Nominee Appointment Proposal and the Incentive Award Plan Proposal, are conditioned on the approval of the Condition Precedent Proposals. The Adjournment Proposal is not conditioned upon the approval of any other proposal. Each of these proposals is more fully described in the accompanying proxy statement/prospectus, which each shareholder is encouraged to read carefully and in its entirety.

Concurrent with the execution of the Business Combination Agreement, Sponsor, Leo and certain holders of Class B ordinary shares of Leo entered into the Surrender Agreement, pursuant to which (a) the Surrender will be effectuated in connection with the consummation of the Business Combination and (b) Sponsor and the other holders party thereto agreed to waive any adjustment to the conversion ratio set forth in the Existing Organizational Documents or any other anti-dilution or similar protection with respect to the Class B ordinary shares of Leo held by them that may result from the PIPE Investment and the transactions contemplated by the Business Combination Agreement, in each case on the terms and conditions set forth in the Surrender Agreement. For further details, see “BCA Proposal—Related Agreements

In connection with the Business Combination, certain related agreements have been, or will be entered into on or prior to the Closing, including the Amended Partnership Agreement, Tax Receivable Agreement, Director Nomination Agreement, Amended and Restated Registration Rights Agreement and Lock-Up Agreement (each as defined in the accompanying proxy statement/prospectus). See “BCA Proposal—Related Agreements” in the accompanying proxy statement/prospectus for more information.


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Pursuant to the Existing Organizational Documents, a holder of Leo’s public shares (a “public shareholder”) may request that Leo redeem all or a portion of such public shares for cash if the Business Combination is consummated. Holders of units must elect to separate the units into the underlying public shares and warrants prior to exercising redemption rights with respect to the public shares. If holders hold their units in an account at a brokerage firm or bank, holders must notify their broker or bank that they elect to separate the units into the underlying public shares and warrants, or if a holder holds units registered in its own name, the holder must contact Continental Stock Transfer & Trust Company (“Continental”), Leo’s transfer agent, directly and instruct it to do so. The redemption rights include the requirement that a holder must identify itself in writing as a beneficial holder and provide its legal name, phone number and address to Continental in order to validly redeem its shares. Public shareholders may elect to redeem their public shares even if they vote “for” the BCA Proposal. If the Business Combination is not consummated, the public shares will be returned to the respective holder, broker or bank. If the Business Combination is consummated, and if a public shareholder properly exercises its right to redeem all or a portion of the public shares that it holds and timely delivers its shares to Continental, New DMS will redeem such public shares for a per-share price, payable in cash, equal to the pro rata portion of the trust account established at the consummation of our initial public offering, calculated as of two business days prior to the consummation of the Business Combination. For illustrative purposes, as of                , 2020, this would have amounted to approximately $                per issued and outstanding public share. If a public shareholder exercises its redemption rights in full, then it will be electing to exchange its public shares for cash and will no longer own public shares. The redemption will take place following the Domestication and accordingly it is shares of New DMS Class A Common Stock that will be redeemed immediately after consummation of the Business Combination. See “Extraordinary General Meeting of Leo— Redemption Rights” in the accompanying proxy statement/prospectus for a detailed description of the procedures to be followed if you wish to redeem your public shares for cash.

Notwithstanding the foregoing, a public shareholder, together with any affiliate of such public shareholder or any other person with whom such public shareholder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)), will be restricted from redeeming its public shares with respect to more than an aggregate of 15% of the public shares. Accordingly, if a public shareholder, alone or acting in concert or as a group, seeks to redeem more than 15% of the public shares, then any such shares in excess of that 15% limit would not be redeemed for cash.

The holders of Class B ordinary shares (the “Class B Shareholders”) have agreed to vote all of their ordinary shares in favor of the proposals being presented at the extraordinary general meeting and waive their redemption rights with respect to such ordinary shares in connection with the consummation of the Business Combination. The Class B ordinary shares will be excluded from the pro rata calculation used to determine the per-share redemption price. As of the date of this proxy statement/prospectus, the Class B Shareholders own 20.0% of the issued and outstanding ordinary shares.

The Business Combination Agreement is subject to the satisfaction or waiver of certain other closing conditions as described in the accompanying proxy statement/prospectus. There can be no assurance that the parties to the Business Combination Agreement would waive any such provision of the Business Combination Agreement. In addition, in no event will Leo redeem public shares in an amount that would cause New DMS’s net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) to be less than $5,000,001.

Leo is providing the accompanying proxy statement/prospectus and accompanying proxy card to Leo’s shareholders in connection with the solicitation of proxies to be voted at the extraordinary general meeting and at any adjournments of the extraordinary general meeting. Information about the extraordinary general meeting, the Business Combination and other related business to be considered by Leo’s shareholders at the extraordinary general meeting is included in the accompanying proxy statement/prospectus. Whether or not you plan to attend the extraordinary general meeting, all of Leo’s shareholders are urged to read the accompanying proxy statement/prospectus, including the Annexes and other documents referred to therein, carefully and in their entirety. You should also carefully consider the risk factors described in “Risk Factors” beginning on page 39 of the accompanying proxy statement/prospectus.


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After careful consideration, the board of directors of Leo has unanimously approved the Business Combination and unanimously recommends that shareholders vote “FOR” the adoption of the Business Combination Agreement and approval of the transactions contemplated thereby, including the Business Combination, and “FOR” all other proposals presented to Leo’s shareholders in the accompanying proxy statement/prospectus. When you consider the recommendation of these proposals by the board of directors of Leo, you should keep in mind that Leo’s directors and officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “BCA Proposal—Interests of Leo’s Directors and Executive Officers in the Business Combination” in the accompanying proxy statement/prospectus for a further discussion of these considerations.

The approval of each of the Domestication Proposal and Organizational Documents Proposals requires a special resolution under Cayman Islands law, being the affirmative vote of holders of at least two-thirds of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting. The approval of each of the BCA Proposal, Incentive Award Plan Proposal, the Security Issuance Proposal, the Seller Nominee Appointment Proposal. and the Adjournment Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of a majority of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting.

Your vote is very important. Whether or not you plan to attend the extraordinary general meeting, please vote as soon as possible by following the instructions in the accompanying proxy statement/prospectus to make sure that your shares are represented at the extraordinary general meeting. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the extraordinary general meeting. The Business Combination will be consummated only if the Condition Precedent Proposals are approved at the extraordinary general meeting. Each of the Condition Precedent Proposals is cross-conditioned on the approval of each other. The Organizational Documents Proposals that are not Required Organizational Documents Proposals, the Seller Nominee Appointment Proposal and the Incentive Award Plan Proposal, are conditioned on the approval of the Condition Precedent Proposals. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in the accompanying proxy statement/prospectus.

If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted FOR each of the proposals presented at the extraordinary general meeting. If you fail to return your proxy card or fail to instruct your bank, broker or other nominee how to vote, and do not attend the extraordinary general meeting in person, the effect will be, among other things, that your shares will not be counted for purposes of determining whether a quorum is present at the extraordinary general meeting. If you are a shareholder of record and you attend the extraordinary general meeting and wish to vote in person, you may withdraw your proxy and vote in person.

TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST DEMAND IN WRITING THAT YOUR PUBLIC SHARES ARE REDEEMED FOR A PRO RATA PORTION OF THE FUNDS HELD IN THE TRUST ACCOUNT AND TENDER YOUR SHARES TO LEO’S TRANSFER AGENT AT LEAST TWO BUSINESS DAYS PRIOR TO THE VOTE AT THE EXTRAORDINARY GENERAL MEETING. IN ORDER TO EXERCISE YOUR REDEMPTION RIGHT YOU NEED TO IDENTIFY YOURSELF AS A BENEFICIAL HOLDER AND PROVIDE YOUR LEGAL NAME, PHONE NUMBER AND ADDRESS IN YOUR WRITTEN DEMAND. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR SHARE CERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT WITHDRAWAL AT CUSTODIAN) SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL BE RETURNED TO YOU OR YOUR ACCOUNT. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS.


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On behalf of Leo’s board of directors, I would like to thank you for your support and look forward to the successful completion of the Business Combination.

 

Sincerely,
Lyndon Lea
Chairman and Chief Executive Officer

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.

The accompanying proxy statement/prospectus is dated                 , 2020 and is first being mailed to shareholders on or about                , 2020.


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LEO HOLDINGS CORP.

A CAYMAN ISLANDS EXEMPTED COMPANY

(COMPANY NUMBER 329879)

21 GROSVENOR PLACE

LONDON SW1X 7HF, UNITED KINGDOM

NOTICE OF EXTRAORDINARY GENERAL MEETING

TO BE HELD ON                     , 2020

TO THE SHAREHOLDERS OF LEO HOLDINGS CORP.:

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of the shareholders (the “extraordinary general meeting”) of Leo Holdings Corp., a Cayman Islands exempted company (“Leo”), will be held at 9:00 a.m., Eastern Time, on                      , 2020, at the offices of Kirkland & Ellis LLP located at 601 Lexington Avenue, New York, New York 10022.* You are cordially invited to attend the extraordinary general meeting, which will be held for the following purposes:

 

   

Proposal No. 1—The BCA Proposal—to consider and vote upon a proposal to approve by ordinary resolution and adopt the Business Combination Agreement, dated as of April 23, 2020 and as hereafter amended, by and among Leo, Digital Media Solutions Holdings, LLC (“DMS”), CEP V DMS US Blocker Company, a Delaware corporation (“Blocker Corp”), Prism Data, LLC, a Delaware limited liability company (“Prism”), CEP V-A DMS AIV Limited Partnership, a Delaware limited partnership (“Clairvest Direct Seller”), Clairvest Equity Partners V Limited Partnership, an Ontario, Canada limited partnership (“Blocker Seller 1”), CEP V Co-Investment Limited Partnership, a Manitoba, Canada limited partnership (“Blocker Seller 2,” and together with Prism, Clairvest Direct Seller and Blocker Seller 1, the “Sellers”), Clairvest GP Manageco Inc., an Ontario corporation (“Clairvest GP”) as a Seller Representative, and, solely for the limited purposes set forth therein, Leo Investors Limited Partnership, a Cayman Islands exempted limited partnership (“Sponsor”) (the “Business Combination Agreement”) (a copy of which is attached to this proxy statement/prospectus as Annex A), pursuant to which, among other things, following the Domestication of Leo to Delaware as described below, Leo will purchase all of the outstanding stock of Blocker Corp and a portion of the units of DMS held by Prism and Clairvest Direct Seller, which units Leo will immediately contribute to the capital of Blocker Corp, in exchange for a combination of (a) cash consideration, (b) 2,000,000 private placement warrants (the “Seller Warrants”), (c) shares of Class B common stock, par value $0.0001 per share, of New DMS (the “New DMS Class B Common Stock”), which will have no economic value but will entitle the holder thereof to one vote per share, and (d) shares of Class C common stock, par value $0.0001 per share, of New DMS (the “New DMS Class C Common Stock”), which are convertible into shares of Class A common stock, par value $0.0001 per share, of New DMS (the “New DMS Class A Common Stock”) pursuant to a conversion ratio to be determined at the closing of the Business Combination (as defined below), certain related agreements (including the Subscription Agreements, the Amended Partnership Agreement, the Tax Receivable Agreement and the Surrender Agreement, each as defined in this proxy statement/prospectus) and the transactions contemplated thereby (this proposal is referred to herein as the “BCA Proposal”);

 

   

Proposal No. 2—The Domestication Proposal—to consider and vote upon a proposal to approve by special resolution the change of Leo’s jurisdiction of incorporation by deregistering as an exempted

 

* 

We intend to hold the extraordinary general meeting in person. However, we are sensitive to the public health and travel concerns our shareholders may have and recommendations that public health officials may issue in light of the evolving coronavirus (COVID-19) situation. As a result, we may impose additional procedures or limitations on meeting attendees or may decide to hold the meeting in a different location or solely by means of remote communication (i.e., a virtual-only meeting). We plan to announce any such updates in a press release filed with the Securities and Exchange Commission and on our proxy website                     , and we encourage you to check this website prior to the meeting if you plan to attend.


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company in the Cayman Islands and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware (the “Domestication,” and together with the other transactions contemplated by the Business Combination Agreement, the “Business Combination”) (this proposal is referred to herein as the “Domestication Proposal”);

 

   

Organizational Documents Proposals—to consider and vote upon the following six separate proposals (collectively, the “Organizational Documents Proposals”) to approve by special resolution the following material differences between the current amended and restated memorandum and articles of association of Leo (the “Existing Organizational Documents”) and the proposed new certificate of incorporation (“Proposed Certificate of Incorporation”) and the proposed new bylaws (“Proposed Bylaws”) of Leo Holdings Corp. (a corporation incorporated in the State of Delaware, assuming the Domestication Proposal is approved and adopted, and the filing with and acceptance by the Secretary of State of Delaware of the certificate of domestication in accordance with Section 388 of the Delaware General Corporation Law (the “DGCL”)), which will be renamed “Digital Media Solutions, Inc.” in connection with the Domestication (Leo after the Domestication is referred to herein as “New DMS”):

 

  (A)

Proposal No. 3—Organizational Documents Proposal A—to authorize the change in the authorized capital stock of Leo from (i) 200,000,000 Class A ordinary shares, par value $0.0001 per share (the “public shares”), 20,000,000 Class B ordinary shares, par value $0.0001 per share (the “Class B ordinary shares” and, together with the Class A ordinary shares, the “ordinary shares”) and 1,000,000 preferred shares, par value $0.0001 per share, to (ii) 600,000,000 shares of common stock, par value $0.0001 per share, of New DMS, consisting of (a)                      shares of New DMS Class A Common Stock, (b)                      shares of New DMS Class B Common Stock, (c)                      shares of New DMS Class C Common Stock, and (d) 100,000,000 shares of preferred stock, par value $0.0001 per share, of New DMS (“New DMS Preferred Stock”) (this proposal is referred to herein as “Organizational Documents Proposal A”);

 

  (B)

Proposal No. 4—Organizational Documents Proposal B—to authorize the board of directors of New DMS to issue any or all shares of New DMS Preferred Stock in one or more classes or series, with such terms and conditions as may be expressly determined by New DMS’s board of directors and as may be permitted by the DGCL (this proposal is referred to herein as “Organizational Documents Proposal B”);

 

  (C)

Proposal No. 5—Organizational Documents Proposal C—to provide that certain provisions of the certificate of incorporation of New DMS are subject to the Director Nomination Agreement (this proposal is referred to herein as “Organizational Documents Proposal C”);

 

  (D)

Proposal No. 6—Organizational Documents Proposal D—to authorize the removal of the ability of New DMS stockholders to take action by written consent in lieu of a meeting, from and after the first date that Prism, Clairvest and any of their respective affiliates cease to collectively own, in the aggregate, at least fifty percent (50%) of the outstanding voting stock of New DMS (this proposal is referred to herein as “Organizational Documents Proposal D”);

 

  (E)

Proposal No. 7—Organizational Documents Proposal E—to authorize the grant of an explicit waiver regarding corporate opportunities to New DMS and its directors (this proposal is referred to herein as “Organizational Documents Proposal E” and, together with Organization Documents Proposal A, the “Required Organizational Documents Proposals”);

 

  (E)

Proposal No. 8—Organizational Documents Proposal F—to authorize all other changes in connection with the replacement of Existing Organizational Documents with the Proposed Certificate of Incorporation and Proposed Bylaws as part of the Domestication (copies of which are attached to this proxy statement/prospectus as Annex C and Annex D, respectively), including (1) changing the post-Business Combination corporate name from “Leo Holdings Corp.” to “Digital Media Solutions, Inc.” (which is expected to occur upon the Domestication), (2) making New DMS’s corporate existence perpetual, (3) adopting Delaware as the exclusive forum for certain stockholder litigation, (4) electing to not be governed by Section 203 of the DGCL and limiting certain corporate takeovers by interested stockholders and (5) removing certain provisions related to our status as a blank check company that will no longer be applicable upon consummation of the Business Combination, all of


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  which Leo’s board of directors believes is necessary to adequately address the needs of New DMS after the Business Combination;

 

   

Proposal No. 9—The Security Issuance Proposal—to consider and vote upon a proposal to approve by ordinary resolution for the purposes of complying with the applicable provisions of NYSE Listing Rule 312.03, the issuance of shares of New DMS Class A Common Stock to certain private placement investors, including an affiliate of Sponsor, and the issuance of the Seller Warrants, New DMS Class B Common Stock, including the New DMS Class A Common Stock into which the DMS Units are redeemable in accordance with the Amended Partnership Agreement, and New DMS Class C Common Stock, including the New DMS Class A Common Stock into which the New DMS Class C Common Stock is convertible in accordance with the Proposed Certificate of Incorporation, to the Sellers, and the issuance of to the extent such issuance would require a shareholder vote under NYSE Listing Rule 312.03 (this proposal is referred to herein as the “Security Issuance Proposal” and, collectively with the BCA Proposal, the Domestication Proposal and the Required Organizational Documents Proposals, the “Condition Precedent Proposals”);

 

   

Proposal No. 10—The Seller Nominee Appointment Proposal—to consider and vote upon a proposal to approve by ordinary resolution the appointment of Robbie Isenberg, James Miller, Fernando Borghese and Mary Minnick to the board of directors of New DMS as of the closing of the transactions contemplated by the Business Combination Agreement in accordance with Section 9.14(g) of the Business Combination Agreement (this proposal is referred to herein as the “Seller Nominee Appointment Proposal”);

 

   

Proposal No. 11—The Incentive Award Plan Proposal—to consider and vote upon a proposal to approve by ordinary resolution the Digital Media Solutions, Inc. 2020 Omnibus Incentive Plan, a copy of which is attached to this proxy statement/prospectus as Annex E (this proposal is referred to herein as the “Incentive Award Plan Proposal”); and

 

   

Proposal No. 12—The Adjournment Proposal—to consider and vote upon a proposal to approve by ordinary resolution the adjournment of the extraordinary general meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for the approval of one or more proposals at the extraordinary general meeting (this proposal is referred to herein as the “Adjournment Proposal” and together with the BCA Proposal, the Domestication Proposal, the Organizational Documents Proposals, the Security Issuance Proposal, the Seller Nominee Appointment Proposal and the Incentive Award Plan Proposal, the “Proxy Proposals”).

Each of the BCA Proposal, the Domestication Proposal, the Required Organizational Documents Proposals and the Security Issuance Proposal is conditioned on the approval and adoption of each of the other Condition Precedent Proposals. The Organizational Documents Proposals that are not Required Organizational Documents Proposals, the Seller Nominee Appointment Proposal and the Incentive Award Plan Proposal, are conditioned on the approval of the Condition Precedent Proposals. The Adjournment Proposal is not conditioned on any other proposal.

These items of business are described in this proxy statement/prospectus, which we encourage you to read carefully and in its entirety before voting.

Only holders of record of ordinary shares at the close of business on                , 2020 are entitled to notice of and to vote and have their votes counted at the extraordinary general meeting and any adjournment of the extraordinary general meeting.

This proxy statement/prospectus and accompanying proxy card is being provided to Leo’s shareholders in connection with the solicitation of proxies to be voted at the extraordinary general meeting and at any adjournment of the extraordinary general meeting. Whether or not you plan to attend the extraordinary general meeting, all of Leo’s shareholders are urged to read this proxy statement/prospectus, including the Annexes and the documents referred to herein carefully and in their entirety. You should also carefully consider the risk factors described in “Risk Factors” beginning on page 39 of this proxy statement/prospectus.


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After careful consideration, the board of directors of Leo has unanimously approved the Business Combination and unanimously recommends that shareholders vote “FOR” the adoption of the Business Combination Agreement and approval of the transactions contemplated thereby, including the Business Combination, and “FOR” all other proposals presented to Leo’s shareholders in this proxy statement/prospectus. When you consider the recommendation of these proposals by the board of directors of Leo, you should keep in mind that Leo’s directors and officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “BCA Proposal—Interests of Leo’s Directors and Executive Officers in the Business Combination” in this proxy statement/prospectus for a further discussion of these considerations.

Pursuant to the Existing Organizational Documents, a holder of public shares (a “public shareholder”) may request of Leo that New DMS redeem all or a portion of its public shares for cash if the Business Combination is consummated. As a holder of public shares, you will be entitled to receive cash for any public shares to be redeemed only if you:

 

  (i)

(a) hold public shares, or (b) if you hold public shares through units, you elect to separate your units into the underlying public shares and warrants prior to exercising your redemption rights with respect to the public shares;

 

  (ii)

submit a written request to Continental Stock Transfer & Trust Company (“Continental”), Leo’s transfer agent, in which you (i) request that New DMS redeem all or a portion of your public shares for cash, and (ii) identify yourself as the beneficial holder of the public shares and provide your legal name, phone number and address; and

 

  (iii)

deliver your public shares to Continental, Leo’s transfer agent, physically or electronically through The Depository Trust Company.

Holders must complete the procedures for electing to redeem their public shares in the manner described above prior to 5:00 p.m., Eastern Time, on                 , 2020 (two business days before the extraordinary general meeting) in order for their shares to be redeemed.

Holders of units must elect to separate the units into the underlying public shares and warrants prior to exercising redemption rights with respect to the public shares. If holders hold their units in an account at a brokerage firm or bank, holders must notify their broker or bank that they elect to separate the units into the underlying public shares and warrants, or if a holder holds units registered in its own name, the holder must contact Continental, Leo’s transfer agent, directly and instruct them to do so. The redemption rights include the requirement that a holder must identify itself in writing as a beneficial holder and provide its legal name, phone number and address to Continental in order to validly redeem its shares. Public shareholders may elect to redeem public shares regardless of if or how they vote in respect of the BCA Proposal. If the Business Combination is not consummated, the public shares will be returned to the respective holder, broker or bank. If the Business Combination is consummated, and if a public shareholder properly exercises its right to redeem all or a portion of the public shares that it holds and timely delivers its shares to Continental, Leo’s transfer agent, New DMS will redeem such public shares for a per-share price, payable in cash, equal to the pro rata portion of the trust account established at the consummation of our initial public offering (the “trust account”), calculated as of two business days prior to the consummation of the Business Combination. For illustrative purposes, as of                 , 2020, this would have amounted to approximately $             per issued and outstanding public share. If a public shareholder exercises its redemption rights in full, then it will be electing to exchange its public shares for cash and will no longer own public shares. The redemption will take place following the Domestication and accordingly it is shares of New DMS Class A Common Stock that will be redeemed immediately after consummation of the Business Combination. See “Extraordinary General Meeting of Leo—Redemption Rights” in this proxy statement/prospectus for a detailed description of the procedures to be followed if you wish to redeem your public shares for cash.

Notwithstanding the foregoing, a public shareholder, together with any affiliate of such public shareholder or any other person with whom such public shareholder is acting in concert or as a “group” (as defined in


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Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)), will be restricted from redeeming its public shares with respect to more than an aggregate of 15% of the public shares. Accordingly, if a public shareholder, alone or acting in concert or as a group, seeks to redeem more than 15% of the public shares, then any such shares in excess of that 15% limit would not be redeemed for cash.

The Class B Shareholders have agreed to vote all of their ordinary shares in favor of the proposals being presented at the extraordinary general meeting and waive their redemption rights with respect to such ordinary shares in connection with the consummation of the Business Combination. The Class B ordinary shares will be excluded from the pro rata calculation used to determine the per-share redemption price. As of the date of this proxy statement/prospectus, the Class B Shareholders own 20.0% of the issued and outstanding ordinary shares.

The Business Combination Agreement is subject to the satisfaction or waiver of certain other closing conditions as described in the accompanying proxy statement/prospectus. There can be no assurance that the parties to the Business Combination Agreement would waive any such provision of the Business Combination Agreement. In addition, in no event will Leo redeem public shares in an amount that would cause New DMS’s net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) to be less than $5,000,001.

The approval of each of the Domestication Proposal and the Organizational Documents Proposals requires a special resolution under Cayman Islands law, being the affirmative vote of holders of at least two-thirds of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting. The approval of each of the BCA Proposal, the Incentive Award Plan Proposal, the Security Issuance Proposal, the Seller Nominee Appointment Proposal. and the Adjournment Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of a majority of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting.

Your vote is very important. Whether or not you plan to attend the extraordinary general meeting, please vote as soon as possible by following the instructions in this proxy statement/prospectus to make sure that your shares are represented at the extraordinary general meeting. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the extraordinary general meeting. The Business Combination will be consummated only if the Condition Precedent Proposals are approved at the extraordinary general meeting. Each of the Condition Precedent Proposals is cross-conditioned on the approval of each other. The Organizational Documents Proposals that are not Required Organizational Documents Proposals, the Seller Nominee Appointment Proposal and the Incentive Award Plan Proposal, are conditioned on the approval of the Condition Precedent Proposals. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus.

If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted FOR each of the proposals presented at the extraordinary general meeting. If you fail to return your proxy card or fail to instruct your bank, broker or other nominee how to vote, and do not attend the extraordinary general meeting in person, the effect will be, among other things, that your shares will not be counted for purposes of determining whether a quorum is present at the extraordinary general meeting. If you are a shareholder of record and you attend the extraordinary general meeting and wish to vote in person, you may withdraw your proxy and vote in person.

Your attention is directed to the remainder of the proxy statement/prospectus following this notice (including the Annexes and other documents referred to herein) for a more complete description of the proposed Business Combination and related transactions and each of the proposals. You are encouraged to read this proxy statement/prospectus carefully and in its entirety, including the Annexes and other documents referred to herein. If you have any questions or need assistance voting your ordinary shares, please contact Morrow Sodali LLC, our proxy solicitor, by calling (800) 662-5200, or banks and brokers can call collect at (203) 658-9400, or by emailing LHC.info@investor.morrowsodali.com.


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Thank you for your participation. We look forward to your continued support.

By Order of the Board of Directors of Leo Holdings Corp.,

 

            
  Lyndon Lea
  Chairman and Chief Executive Officer

TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST DEMAND IN WRITING THAT YOUR PUBLIC SHARES ARE REDEEMED FOR A PRO RATA PORTION OF THE FUNDS HELD IN THE TRUST ACCOUNT AND TENDER YOUR SHARES TO LEO’S TRANSFER AGENT AT LEAST TWO BUSINESS DAYS PRIOR TO THE VOTE AT THE EXTRAORDINARY GENERAL MEETING. IN ORDER TO EXERCISE YOUR REDEMPTION RIGHT YOU NEED TO IDENTIFY YOURSELF AS A BENEFICIAL HOLDER AND PROVIDE YOUR LEGAL NAME, PHONE NUMBER AND ADDRESS IN YOUR WRITTEN DEMAND. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR SHARE CERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT WITHDRAWAL AT CUSTODIAN) SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL BE RETURNED TO YOU OR YOUR ACCOUNT. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS.


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TABLE OF CONTENTS

 

     Page  

ADDITIONAL INFORMATION

     i  

TRADEMARKS

     i  

SELECTED DEFINITIONS

     ii  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     vi  

NON-GAAP FINANCIAL MEASURES

     ix  

QUESTIONS AND ANSWERS FOR SHAREHOLDERS OF LEO

     xii  

SUMMARY OF THE PROXY STATEMENT/PROSPECTUS

     1  

RISK FACTORS

     39  

EXTRAORDINARY GENERAL MEETING OF LEO

     86  

BCA PROPOSAL

     94  

DOMESTICATION PROPOSAL

     134  

ORGANIZATIONAL DOCUMENTS PROPOSALS

     137  

ORGANIZATIONAL DOCUMENTS PROPOSAL A—APPROVAL OF AUTHORIZATION OF CHANGE TO AUTHORIZED CAPITAL STOCK, AS SET FORTH IN THE PROPOSED ORGANIZATIONAL DOCUMENTS

     141  

ORGANIZATIONAL DOCUMENTS PROPOSAL B—APPROVAL OF PROPOSAL REGARDING ISSUANCE OF PREFERRED STOCK OF NEW DMS AT THE BOARD OF DIRECTORS’ SOLE DISCRETION, AS SET FORTH IN THE PROPOSED ORGANIZATIONAL DOCUMENTS

     143  

ORGANIZATIONAL DOCUMENTS PROPOSAL C—APPROVAL OF PROPOSAL REGARDING CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION BEING SUBJECT TO THE DIRECTOR NOMINATION AGREEMENT

     145  

ORGANIZATIONAL DOCUMENTS PROPOSAL D—APPROVAL OF PROPOSAL REGARDING THE ABILITY OF STOCKHOLDERS TO ACT BY WRITTEN CONSENT, AS SET FORTH IN THE PROPOSED ORGANIZATIONAL DOCUMENTS

     146  

ORGANIZATIONAL DOCUMENTS PROPOSAL E—APPROVAL OF PROPOSAL REGARDING THE GRANT OF AN EXPLICIT WAIVER OF CORPORATE OPPORTUNITIES

     148  

ORGANIZATIONAL DOCUMENTS PROPOSAL F—APPROVAL OF OTHER CHANGES IN CONNECTION WITH ADOPTION OF THE PROPOSED ORGANIZATIONAL DOCUMENTS

     149  

SECURITY ISSUANCE PROPOSAL

     153  

SELLER NOMINEE APPOINTMENT PROPOSAL

     155  

INCENTIVE AWARD PLAN PROPOSAL

     157  

ADJOURNMENT PROPOSAL

     166  

U.S. FEDERAL INCOME TAX CONSIDERATIONS

     167  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     177  

INFORMATION ABOUT LEO

     190  

LEO’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     208  

INFORMATION ABOUT DMS

     214  

DMS’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     226  

EXECUTIVE AND DIRECTOR COMPENSATION

     243  

MANAGEMENT OF NEW DMS FOLLOWING THE BUSINESS COMBINATION

     245  

BENEFICIAL OWNERSHIP OF SECURITIES

     249  

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

     255  

COMPARISON OF CORPORATE GOVERNANCE AND SHAREHOLDER RIGHTS

     259  

DESCRIPTION OF NEW DMS SECURITIES

     261  

SECURITIES ACT RESTRICTIONS ON RESALE OF NEW DMS CLASS A COMMON STOCK

     274  

STOCKHOLDER PROPOSALS AND NOMINATIONS

     275  

SHAREHOLDER COMMUNICATIONS

     275  

LEGAL MATTERS

     276  

EXPERTS

     276  


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ADDITIONAL INFORMATION

You may request copies of this proxy statement/prospectus and any other publicly available information concerning Leo, without charge, by written request to our General Counsel at Leo Holdings Corp., 21 Grosvenor Place, London SW1X 7HF, United Kingdom, or by telephone request at +44 20 7201 2200; or Morrow Sodali LLC, our proxy solicitor, by calling (800) 662-5200, or banks and brokers can call collect at (203) 658-9400, or by emailing LHC.info@investor.morrowsodali.com, or from the SEC through the SEC website at the address provided above.

In order for Leo’s shareholders to receive timely delivery of the documents in advance of the extraordinary general meeting of Leo to be held on                     , 2020, you must request the information no later than five business days prior to the date of the extraordinary general meeting, by                    , 2020.

TRADEMARKS

This document contains references to trademarks and service marks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this proxy statement/prospectus may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

 

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SELECTED DEFINITIONS

Unless otherwise stated in this proxy statement/prospectus or the context otherwise requires, references to:

 

   

“Amended and Restated Registration Rights Agreement” are to the amended and restated registration rights agreement to be entered into by New DMS, Prism, Clairvest Direct Seller, Blocker Seller 1, Blocker Seller 2, Sponsor PIPE Entity and the holders of ordinary shares of Leo who are parties to the existing registration rights agreement in respect to ordinary shares held by such holders at the Closing;

 

   

“Amended and Restated Warrant Agreement” are to the amended and restated warrant agreement to be entered into by New DMS and Continental at the Closing;

 

   

“Blocker Corp” are to CEP V DMS US Blocker Company, a Delaware corporation;

 

   

“Blocker Seller 1” are to Clairvest Equity Partners V Limited Partnership, an Ontario, Canada limited partnership;

 

   

“Blocker Seller 2” are to CEP V Co-Investment Limited Partnership, a Manitoba, Canada limited partnership;

 

   

“Blocker Sellers” are to Blocker Seller 1 and Blocker Seller 2;

 

   

“Business Combination” are to the Domestication, the Equity Purchase and other transactions contemplated by the Business Combination Agreement, collectively;

 

   

“Business Combination Consideration” are to a combination of cash consideration, the Seller Warrants, shares of New DMS Class B Common Stock and shares of New DMS Class C Common Stock;

 

   

“Cayman Islands Companies Law” are to the Companies Law (2020 Revision) of the Cayman Islands;

 

   

“Clairvest” are to Clairvest Group Inc., an Ontario corporation;

 

   

“Clairvest Direct Seller” are to CEP V-A DMS AIV Limited Partnership, a Delaware limited partnership;

 

   

“Clairvest GP” are to Clairvest GP Manageco Inc., an Ontario corporation;

 

   

“Class A ordinary shares” are to the Class A ordinary shares, par value $0.0001 per share, of Leo;

 

   

“Class B ordinary shares” or “founder shares” are to the 5,000,000 Class B ordinary shares, par value $0.0001 per share, of Leo (of which 1,500,000 Class B ordinary shares shall be surrendered and forfeited pursuant to the Surrender Agreement described in this proxy statement/prospectus);

 

   

“Class B Shareholders” are to Sponsor and the Leo independent directors;

 

   

“Closing” are to the closing of the Business Combination;

 

   

“company,” “we,” “us” and “our” are to Leo prior to its domestication as a corporation in the State of Delaware and to New DMS upon and after Leo’s domestication as a corporation incorporated in the State of Delaware;

 

   

“Condition Precedent Proposals” are to the BCA Proposal, the Domestication Proposal, the Required Organizational Documents Proposals and Security Issuance Proposal, collectively;

 

   

“Continental” are to Continental Stock Transfer & Trust Company;

 

   

“Converted Founder Shares” are to the shares of New DMS Class A Common Stock issued as a matter of law upon the conversion of the Class B ordinary shares at the time of the Domestication;

 

   

“Director Nomination Agreement” are to the director nomination agreement to be entered into by New DMS, Sponsor, Sponsor PIPE Entity, Clairvest Group Inc. and Prism at the Closing;

 

   

“DMS” are to Digital Media Solutions Holdings, LLC, a Delaware limited liability company, and its subsidiaries;

 

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“Domestication” are to the domestication of Leo Holdings Corp. as a corporation incorporated in the State of Delaware;

 

   

“Equity Purchase” are to the purchase of all outstanding stock of Blocker Corp and a portion of the units of DMS held by Prism and Clairvest Direct Seller pursuant to the Business Combination Agreement in exchange for the Business Combination Consideration;

 

   

“Existing Organizational Documents” are to the amended and restated memorandum and articles of association of Leo, dated February 14, 2018;

 

   

“initial public offering” are to Leo’s initial public offering that was consummated on February 15, 2018;

 

   

“IPO registration statement” are to the Registration Statement on Form S-1 (333-222599) filed by Leo in connection with its initial public offering and declared effective by the SEC on February 12, 2018;

 

   

“Leo” are to Leo Holdings Corp. prior to the Domestication;

 

   

“Leo independent directors” are to Mss. Bush and Minnick, and Mr. Bensoussan;

 

   

“Lion Capital” are to Lion Capital, LLP, an affiliate of Sponsor;

 

   

“Lock-Up Agreement” are to the lock-up agreement to be entered into by New DMS and the Sellers at the Closing;

 

   

“New DMS” are to Digital Media Solutions, Inc. (f.k.a. Leo Holdings Corp.) upon and after the Business Combination;

 

   

“New DMS Board” are to the board of directors of New DMS;

 

   

“New DMS Class A Common Stock” are to the Class A common stock, par value $0.0001 per share, of New DMS;

 

   

“New DMS Class B Common Stock” are to the Class B common stock, par value $0.0001 per share, of New DMS, which will have no economic value but will entitle the holder thereof to one vote per share;

 

   

“New DMS Class C Common Stock” are to the Class C common stock, par value $0.0001 per share, of New DMS, which are convertible into shares of New DMS Class A Common Stock;

 

   

“New DMS Common Stock” are collectively to New DMS Class A Common Stock, New DMS Class B Common Stock and New DMS Class C Common Stock;

 

   

“New DMS public shares” are to the shares of New DMS Class A Common Stock issued as a matter of law upon the conversion at the time of the Domestication of the Class A ordinary shares that were offered and sold by Leo as part of units in its initial public offering and registered pursuant to the IPO registration statement and of the Class B ordinary shares;

 

   

“New DMS public warrants” are to the 10,000,000 warrants of New DMS issued as a matter of law upon the conversion at the time of the Domestication of the public warrants that were offered and sold by Leo as part of units in its initial public offering and registered pursuant to the IPO registration statement;

 

   

the outstanding New DMS Class A Common Stock “on an as-converted and as-redeemed basis” are to the number of shares of New DMS Class A Common Stock that would be outstanding as of immediately after the Closing assuming (i) all shares of New DMS Class C Common Stock were converted into shares of New DMS Class A Common Stock in accordance with the Proposed Certificate of Incorporation and (ii) all DMS Units held by Prism and Clairvest Direct Seller were acquired upon a Redemption by New DMS for shares of New DMS Class A Common Stock in accordance with the Amended Partnership Agreement;

 

   

“ordinary shares” are to the Class A ordinary shares and the Class B ordinary shares, collectively;

 

   

“Plan” are to the Digital Media Solutions, Inc. 2020 Omnibus Incentive Plan to be considered by the shareholders pursuant to the Incentive Award Plan Proposal;

 

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“PIPE Investment” are to the transactions contemplated by the Subscription Agreements, pursuant to which the PIPE Investors have collectively committed to subscribe for 10,000,0000 shares of New DMS Class A Common Stock for an aggregate purchase price equal to $100.0 million to be consummated substantially concurrently with the Closing;

 

   

“PIPE Investors” are to the qualified institutional buyers and accredited investors (including Sponsor PIPE Entity) that have committed to purchase New DMS Class A Common Stock in the PIPE Investment;

 

   

“Prism” are to Prism Data, LLC, a Delaware limited liability company;

 

   

“private placement warrants” are to the 4,000,000 private placement warrants outstanding as of the date of this proxy statement/prospectus (of which 2,000,000 private placement warrants shall be surrendered and forfeited pursuant to the Surrender Agreement described in this proxy statement/prospectus), which will be automatically converted by operation of law, on a one-for-one basis without giving effect to any rights of adjustment or other anti-dilution protections which adjustment and protections will have been waived by the holders of the Class B ordinary shares pursuant to the Surrender Agreement, into warrants to acquire shares of New DMS Class A Common Stock in the Domestication;

 

   

“pro forma” are to giving pro forma effect to the Business Combination;

 

   

“Proposed Bylaws” are to the proposed bylaws of New DMS to be effective upon the Domestication attached to this proxy statement/prospectus as Annex D;

 

   

“Proposed Certificate of Incorporation” are to the proposed certificate of incorporation of New DMS to be effective upon the Domestication attached to this proxy statement/prospectus as Annex C;

 

   

“Proposed Organizational Documents” are to the Proposed Certificate of Incorporation and the Proposed Bylaws;

 

   

“public shares” are to the currently outstanding 19,312,807 Class A ordinary shares that were offered and sold as part of units by Leo in its initial public offering and registered pursuant to the IPO registration statement and the New DMS public shares;

 

   

“public shareholders” are to holders of public shares, whether acquired in Leo’s initial public offering or acquired in the secondary market;

 

   

“public warrants” are to the 10,000,000 public warrants that were offered and sold as part of units by Leo in its initial public offering and registered pursuant to the IPO registration statement and the New DMS public warrants;

 

   

“redemption” are to each redemption of public shares for cash pursuant to the Existing Organizational Documents;

 

   

“SEC” are to the Securities and Exchange Commission;

 

   

“Sellers” are to Prism, Clairvest Direct Seller and Blocker Sellers;

 

   

“Seller Warrants” are to the 2,000,000 warrants issued to Sellers as part of the Business Combination Consideration and pursuant to the Amended and Restated Warrant Agreement;

 

   

“Surrender Agreement” are to the Sponsor Shares and Warrant Surrender Agreement, dated as of April 23, 2020, entered into by Leo, the Sponsor and the Leo independent directors;

 

   

“Sponsor” are to Leo Investors Limited Partnership, a Cayman Islands exempted limited partnership;

 

   

“Sponsor PIPE Entity” are to Lion Capital (Guernsey) Bridgeco Limited, a company organized under the laws of Guernsey;

 

   

“Subscription Agreements” are to the subscription agreements, entered into by Leo and each of the PIPE Investors in connection with the PIPE Investment;

 

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“Tax Receivable Agreement” are to the tax receivable agreement to be entered into by New DMS, Blocker Corp and the Sellers at the Closing;

 

   

“transfer agent” are to Continental, Leo’s transfer agent;

 

   

“trust account” are to the trust account established at the consummation of Leo’s initial public offering at JP Morgan Chase Bank, N.A. and maintained by Continental, acting as trustee;

 

   

“units” are to the units of Leo, each unit representing one Class A ordinary share and one-half of one warrant to acquire one Class A ordinary share, that were offered and sold by Leo in its initial public offering and registered pursuant to the IPO registration statement; and

 

   

“warrants” are to the public warrants and the private placement warrants and, with respect to any period of time after the Closing, the Seller Warrants.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this proxy statement/prospectus may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future, including those relating to the Business Combination. The information included in this proxy statement/prospectus in relation to DMS has been provided by DMS and its respective management, and forward-looking statements include statements relating to our and its respective management team’s expectations, hopes, beliefs, intentions or strategies regarding the future, including those relating to the Business Combination. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this proxy statement/prospectus may include, for example, statements about:

 

   

our ability to complete the Business Combination with DMS or, if we do not consummate such business combination, any other initial business combination;

 

   

satisfaction or waiver of the conditions to the Business Combination including, among other things: (1) the approval of the BCA Proposal, the Domestication Proposal, the Security Issuance Proposal and certain of the Organizational Documents Proposals being obtained; (2) all required waiting periods or approvals under the Hart-Scott-Rodino Act of 1976 (the “HSR Act”) and all applicable antitrust laws having expired, been received or terminated; (3) the consummation of the Domestication immediately prior to the Closing; (4) the consummation of the PIPE Investment immediately prior to the Closing; (5) 1,500,000 Class B ordinary shares and 2,000,000 private placement warrants of Leo having been surrendered and forfeited by Sponsor and the Leo independent directors, as applicable, in accordance with the Surrender Agreement; (6) the absence of a Material Adverse Effect (as defined in the Business Combination Agreement); (7) the net tangible assets of New DMS (as determined in accordance with Rule 3a51-1(g)(1) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)) being at least $5,000,001; (8) cash proceeds from the trust account established for the purpose of holding the net proceeds of Leo’s initial public offering and certain of the proceeds from its concurrent private placement of warrants, together with the proceeds from the PIPE Investment, net of any amounts paid to Leo shareholders that exercise their redemption rights in connection with the Business Combination, equaling no less than $200,000,000 at the Closing; and (9) the shares of New DMS Class A Common Stock to be issued in connection with the Business Combination Agreement having been approved for listing on the NYSE;

 

   

the occurrence of any event, change or other circumstances, including the outcome of any legal proceedings that may be instituted against Leo and DMS following the announcement of the Business Combination Agreement and the transactions contemplated therein, that could give rise to the termination of the Business Combination Agreement;

 

   

our ability to consummate the Business Combination due to the uncertainty resulting from the recent COVID-19 pandemic;

 

   

the projected financial information, growth rate and market opportunity of New DMS;

 

   

the ability to obtain and/or maintain the listing of the New DMS Class A Common Stock and the warrants on the NYSE, and the potential liquidity and trading of our securities;

 

   

the risk that the proposed Business Combination disrupts current plans and operations of DMS as a result of the announcement and consummation of the proposed Business Combination;

 

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the ability to recognize the anticipated benefits of the proposed Business Combination, which may be affected by, among other things, competition, the ability of the combined company to grow and manage growth profitably and retain its key employees;

 

   

costs related to the proposed Business Combination;

 

   

changes in applicable laws or regulations;

 

   

our ability to raise financing in the future;

 

   

our success in retaining or recruiting, or changes required in, our officers, key employees or directors following the completion of the Business Combination;

 

   

our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving the Business Combination;

 

   

factors relating to our business, operations and financial performance following the Business Combination, including:

 

   

our ability to attract consumers to our websites, marketplaces or brand direct solutions and convert them to sales for our advertisers;

 

   

our ability to maintain or increase our share of expenditures from our advertisers and our ability to establish relationships with new advertisers;

 

   

our ability to maintain, grow and protect the data we obtain from consumers and advertisers;

 

   

our dependence on our emails and sites not being treated disadvantageously by internet service providers;

 

   

our ability to provide new product and service offerings that make our marketplaces, brand direct solutions and websites useful for consumers;

 

   

our ability to compete effectively for consumers and advertisers;

 

   

our ability to successfully integrate the operations of companies we acquire;

 

   

the performance of our technology infrastructure;

 

   

our dependence on third-party website publishers for a significant portion of our visitors;

 

   

our ability to protect our intellectual property rights;

 

   

our ability to maintain adequate internal controls over financial and management systems; and

 

   

other factors detailed under the section entitled “Risk Factors.”

 

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The forward-looking statements contained in this proxy statement/prospectus are based on current expectations and beliefs concerning future developments and their potential effects on us and/or DMS. There can be no assurance that future developments affecting us and/or DMS will be those that we and/or DMS have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control or the control of DMS) or 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. Some of these risks and uncertainties may in the future be amplified by the COVID-19 outbreak and there may be additional risks that we consider immaterial or which are unknown. It is not possible to predict or identify all such risks. We and DMS 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.

Before any shareholder grants its proxy or instructs how its vote should be cast or vote on the proposals to be put to the extraordinary general meeting, such stockholder should be aware that the occurrence of the events described in the “Risk Factors” section and elsewhere in this proxy statement/prospectus may adversely affect us.

 

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NON-GAAP FINANCIAL MEASURES

Adjusted EBITDA, a measure used by DMS management to assess operating performance, is defined as net (loss) income, excluding (1) interest expense, (2) income tax expense, (3) depreciation and amortization, (4) acquisition costs, (5) loss on extinguishment of debt, (6) other income, (7) other expense and (8) other non-recurring, infrequent or unusual costs. An item is considered to be non-recurring, infrequent or unusual if it is unlikely that it will recur in the next two years or if a similar charge or gain has not occurred in the preceding two years, in accordance with SEC rules.

Combined Adjusted EBITDA is defined as Adjusted EBITDA, adjusted for (1) future expected cost savings resulting primarily from W4 Performance Ad Network reorganization (“PAN”) such as adjustments to headcount towards the end of the year ended December 31, 2019, and other operation synergies, (2) future expected UE technology synergies and cost savings due to the use of an alternative vendor, (3) future expected costs savings resulting primarily from UE reorganization such as staff adjustments, use of lower cost distribution vendors, among others, and (4) UE EBITDA from January 1, 2019 through the date of the acquisition.

Unlevered Free Cash Flow is defined as Combined Adjusted EBITDA, less capital expenditures, and Unlevered Free Cash Flow Conversion is defined as Unlevered Free Cash Flow divided by Combined Adjusted EBITDA Adjusted EBITDA, Combined Adjusted EBITDA, Unlevered Free Cash Flow and Unlevered Free Cash Flow Conversion is presented because DMS management believes that it provides useful information to investors regarding DMS’s operating performance and its capacity to incur and service debt and fund capital expenditures. DMS believes that these measures are used by many investors, analysts and rating agencies as a measure of performance. By reporting these measures, DMS provides a basis for comparison of our business operations between current, past and future periods by excluding items that DMS does not believe are indicative of our core operating performance.

Financial measures that are not U.S. generally accepted accounting principles (“GAAP”) should not be considered as alternatives to operating income, cash flows from operating activities or any other performance measures derived in accordance with GAAP as measures of operating performance, or cash flows as measures of liquidity. These measures have important limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Because of these limitations, DMS relies primarily on its GAAP results and uses Adjusted EBITDA only as a supplement.

 

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See below for a reconciliation of Adjusted EBITDA, Combined Adjusted EBITDA and Unlevered Free Cash Flow from net income (loss), the most directly comparable GAAP measure:

 

     Year Ended December 31,  
     2019     2018     2017  
     (U.S. dollars in thousands)  

Net (loss) income

   $ (11,230   $ 1,403     $ 4,275  

Adjustments

      

Interest expense

     10,930       4,614       800  

Income tax expense

     137       —         —    

Depreciation and amortization

     9,745       5,295       2,145  

Acquisition costs (1)

     19,234       10,388       2,271  

Loss on extinguishment of debt

     —         303       —    

Other income (2)

     —         —         (2,311

Other expense (3)

     1,033       326       428  

Other non-recurring expenses (4)

     3,076       640       1,490  
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 32,925     $ 22,969     $ 9,098  
  

 

 

   

 

 

   

 

 

 

Adjustments

      

Pro forma cost savings – PAN (5)

   $ 2,226     $ 2,165     $ 1,296  

Technology synergies (6)

     3,116       3,116       3,116  

Pro forma cost savings – UE (7)

     4,339       3,799       3,799  

Acquisitions EBITDA (8)

     9,112       15,124       12,899  
  

 

 

   

 

 

   

 

 

 

Combined Adjusted EBITDA (9)

   $ 51,718     $ 47,173     $ 30,208  
  

 

 

   

 

 

   

 

 

 

Capital expenditures

   $ (6,553     (2,636     (891)  
  

 

 

   

 

 

   

 

 

 

Unlevered Free Cash Flow (9)

   $ 45,165     $ 44,537     $ 29,317  
  

 

 

   

 

 

   

 

 

 

Unlevered Free Cash Flow Conversion (9)

     87.3     94.4     97.1
  

 

 

   

 

 

   

 

 

 

 

(1)

Acquisition incentive payments, contingent consideration accretion and earnout payments.

(2)

Lawsuit settlement proceeds and gain on litigation.

(3)

Director and investor management fees and expenses related to philanthropic initiatives

(4)

Restructuring costs such as lease termination costs due to office closure, severance payments on company reorganization, write-off of equity investment, advanced payment on company equity plan and company sale transaction fees.

(5)

Annualized future expected cost savings resulting primarily from PAN reorganization.

(6)

Annualized future expected UE technology synergies related to uniform infrastructure platform.

(7)

Annualized future expected cost savings resulting primarily from UE reorganization.

(8)

UE EBITDA from January 1, 2019 through the date of the acquisition.

(9)

This is a non-GAAP financial measure that has not been prepared in accordance with Article 11 of Regulation S-X.

A reconciliation of Unlevered Free Cash Flow to net cash (used in) provided by operating activities, the most directly comparable GAAP measure, is presented below:

 

     Year Ended December 31,  
     2019      2018      2017  
     (U.S. dollars in thousands)  

Unlevered Free Cash Flow (1)

   $ 45,165      $ 44,537      $ 29,317  

Capital expenditures

     6,553        2,636        891  
  

 

 

    

 

 

    

 

 

 

Combined Adjusted EBITDA (1)

   $ 51,718      $ 47,173      $ 30,208  

Acquisitions EBITDA (2)

     9,112        15,124        12,899  

 

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     Year Ended December 31,  
     2019      2018      2017  
     (U.S. dollars in thousands)  

Pro forma cost savings – UE (3)

     4,339        3,799        3,799  

Technology synergies (4)

     3,116        3,116        3,116  

Pro forma cost savings – PAN (5)

     2,226        2,165      $ 1,296  
  

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 32,925      $ 22,969      $ 9,098  

Other non-recurring expenses (6)

     3,076        640        1,490  

Other expense (7)

     1,033        326        428  

Other income (8)

     —          —          (2,311

Loss on extinguishment of debt

     —          303        —    

Acquisition costs (9)

     19,234        10,388        2,271  
  

 

 

    

 

 

    

 

 

 

EBITDA

   $ 9,582      $ 11,312      $ 7,220  

Interest expense

     (10,930      (4,614      (800

Income tax expense

     (137      

Amortization of debt issuance costs

     629        295        109  

Loss on extinguishment of debt

     —          303        —    

Loss on sale of property, plant and equipment, net

     —          —          90  

Payment of contingent consideration

     (15,904      —          —    

Change in accounts receivable, net

     207        (2,807      883  

Change in prepaid expenses and other current assets

     (776      2,114        976  

Change in accounts payable and other current liabilities

     (5,662      8,818        3,229  

Change in contingent consideration payable

     13,841        3,063        —    

Change in other liabilities

     (405      158        (551
  

 

 

    

 

 

    

 

 

 

Net cash (used in) provided by operating activities

   $ (9,555    $ 18,642      $ 11,156  
  

 

 

    

 

 

    

 

 

 

 

(1)

This is a non-GAAP financial measure that has not been prepared in accordance with Article 11 of Regulation S-X.

(2)

UE EBITDA from January 1, 2019 through the date of the acquisition.

(3)

Annualized future expected cost savings resulting primarily from UE reorganization.

(4)

Annualized future expected UE technology synergies related to uniform infrastructure platform.

(5)

Annualized future expected cost savings resulting primarily from PAN reorganization.

(6)

Restructuring costs such as lease termination costs due to office closure, severance payments on company reorganization, write-off equity investment, advanced payment on company equity plan and company sale transaction fees.

(7)

Director and investor management fees and expenses related to philanthropic initiatives.

(8)

Lawsuit settlement proceeds.

(9)

Acquisition incentive payments, contingent consideration and earnout payments.

 

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QUESTIONS AND ANSWERS FOR SHAREHOLDERS OF LEO

The questions and answers below highlight only selected information from this document and only briefly address some commonly asked questions about the proposals to be presented at the extraordinary general meeting, including with respect to the proposed Business Combination. The following questions and answers do not include all the information that is important to Leo’s shareholders. We urge shareholders to read this proxy statement/prospectus, including the Annexes and the other documents referred to herein, carefully and in their entirety to fully understand the proposed Business Combination and the voting procedures for the extraordinary general meeting, which will be held at 9:00 a.m. Eastern Time, on                     , 2020, at the offices of Kirkland & Ellis LLP located at 601 Lexington Avenue, New York, New York 10022.

 

Q:

Why am I receiving this proxy statement/prospectus?

 

A:

Leo shareholders are being asked to consider and vote upon, among other proposals, a proposal to approve and adopt the Business Combination Agreement and approve the transactions contemplated thereby, including the Business Combination. In accordance with the terms and subject to the conditions of the Business Combination Agreement, among other things, following the Domestication, Leo will effect the Equity Purchase in exchange for the Business Combination Consideration. Upon the effectiveness of the Domestication, we will be renamed “Digital Media Solutions, Inc.” See “BCA Proposal.”

A copy of the Business Combination Agreement is attached to this proxy statement/prospectus as Annex A and you are encouraged to read the Business Combination Agreement in its entirety.

The approval of each of the BCA Proposal, Incentive Award Plan Proposal, the Security Issuance Proposal, the Seller Nominee Appointment Proposal and the Adjournment Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of a majority of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting, and each of the Domestication Proposal and the Organizational Documents Proposals requires a special resolution under Cayman Islands law, being the affirmative vote of holders of at least two-thirds of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting.

Under the Business Combination Agreement, Leo will domesticate as a Delaware corporation. On the effective date of the Domestication, (1) the issued and outstanding Class A ordinary shares will convert automatically by operation of law, on a one-for-one basis, into shares of New DMS Class A Common Stock, (2) the issued and outstanding public warrants to purchase Class A ordinary shares will automatically become warrants to acquire shares of New DMS Class A Common Stock (no other changes will be made to the terms of any issued and outstanding public warrants as a result of the Domestication), (3) each issued and outstanding unit that has not been previously separated into the underlying Class A ordinary share and underlying warrant will be cancelled and will entitle the holder thereof to one share of New DMS Class A Common Stock and one-half of one warrant to acquire one share of New DMS Class A Common Stock, (4) the issued and outstanding Class B ordinary shares will convert automatically by operation of law, on a one-for-one basis without giving effect to any rights of adjustment or other anti-dilution protections which adjustment and protections will have been waived by the holders of the Class B ordinary shares pursuant to the Surrender Agreement, into shares of New DMS Class A Common Stock (also referred to herein as the Converted Founder Shares), and (5) the issued and outstanding private placement warrants will automatically become warrants to acquire shares of New DMS Class A Common Stock (no other changes will be made to the terms of any issued and outstanding private placement warrants as a result of the Domestication). See “Domestication Proposal.”

The provisions of the Proposed Organizational Documents will differ in certain material respects from the Existing Organizational Documents. Please see “What amendments will be made to the current constitutional documents of Leo?” below.

THE VOTE OF SHAREHOLDERS IS IMPORTANT. SHAREHOLDERS ARE ENCOURAGED TO VOTE AS SOON AS POSSIBLE AFTER CAREFULLY REVIEWING THIS PROXY STATEMENT/PROSPECTUS.

 

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Q:

What proposals are shareholders of Leo being asked to vote upon?

 

A:

At the extraordinary general meeting, Leo is asking holders of its ordinary shares to consider and vote upon twelve separate proposals:

 

   

a proposal to approve by ordinary resolution and adopt the Business Combination Agreement, certain related agreements (including the Subscription Agreements, the Amended Partnership Agreement, the Tax Receivable Agreement and the Surrender Agreement) and the transactions contemplated thereby;

 

   

a proposal to approve by special resolution the Domestication;

 

   

the following six separate proposals to approve by special resolution the following material differences between the Existing Organizational Documents and the Proposed Organizational Documents:

 

   

to authorize the change in the authorized capital stock of Leo from (i) 200,000,000 Class A ordinary shares, par value $0.0001 per share, 20,000,000 Class B ordinary shares, par value $0.0001 per share, and 1,000,000 preferred shares, par value $0.0001 per share, to (ii) 600,000,000 shares of common stock, par value $0.0001 per share, of New DMS, consisting of (a)                      shares of New DMS Class A Common Stock, (b)                      shares of New DMS Class B Common Stock, (c)                      shares of New DMS Class C common stock, and (d) 100,000,000 shares of New DMS Preferred Stock;

 

   

to authorize the New DMS Board to issue any or all shares of New DMS Preferred Stock in one or more classes or series, with such terms and conditions as may be expressly determined by the New DMS Board and as may be permitted by the DGCL;

 

   

to provide that certain provisions of the certificate of incorporation of New DMS are subject to the Director Nomination Agreement;

 

   

to authorize the removal of the ability of New DMS stockholders to take action by written consent in lieu of a meeting, from and after the first date that Prism, Clairvest and any of their respective affiliates ceases to collectively own, in the aggregate, at least fifty percent (50%) of the outstanding voting stock of New DMS;

 

   

to authorize the grant of an explicit waiver regarding corporate opportunities to New DMS and its directors; and

 

   

to authorize all other changes in connection with the replacement of Existing Organizational Documents with the Proposed Organization Documents as part of the Domestication;

 

   

a proposal to approve by ordinary resolution, for the purposes of complying with the applicable provisions of NYSE Listing Rule 312.03, the issuance of shares of New DMS Class A Common Stock to the PIPE Investors, including an affiliate of Sponsor, and the issuance of the Seller Warrants, New DMS Class B Common Stock, including the New DMS Class A Common Stock into which the DMS Units are redeemable in accordance with the Amended Partnership Agreement, and New DMS Class C Common Stock, including the New DMS Class A Common Stock into which the New DMS Class C Common Stock is convertible in accordance with the Proposed Certificate of Incorporation, to the Sellers, to the extent such issuance would require a shareholder vote under NYSE Listing Rule 312.03;

 

   

a proposal to approve by ordinary resolution the appointment of Robbie Isenberg, James Miller, Fernando Borghese and Mary Minnick to the New DMS Board as of the Closing (we refer to this proposal as the “Seller Nominee Appointment Proposal”);

 

   

a proposal to approve by ordinary resolution the Plan; and

 

   

a proposal to approve by ordinary resolution the adjournment of the extraordinary general meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for the approval of one or more proposals at the extraordinary general meeting.

 

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If our shareholders do not approve each of the Condition Precedent Proposals, then unless certain conditions in the Business Combination Agreement are waived by the applicable parties to the Business Combination Agreement, the Business Combination Agreement could terminate and the Business Combination may not be consummated. In addition to the foregoing proposals, the shareholders are also being asked to consider and vote upon the Adjournment Proposal. See “BCA Proposal,” “Domestication Proposal,” “Organizational Documents Proposals,” “Security Issuance Proposal,” “Incentive Award Plan Proposal,“Seller Nominee Appointment Proposal” and “Adjournment Proposal.”

Leo will hold the extraordinary general meeting to consider and vote upon these proposals. This proxy statement/prospectus contains important information about the Business Combination and the other matters to be acted upon at the extraordinary general meeting. Shareholders of Leo should read it carefully.

After careful consideration, Leo’s board of directors has determined that the BCA Proposal, the Domestication Proposal, each of the Organizational Documents Proposals, the Security Issuance Proposal, the Incentive Award Plan Proposal, the Seller Nominee Appointment Proposal and the Adjournment Proposal are in the best interests of Leo and its shareholders and unanimously recommends that you vote or give instruction to vote “FOR” each of those proposals.

The existence of financial and personal interests of one or more of Leo’s directors may result in a conflict of interest on the part of such director(s) between what he or they may believe is in the best interests of Leo and its shareholders and what he or they may believe is best for himself or themselves in determining to recommend that shareholders vote for the proposals. In addition, Leo’s officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “BCA Proposal—Interests of Leo’s Directors and Executive Officers in the Business Combination” for a further discussion of these considerations.

 

Q:

Why is Leo proposing the Business Combination?

 

A:

Leo was organized to effect a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination, with one or more businesses or entities.

Based on its due diligence investigations of DMS and the industry in which it operates, including the financial and other information provided by DMS in the course of Leo’s due diligence investigations, the Leo board of directors believes that the Business Combination with DMS is in the best interests of Leo and its shareholders and presents an opportunity to increase shareholder value. However, there is no assurance of this. See “BCA Proposal—Leo’s Board of Directors’ Reasons for the Business Combination.”

Although Leo’s board of directors believes that the Business Combination with DMS presents a unique business combination opportunity and is in the best interests of Leo and its shareholders, the board of directors did consider certain potentially material negative factors in arriving at that conclusion. These factors are discussed in greater detail in the sections entitled “BCA Proposal—Leo’s Board of Directors’ Reasons for the Business Combination” and “Risk Factors—Risks Related to DMS’s Business and to New DMS’s Business Following the Business Combination.”

 

Q:

Did Leo’s board of directors obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Business Combination?

 

A:

Leo’s board of directors did not obtain a third-party valuation or fairness opinion in connection with its determination to approve the Business Combination. The officers and directors of Leo have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and concluded that their experience and backgrounds, together with the experience and sector expertise of Leo’s financial advisor, enabled them to make the necessary analyses and determinations regarding the Business Combination with DMS. In addition, Leo’s officers and directors and Leo’s financial advisor have substantial experience with mergers and acquisitions. Accordingly, investors will be relying solely on the judgment of Leo’s board of directors and Leo’s financial advisor in valuing DMS’s business.

 

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Q:

What will DMS’s equityholders receive in return for the Business Combination of DMS by Leo?

 

A:

In accordance with the terms and subject to the conditions of the Business Combination Agreement, Leo will purchase the equity interests of Blocker Corp and a portion of the units of DMS held by Prism and Clairvest Direct Seller (which units will be immediately contributed to the capital of Blocker Corp) in exchange for a combination of cash consideration, the Seller Warrants, shares of New DMS Class B Common Stock and shares of New DMS Class C Common Stock pursuant to a conversion ratio to be determined at the Closing. The cash consideration, Seller Warrants, shares of New DMS Class B Common Stock and shares of New DMS Class C Common Stock constitute the Business Combination Consideration.

Following the Closing, pursuant to the Tax Receivable Agreement, New DMS will be required to pay the Sellers (i) 85% of the amount of savings, if any, in U.S. federal, state and local income tax that New DMS and Blocker Corp actually realize as a result of (A) certain existing tax attributes of Blocker Corp acquired in the Business Combination, and (B) increases in Blocker Corp’s allocable share of the tax basis of the tangible and intangible assets of DMS and certain other tax benefits related to the payment of the cash consideration pursuant to the Business Combination Agreement and any redemptions of DMS Units or exchanges of DMS Units for cash or shares of New DMS Class A Common Stock after the Business Combination and (ii) 100% of certain refunds of pre-Closing taxes of DMS and Blocker Corp received during a taxable year beginning within two (2) years after the Closing. For additional information on the Tax Receivable Agreement, see “BCA Proposal—Related Agreements—Tax Receivable Agreement.

 

Q:

What is the Tax Receivable Agreement?

Concurrent with the Closing and in connection with the reorganization of the post-business combination company in what is commonly referred to as an umbrella partnership-C corporation (or “Up-C”) structure, New DMS and Blocker Corp will enter into the Tax Receivable Agreement with the Sellers. Pursuant to the Tax Receivable Agreement, New DMS will be required to pay the Sellers (i) 85% of the amount of savings, if any, in U.S. federal, state and local income tax that New DMS and Blocker Corp actually realize as a result of (A) certain existing tax attributes of Blocker Corp acquired in the Business Combination, and (B) increases in and Blocker Corp’s allocable share of the tax basis of the tangible and intangible assets of DMS and certain other tax benefits related to the payment of the cash consideration pursuant to the Business Combination Agreement and any redemptions of DMS Units or exchanges of DMS Units for cash or shares of New DMS Class A Common Stock after the Business Combination and (ii) 100% of certain refunds of pre-Closing taxes of DMS and Blocker Corp received during a taxable year beginning within two (2) years after the Closing. All such payments to the Sellers will be New DMS’s obligation, and not that of DMS.

The Up-C structure will allow the Sellers (other than Blocker Seller 1 and Blocker Seller 2) to retain their equity ownership in DMS, an entity that is classified as a partnership, or “passthrough” entity for U.S. federal income (and certain state and local) tax purposes, in the form of DMS Units. Blocker Seller 1, Blocker Seller 2 and those investors who, prior to the Business Combination, held Class A ordinary shares or Class B ordinary shares of Leo will, by contrast, hold their equity ownership in New DMS, a Delaware corporation that is a domestic corporation for U.S. federal income tax purposes. We believe that the Sellers (other than Blocker Seller 1 and Blocker Seller 2) will generally find it advantageous to continue to hold their equity interests in an entity that is not taxable as a corporation for U.S. federal income tax purposes. We do not believe that our Up-C structure will give rise to any significant business or strategic benefit or detriment to us.

Following the Business Combination, we will receive the same benefits as a result of our ownership of Blocker Corp, which will own equity in DMS, an entity that is classified as a partnership, or “passthrough” entity, for U.S. federal income (and certain state and local) tax purposes, in the form of DMS Units. As a result of the Business Combination, Blocker Corp will obtain a step-up in tax basis in the portion of the DMS assets treated as purchased with the Cash Consideration. This step-up in tax basis is expected to provide us with certain tax benefits, such as future depreciation and amortization deductions that can reduce the taxable income allocable to us. As described above, a portion of these benefits will be payable to the Sellers under the Tax Receivable Agreement.

 

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For additional information on the Tax Receivable Agreement, see “BCA Proposal—Related Agreements—Tax Receivable Agreement” and “BCA Proposal—Related Agreements—Amended Partnership Agreement.

 

Q:

What are the principal differences between New DMS Class A Common Stock, New DMS Class B Common Stock and New DMS Class C Common Stock?

 

A:

After the business combination, the New DMS Class A Common Stock, New DMS Class B Common Stock and New DMS Class C Common Stock will constitute all of the classes of common stock of New DMS and will possess all voting power for the election of directors of New DMS, subject to the terms of the Director Nomination Agreement (see “BCA Proposal—Related Agreements—Director Nomination Agreement”) and all other matters requiring stockholder action. Holders of the New DMS Class A Common Stock, New DMS Class B Common Stock and New DMS Class C Common Stock will be entitled to one vote per share and at all times vote together as one class on all matters submitted to a vote of the stockholders of New DMS. The principal difference between, on the one hand, the New DMS Class A Common Stock and New DMS Class C Common Stock, and on the other hand, the New DMS Class B Common Stock is that holders of the New DMS Class B Common Stock will not be entitled to receive dividends, if declared by the New DMS Board, or to receive any portion of any assets in respect of such shares upon the liquidation, dissolution, distribution of assets or winding-up of the post-business combination company. In addition, upon the redemption of the DMS Units held by the members of DMS that are not Blocker Corp (the “Non-Blocker Members”) pursuant to the Amended Partnership Agreement for shares of New DMS Class A Common Stock, cash or a combination of both, the corresponding shares of New DMS Class B Common Stock automatically will be cancelled for no consideration in accordance with the Proposed Certificate of Incorporation. Finally, shares of New DMS Class B Common Stock can only be transferred concurrently with their corresponding DMS Units in accordance with the Amended Partnership Agreement. Shares of New DMS Class C Common Stock will only be issued to Blocker Sellers in connection with the Business Combination. New DMS Class C Common Stock will participate in dividends and distributions on the New DMS Class A Common Stock on an as-converted basis and each share of New DMS Class C Common Stock is convertible into a number of shares of New DMS Class A Common Stock that is equal to the conversion ratio to be determined at the Closing. Only the New DMS Class A Common Stock will be publicly traded.

 

Q:

How will the Company and Leo be managed following the business combination?

 

A:

Following the Closing, the combined company will be organized in an Up-C structure in which our interest in the business of DMS, including its operating subsidiaries, will be held by Blocker Corp and in which New DMS’s only material assets will consist of its equity interests in Blocker Corp. As such, New DMS, through its control of Blocker Corp holding the voting DMS Units and through its directors and officers, will be responsible for all operational and administrative decisions of DMS and the day-to-day management of DMS’s business. Following the Closing, it is expected that (1) the current management of DMS will become the management of New DMS. (2) Joseph Marinucci, Fernando Borghese, Robbie Isenberg and James H. Miller will join the New DMS Board and (3) Mary Minnick (designated as a “Seller Nominee,” as defined in the Business Combination Agreement), Lyndon Lea and Robert Darwent will be retained on the New DMS Board. Please see the section entitled “Management of New DMS Following the Business Combination” for further information.

 

Q:

What equity stake will current Leo shareholders and current DMS equityholders hold in New DMS immediately after the consummation of the Business Combination?

 

A:

As of the date of this proxy statement/prospectus, there are 24,312,807 ordinary shares issued and outstanding, which includes an aggregate of 5,000,000 Class B ordinary shares. As of the date of this proxy statement/prospectus, there is outstanding an aggregate of 14,000,000 warrants, comprised of the 4,000,000 private placement warrants held by Sponsor and the 10,000,000 public warrants. Each whole warrant entitles the holder thereof to purchase one Class A ordinary share and, following the Domestication, will entitle the holder thereof to purchase one share of New DMS Class A Common Stock. Therefore, as of the

 

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  date of this proxy statement/prospectus (without giving effect to the Business Combination and assuming that none of Leo’s outstanding Class A ordinary shares are redeemed in connection with the Business Combination), the Leo fully-diluted share capital would be 38,312,807 ordinary shares.

It is anticipated that, upon completion of the Business Combination, (1) Leo’s public shareholders are expected to own approximately 33.0% of the outstanding New DMS Class A Common Stock on an as-converted and as-redeemed basis, representing approximately 19.2% of the total outstanding voting interests in New DMS capital stock, (2) Prism and Clairvest Direct Seller (without taking into account any public shares held by such DMS equityholders prior to the consummation of the Business Combination), are expected to collectively own all of the outstanding New DMS Class B Common Stock, representing approximately 25.9% of the outstanding New DMS Class A Common Stock on an as-converted and as-redeemed basis and approximately 39.8% of the total outstanding voting interests of the New DMS capital stock, (3) Blocker Sellers (without taking into account any public shares held by Blocker Sellers prior to the consummation of the Business Combination), are expected to collectively own all of the New DMS Class C Common Stock, representing approximately 18% of the outstanding New DMS Class A Common Stock on an as-converted and as-redeemed basis and approximately 27.6% of the total outstanding voting interests of the New DMS capital stock, (4) the Class B Shareholders are expected to own approximately 6% of the outstanding New DMS Class A Common Stock on an as-converted and as-redeemed basis, representing approximately 3.5% of the total outstanding voting interests in New DMS capital stock and (5) the PIPE Investors (including Sponsor PIPE Entity) are expected to own approximately 17.1% of the outstanding New DMS Class A Common Stock on an as-converted and as-redeemed basis, representing approximately 9.9% of the total outstanding voting interests in New DMS capital stock. These percentages (i) assume that none of Leo’s outstanding Class A ordinary shares are redeemed in connection with the Business Combination, (ii) reflect the surrender and forfeiture by Sponsor and the Leo independent directors of 1,500,000 Class B ordinary shares of Leo pursuant to the Surrender Agreement, (iii) assume 10,000,000 shares of New DMS Class A Common Stock are issued to the PIPE Investors upon the consummation of the PIPE Investment, (iv) do not take into account public warrants or private placement warrants to purchase New DMS Class A Common Stock that will be outstanding immediately following the completion of the Business Combination and (v) do not assume the issuance of any shares upon completion of the Business Combination under the Plan. If the actual facts are different than these assumptions, the percentage ownership retained by the Company’s existing stockholders in New DMS will be different.

The following table illustrates varying ownership levels in New DMS Class A Common Stock on an as-converted and as-redeemed basis immediately following the consummation of the Business Combination based on the assumptions above except for varying levels of redemptions by the public shareholders:

 

     Share Ownership in New DMS  
     No redemptions     Maximum redemptions(1)  
     Percentage of Outstanding
Shares
    Percentage of Outstanding
Shares
 

Sellers(2)

     43.9     60.7

Leo’s public shareholders

     33.0     16.4

Former Leo Class B Shareholders

     6.0     5.9

PIPE Investors(3)

     17.1     17.0

 

(1)

Assumes that 9,656,404 of Leo’s outstanding Class A ordinary shares are redeemed in connection with the Business Combination.

(2)

Includes DMS Units, New DMS Class B Common Stock and New DMS Class C Common Stock to be owned by Sellers. In the maximum redemption scenario, Sellers will own New DMS Class B Common Stock and New DMS Class C Common Stock representing the same percentage of the total outstanding voting interests in New DMS capital stock as in the no redemption scenario: 67.4%.

(3)

Includes 7,200,000 shares to be owned by Sponsor PIPE Entity.

 

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For further details, see “BCA Proposal—The Business Combination Agreement—Business Combination Consideration.”

 

Q:

Why is Leo proposing the Domestication?

 

A:

Our board of directors believes that there are significant advantages to us that will arise as a result of a change of our domicile to Delaware. Further, our board of directors believes that any direct benefit that the DGCL provides to a corporation also indirectly benefits its stockholders, who are the owners of the corporation. The board of directors believes that there are several reasons why a reincorporation in Delaware is in the best interests of the Company and its shareholders, including, (i) the prominence, predictability and flexibility of the DGCL, (ii) Delaware’s well-established principles of corporate governance and (iii) the increased ability for Delaware corporations to attract and retain qualified directors, each of the foregoing are discussed in greater detail in the section entitled “Domestication Proposal—Reasons for the Domestication.”

To effect the Domestication, we will file a notice of deregistration with the Cayman Islands Registrar of Companies, together with the necessary accompanying documents, and file a certificate of corporate domestication and a certificate of incorporation with the Secretary of State of the State of Delaware, under which we will be domesticated and continue as a Delaware corporation.

The approval of the Domestication Proposal is a condition to closing the Business Combination under the Business Combination Agreement. The approval of the Domestication Proposal requires a special resolution under Cayman Islands law, being the affirmative vote of holders of at least two-thirds of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting. Abstentions and broker non-votes, while considered present for the purposes of establishing a quorum, will not count as votes cast at the extraordinary general meeting, and otherwise will have no effect on a particular proposal.

 

Q:

What amendments will be made to the current constitutional documents of Leo?

 

A:

The consummation of the Business Combination is conditional, among other things, on the Domestication. Accordingly, in addition to voting on the Business Combination, Leo’s shareholders also are being asked to consider and vote upon a proposal to approve the Domestication, and replace our Existing Organizational Documents, in each case, under Cayman Islands law with the Proposed Organizational Documents, in each case, under the DGCL, which differ from the Existing Organizational Documents in the following material respects:

 

    

Existing Organizational Documents

  

Proposed Organizational Documents

Authorized Shares
(Organizational Documents
Proposal A)

   The Existing Organizational Documents authorize 221,000,000 shares, consisting of 200,000,000 Class A ordinary shares, 20,000,000 Class B ordinary shares and 1,000,000 preferred shares.    The Proposed Organizational Documents authorize 600,000,000 shares of common stock, par value $0.0001 per share, of New DMS, consisting of (a)                      shares of New DMS Class A Common Stock, (b)                      shares of New DMS Class B Common Stock, (c)                      shares of New DMS Class C common stock, and (d) 100,000,000 shares of New DMS Preferred Stock.
   See paragraph 5 of our Existing Organizational Documents    See Article Fourth of the Proposed Certificate of Incorporation.
Authorize the Board of Directors to Issue Preferred Stock Without    The Existing Organizational Documents authorize the issuance    The Proposed Organizational Documents authorize the board of

 

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Existing Organizational Documents

  

Proposed Organizational Documents

Stockholder Consent
(Organizational Documents
Proposal B)
   of 1,000,000 preferred shares with such designation, rights and preferences as may be determined from time to time by our board of directors. Accordingly, our board of directors is empowered under the Existing Organizational Documents, without shareholder approval, to issue preferred shares with dividend, liquidation, redemption, voting or other rights which could adversely affect the voting power or other rights of the holders of ordinary shares.    directors to issue all or any shares of preferred stock in one or more series and to fix for each such series such voting powers, full or limited, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as the board of directors may determine.
   See paragraph 5 and Article 3 of our Existing Organizational Documents.    See Article Fourth subsection C of the Proposed Certificate of Incorporation.
Director Nomination Agreement
(Organizational Documents
Proposal C)
   The Existing Organizational Documents are not subject to any director composition agreement.    The Proposed Organizational Documents provide that certain provisions therein are subject to the Director Nomination Agreement.
      See Article Fifth subsections C, D and E of the Proposed Certificate of Incorporation.
Shareholder/Stockholder Written Consent In Lieu of a Meeting
(Organizational Documents
Proposal D)
   The Existing Organizational Documents provide that resolutions may be passed by a vote in person, by proxy at a general meeting, or by unanimous written resolution.    The Proposed Organizational Documents allow stockholders to vote in person or by proxy at a meeting of stockholders, but prohibit the ability of stockholders to act by written consent in lieu of a meeting from and after the first date that Prism, Clairvest and any of their respective affiliates cease to collectively own, in the aggregate, at least 50% of the outstanding voting stock of New DMS..
   See Article 22 of our Existing Organizational Documents.    See Article Sixth subsection B of the Proposed Certificate of Incorporation.
Waiver of Corporate Opportunities
(
Organizational Documents
Proposal E)
   The Existing Organizational Documents do not provide an explicit waiver of corporate    The Proposed Organizational Documents will explicitly waive corporate opportunities to New DMS and its directors.

 

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Existing Organizational Documents

  

Proposed Organizational Documents

   opportunities for Leo or its directors.   
Corporate Name
(Organizational Documents
Proposal F)
   The Existing Organizational Documents provide the name of the company is “Leo Holdings Corp.”    The Proposed Organizational Documents will provide that the name of the corporation will be “Digital Media Solutions, Inc.”
   See paragraph 1 of our Existing Organizational Documents.   
Perpetual Existence
(Organizational Documents
Proposal F)
   The Existing Organizational Documents provide that if we do not consummate a business combination (as defined in the Existing Organizational Documents) by July 31, 2020, Leo shall cease all operations except for the purposes of winding up and shall redeem the shares issued in our initial public offering and liquidate our trust account.    The Proposed Organizational Documents do not include any provisions relating to New DMS’s ongoing existence; the default under the DGCL will make New DMS’s existence perpetual.
   See Article 49 of our Existing Organizational Documents.    This is the default rule under the DGCL.
Exclusive Forum
(Organizational Documents
Proposal F)
   The Existing Organizational Documents do not contain a provision adopting an exclusive forum for certain shareholder litigation.    The Proposed Organizational Documents adopt Delaware as the exclusive forum for certain stockholder litigation.
      See Section Eighth of the Proposed Certificate of Incorporation.
Takeovers by Interested Stockholders
(Organizational Documents
Proposal F)
   The Existing Organizational Documents do not provide restrictions on takeovers of Leo by a related shareholder following a business combination.    The Proposed Organizational Documents will have New DMS elect not to be governed by Section 203 of the DGCL relating to takeovers by interested stockholders but will provide other restrictions regarding takeovers by interested stockholders.
      See Section Ninth subsections A and B of the Proposed Certificate of Incorporation.

 

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Existing Organizational Documents

  

Proposed Organizational Documents

      See Section Tenth of the Proposed Certificate of Incorporation.
Provisions Related to Status as Blank Check Company
(Organizational Documents
Proposal F)
   The Existing Organizational Documents set forth various provisions related to our status as a blank check company prior to the consummation of a business combination.    The Proposed Organizational Documents do not include such provisions related to our status as a blank check company, which no longer will apply upon consummation of the Business Combination, as we will cease to be a blank check company at such time.
   See Article 49 of our Existing Organizational Documents.   

 

Q:

How will the Domestication affect my ordinary shares, warrants and units?

 

A:

On the effective date of the Domestication, (1) the issued and outstanding Class A ordinary shares will convert automatically by operation of law, on a one-for-one basis, into shares of New DMS Class A Common Stock; (2) the issued and outstanding redeemable warrants that were registered pursuant to the IPO registration statement will automatically become redeemable warrants to acquire shares of New DMS Class A Common Stock (no other changes will be made to the terms of any issued and outstanding public warrants as a result of the Domestication); (3) each issued and outstanding unit will be cancelled and will entitle the holder thereof to one share of New DMS Class A Common Stock and one-half of one redeemable warrant to acquire one share of New DMS Class A Common Stock; (4) each issued and outstanding Class B ordinary share, par value $0.0001 per share, of Leo will convert automatically by operation of law, on a one-for-one basis without giving effect to any rights of adjustment or other anti-dilution protections which adjustment and protections will have been waived by the holders of the Class B ordinary shares pursuant to the Surrender Agreement, into shares of New DMS Class A Common Stock; and (5) the issued and outstanding warrants of Leo issued in a private placement will automatically become warrants to acquire shares of New DMS Class A Common Stock (no other changes will be made to the terms of any issued and outstanding private placement warrants as a result of the Domestication). See “Domestication Proposal.

 

Q:

What are the U.S. federal income tax consequences of the Domestication?

 

A:

As discussed more fully under “U.S. Federal Income Tax Considerations” (beginning on page 143 of this proxy statement/prospectus), it is intended that the Domestication will constitute a reorganization within the meaning of Section 368(a)(l)(F) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”). Assuming that the Domestication so qualifies, U.S. Holders (as defined in “U.S. Federal Income Tax Considerations” below) will be subject to Section 367(b) of the Code and, as a result:

 

   

a U.S. Holder whose public shares have a fair market value of less than $50,000 on the date of the Domestication will not recognize any gain or loss and will not be required to include any part of Leo’s earnings in income;

 

   

a U.S. Holder whose public shares have a fair market value of $50,000 or more and who, on the date of the Domestication, owns (actually and constructively) less than 10% of the total combined voting power of all classes of our stock entitled to vote and less than 10% of the total value of all classes of our stock will generally recognize gain (but not loss) on the exchange of public shares for New DMS public shares pursuant to the Domestication. As an alternative to recognizing gain, such U.S. Holder may file an election to include in income as a deemed dividend the “all earnings and profits amount” (as defined in

 

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the Treasury Regulations under Section 367(b) of the Code) attributable to its public shares provided certain other requirements are satisfied; and

 

   

a U.S. Holder whose public shares have a fair market value of $50,000 or more and who, on the date of the Domestication, owns (actually or constructively) 10% or more of the total combined voting power of all classes of our stock entitled to vote or 10% or more of the total value of all classes of our stock will generally be required to include in income as a deemed dividend the “all earnings and profits amount” attributable to its public shares provided certain other requirements are satisfied. Any such U.S. Holder that is a corporation may, under certain circumstances, effectively be exempt from taxation on a portion or all of the deemed dividend pursuant to Section 245A of the Code (participation exemption).

Leo does not expect to have significant, if any, cumulative earnings and profits through the date of the Domestication.

As discussed more fully under “U.S. Federal Income Tax Considerations” (beginning on page 143 of this proxy statement/prospectus), Leo believes that it is likely classified as a “passive foreign investment company” (“PFIC”), for U.S. federal income tax purposes. In such case, notwithstanding the foregoing U.S. federal income tax consequences of the Domestication, proposed Treasury Regulations under Section 1291(f) of the Code (which have a retroactive effective date), if finalized in their current form, generally would require a U.S. Holder to recognize gain on the exchange of public shares or public warrants for New DMS public shares or New DMS public warrants pursuant to the Domestication. The tax on any such gain would be imposed at the rate applicable to ordinary income and an interest charge would apply based on a complex set of rules. However, it is difficult to predict whether, in what form, and with what effective date, final Treasury Regulations under Section 1291(f) of the Code will be adopted. Importantly, however, U.S. Holders that make or have made certain elections discussed further under “U.S. Federal Income Tax Considerations—QEF Election and Mark-to-Market Election” with respect to their public shares are generally not subject to such gain recognition rules under the currently proposed Treasury Regulations under Section 1291(f) of the Code in respect of such public shares. For a more complete discussion of the potential application of the PFIC rules to U.S. Holders as a result of the Domestication, see “U.S. Federal Income Tax Considerations” (beginning on page 143 of this proxy statement/prospectus).

Additionally, the Domestication may cause non-U.S. Holders (as defined in “U.S. Federal Income Tax Considerations” beginning on page 143 of this proxy statement/prospectus) to become subject to U.S. federal income withholding taxes on any dividends paid in respect of such non-U.S. Holder’s New DMS public shares after the Domestication.

The tax consequences of the Domestication are complex and will depend on a holder’s particular circumstances. All holders are urged to consult their tax advisor on the tax consequences to them of the Domestication, including the applicability and effect of U.S. federal, state, local and foreign income and other tax laws. For a more complete discussion of the U.S. federal income tax considerations of the Domestication, see “U.S. Federal Income Tax Considerations” (beginning on page 143 of this proxy statement/prospectus).

 

Q:

Do I have redemption rights?

 

A:

If you are a holder of public shares, you have the right to request that we redeem all or a portion of your public shares for cash provided that you follow the procedures and deadlines described elsewhere in this proxy statement/prospectus. Public shareholders may elect to redeem all or a portion of the public shares held by them regardless of if or how they vote in respect of the BCA Proposal. If you wish to

  exercise your redemption rights, please see the answer to the next question: “How do I exercise my redemption rights?

Notwithstanding the foregoing, a public shareholder, together with any affiliate of such public shareholder or any other person with whom such public shareholder is acting in concert or as a “group” (as defined in

 

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Section 13(d)(3) of the Exchange Act), will be restricted from redeeming its public shares with respect to more than an aggregate of 15% of the public shares. Accordingly, if a public shareholder, alone or acting in concert or as a group, seeks to redeem more than 15% of the public shares, then any such shares in excess of that 15% limit would not be redeemed for cash.

The Class B Shareholders have agreed to waive their redemption rights with respect to all of their ordinary shares in connection with the consummation of the Business Combination. The Class B ordinary shares will be excluded from the pro rata calculation used to determine the per-share redemption price.

 

Q:

How do I exercise my redemption rights?

 

A:

If you are a public shareholder and wish to exercise your right to redeem the public shares, you must:

 

  (i)

(a) hold public shares, or (b) if you hold public shares through units, you elect to separate your units into the underlying public shares and public warrants prior to exercising your redemption rights with respect to the public shares;

 

  (ii)

submit a written request to Continental, our transfer agent, in which you (i) request that we redeem all or a portion of your public shares for cash, and (ii) identify yourself as the beneficial holder of the public shares and provide your legal name, phone number and address; and

 

  (iii)

deliver your public shares to Continental, our transfer agent, physically or electronically through The Depository Trust Company (“DTC”).

Holders must complete the procedures for electing to redeem their public shares in the manner described above prior to 5:00 p.m., Eastern Time, on                     , 2020 (two business days before the extraordinary general meeting) in order for their shares to be redeemed.

The address of Continental, our transfer agent, is listed under the question “Who can help answer my questions?” below.

Holders of units must elect to separate the units into the underlying public shares and public warrants prior to exercising redemption rights with respect to the public shares. If holders hold their units in an account at a brokerage firm or bank, holders must notify their broker or bank that they elect to separate the units into the underlying public shares and public warrants, or if a holder holds units registered in its own name, the holder must contact Continental, our transfer agent, directly and instruct them to do so.

Public shareholders will be entitled to request that their public shares be redeemed for a pro rata portion of the amount then on deposit in the trust account as of two business days prior to the consummation of the Business Combination including interest earned on the funds held in the trust account and not previously released to us (net of taxes payable). For illustrative purposes, as of            , 2020, this would have amounted to approximately $             per issued and outstanding public share. However, the proceeds deposited in the trust account could become subject to the claims of our creditors, if any, which could have priority over the claims of our public shareholders, regardless of whether such public shareholders vote or, if they do vote, irrespective of if they vote for or against the BCA Proposal. Therefore, the per share distribution from the trust account in such a situation may be less than originally expected due to such claims. Whether you vote, and if you do vote irrespective of how you vote, on any proposal, including the BCA Proposal, will have no impact on the amount you will receive upon exercise of your redemption rights. It is expected that the funds to be distributed to public shareholders electing to redeem their public shares will be distributed promptly after the consummation of the Business Combination.

Any request for redemption, once made by a holder of public shares, may be withdrawn at any time up to the time the vote is taken with respect to the BCA Proposal at the extraordinary general meeting. If you deliver your shares for redemption to Continental, our transfer agent, and later decide prior to the extraordinary general meeting not to elect redemption, you may request that our transfer agent return the shares (physically or electronically) to you. You may make such request by contacting Continental, our transfer agent, at the phone number or address listed at the end of this section.

 

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Any corrected or changed written exercise of redemption rights must be received by Continental, our transfer agent, prior to the vote taken on the BCA Proposal at the extraordinary general meeting. No request for redemption will be honored unless the holder’s public shares have been delivered (either physically or electronically) to Continental, our transfer agent, at least two business days prior to the vote at the extraordinary general meeting.

If a holder of public shares properly makes a request for redemption and the public shares are delivered as described above, then, if the Business Combination is consummated, we will redeem the public shares for a pro rata portion of funds deposited in the trust account, calculated as of two business days prior to the consummation of the Business Combination. The redemption takes place following the Domestication and accordingly it is shares of New DMS Class A Common Stock that will be redeemed immediately after consummation of the Business Combination.

If you are a holder of public shares and you exercise your redemption rights, such exercise will not result in the loss of any warrants that you may hold.

 

Q:

If I am a holder of units, can I exercise redemption rights with respect to my units?

 

A:

No. Holders of issued and outstanding units must elect to separate the units into the underlying public shares and public warrants prior to exercising redemption rights with respect to the public shares. If you hold your units in an account at a brokerage firm or bank, you must notify your broker or bank that you elect to separate the units into the underlying public shares and public warrants, or if you hold units registered in your own name, you must contact Continental, our transfer agent, directly and instruct them to do so. The redemption rights include the requirement that a holder must identify itself in writing as a beneficial holder and provide its legal name, phone number and address to Continental in order to validly redeem its shares. You are requested to cause your public shares to be separated and delivered to Continental, our transfer agent, by 5:00p.m., Eastern Time, on                     , 2020 (two business days before the extraordinary general meeting) in order to exercise your redemption rights with respect to your public shares.

 

Q:

What are the U.S. federal income tax consequences of exercising my redemption rights?

 

A:

We expect that a U.S. Holder (as defined in “U.S. Federal Income Tax Considerations” beginning on page 143 of this proxy statement/prospectus) that exercises its redemption rights to receive cash from the trust account in exchange for its New DMS public shares will generally be treated as selling such New DMS public shares resulting in the recognition of capital gain or capital loss. There may be certain circumstances in which the redemption may be treated as a distribution for U.S. federal income tax purposes depending on the amount of New DMS public shares that such U.S. Holder owns or is deemed to own (including through the ownership of warrants). For a more complete discussion of the U.S. federal income tax considerations of an exercise of redemption rights, see “U.S. Federal Income Tax Considerations” (beginning on page 143 of this proxy statement/prospectus).

Additionally, because the Domestication will occur immediately prior to the redemption by any public shareholder, U.S. Holders exercising redemption rights will be subject to the potential tax consequences of Section 367(b) of the Code as well as potential tax consequences of the U.S. federal income tax rules relating to PFICs. The tax consequences of Section 367(b) of the Code and the PFIC rules are discussed more fully below under “U.S. Federal Income Tax Considerations” (beginning on page 143 of this proxy statement/prospectus).

All holders of our public shares considering exercising their redemption rights are urged to consult their tax advisor on the tax consequences to them of an exercise of redemption rights, including the applicability and effect of U.S. federal, state, local and foreign income and other tax laws.

 

Q:

What happens to the funds deposited in the trust account after consummation of the Business Combination?

 

A:

Following the closing of our initial public offering, an amount equal to $200,000,000 ($10.00 per unit) of the net proceeds from our initial public offering and the sale of the private placement warrants was placed in

 

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  the trust account. As of                     , 2020, funds in the trust account totaled approximately $            and were held in money market funds. These funds will remain in the trust account, except for the withdrawal of interest to pay taxes, if any, until the earliest of (1) the completion of a business combination (including the closing of the Business Combination) or (2) the redemption of all of the public shares if we are unable to complete a business combination by July 31, 2020 (unless such date is extended in accordance with the Existing Organizational Documents), subject to applicable law.

If our initial business combination is paid for using equity or debt securities or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial business combination or used for redemptions or purchases of the public shares, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or expansion of operations of New DMS, the payment of principal or interest due on indebtedness incurred in completing our Business Combination, to fund the purchase of other companies or for working capital. See “Summary of the Proxy Statement/Prospectus—Sources and Uses of Funds for the Business Combination.”

 

Q:

What happens if a substantial number of the public shareholders vote in favor of the BCA Proposal and exercise their redemption rights?

 

A:

Our public shareholders are not required to vote “FOR” the Business Combination in order to exercise their redemption rights. Accordingly, the Business Combination may be consummated even though the funds available from the trust account and the number of public shareholders are reduced as a result of redemptions by public shareholders.

In no event will Leo redeem public shares in an amount that would cause our net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) to be less than $5,000,001.

Additionally, as a result of redemptions, the trading market for the New DMS Class A Common Stock may be less liquid than the market for the public shares was prior to consummation of the Business Combination and we may not be able to meet the listing standards for NYSE or another national securities exchange.

If a sufficient number of the public shareholders exercise their redemption rights, the condition to the consummation of the Business Combination that cash proceeds from the trust account established for the purpose of holding the net proceeds of Leo’s initial public offering and certain of the proceeds from its concurrent private placement of warrants, together with the proceeds from the PIPE Investment, net of any amounts paid to Leo shareholders that exercise their redemption rights in connection with the Business Combination, equal no less than $200,000,000 at the Closing may not be met and the Business Combination may not be consummated. For more information about this condition to the consummation of the Business Combination, see “BCA Proposal—The Business Combination Agreement—Closing Conditions.”

 

Q:

What conditions must be satisfied to complete the Business Combination?

 

A:

The consummation of the Business Combination is conditioned upon, among other things, (1) the approval of the BCA Proposal, the Domestication Proposal, the Security Issuance Proposal and the Required Organizational Documents Proposals being obtained; (2) all required waiting periods or approvals under HSR Act and all applicable antitrust laws shall have expired, been received or terminated; (3) the consummation of the Domestication immediately prior to the Closing; (4) the consummation of the PIPE Investment immediately prior to the Closing; (5) 1,500,000 Class B ordinary shares and 2,000,000 private placement warrants of Leo shall have been surrendered and forfeited by Sponsor and the Leo independent directors, as applicable, in accordance with the Surrender Agreement; (6) the absence of a Material Adverse Effect (as defined in the Business Combination Agreement); (7) the net tangible assets of New DMS (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) being at least $5,000,001; (8) cash proceeds from the trust account established for the purpose of holding the net proceeds of Leo’s initial public offering and certain of the proceeds from its concurrent private placement of warrants, together with the proceeds from the PIPE Investment, net of any amounts paid to Leo shareholders that exercise their redemption rights in connection with the Business Combination, equaling no less than $200,000,000 at the

 

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  Closing; and (9) the shares of New DMS Class A Common Stock to be issued in connection with the Business Combination Agreement will have been approved for listing on the NYSE. Therefore, unless these conditions are waived by the applicable parties to the Business Combination Agreement, the Business Combination Agreement could terminate and the Business Combination may not be consummated.

For more information about conditions to the consummation of the Business Combination, see “BCA Proposal—The Business Combination Agreement—Closing Conditions.”

 

Q:

When do you expect the Business Combination to be completed?

 

A:

It is currently expected that the Business Combination will be consummated in the third quarter of 2020. This date depends, among other things, on the approval of the proposals to be put to Leo shareholders at the extraordinary general meeting. However, such extraordinary general meeting could be adjourned if the Adjournment Proposal is adopted by our shareholders at the extraordinary general meeting and we elect to adjourn the extraordinary general meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for the approval of one or more proposals at the extraordinary general meeting. For a description of the conditions for the completion of the Business Combination, see “BCA Proposal—The Business Combination Agreement—Closing Conditions.”

 

Q:

What happens if the Business Combination is not consummated?

 

A:

Leo will not complete the Domestication to Delaware unless all other conditions to the consummation of the Business Combination have been satisfied or waived by the parties in accordance with the terms of the Business Combination Agreement. If we are not able to consummate the Business Combination with DMS nor able to complete another business combination by July 31, 2020, in each case, as such date may be extended pursuant to our Existing Organizational Documents, we will (1) cease all operations except for the purpose of winding up, (2) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable, and less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (3) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, liquidate and dissolve, subject in each case to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable laws.

 

Q:

Do I have appraisal rights in connection with the proposed Business Combination and the proposed Domestication?

 

A:

Neither our shareholders nor our warrant holders have appraisal rights in connection with the Business Combination or the Domestication under the Cayman Islands Companies Law or under the DGCL.

 

Q:

What do I need to do now?

 

A:

We urge you to read this proxy statement/prospectus, including the Annexes and the documents referred to herein, carefully and in their entirety and to consider how the Business Combination will affect you as a shareholder and/or warrant holder. Our shareholders should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy card.

 

Q:

How do I vote?

 

A:

If you are a holder of record of ordinary shares on the record date for the extraordinary general meeting, you may vote in person at the extraordinary general meeting or by submitting a proxy for the extraordinary general meeting. You may submit your proxy by completing, signing, dating and returning the enclosed proxy card in the accompanying pre-addressed postage paid envelope. If you hold your shares in “street

 

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  name,” which means your shares are held of record by a broker, bank or nominee, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the broker, bank or nominee with instructions on how to vote your shares or, if you wish to attend the extraordinary general meeting and vote in person, obtain a proxy from your broker, bank or nominee.

We intend to hold the extraordinary general meeting in person. However, we are sensitive to the public health and travel concerns our shareholders may have and recommendations that public health officials may issue in light of the evolving coronavirus (COVID-19) situation. As a result, we may impose additional procedures or limitations on meeting attendees or may decide to hold the meeting in a different location or solely by means of remote communication (i.e., a virtual-only meeting). We plan to announce any such updates in a press release filed with the SEC and on our proxy website            , and we encourage you to check this website prior to the meeting if you plan to attend.

 

Q:

If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?

 

A:

No. If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the “beneficial holder” of the shares held for you in what is known as “street name.” If this is the case, this proxy statement/prospectus may have been forwarded to you by your brokerage firm, bank or other nominee, or its agent. As the beneficial holder, you have the right to direct your broker, bank or other nominee as to how to vote your shares. If you do not provide voting instructions to your broker on a particular proposal on which your broker does not have discretionary authority to vote, your shares will not be voted on that proposal. This is called a “broker non-vote.” Abstentions and broker non-votes, while considered present for the purposes of establishing a quorum, will not count as votes cast at the extraordinary general meeting, and otherwise will have no effect on a particular proposal. If you decide to vote, you should provide instructions to your broker, bank or other nominee on how to vote in accordance with the information and procedures provided to you by your broker, bank or other nominee.

 

Q:

When and where will the extraordinary general meeting be held?

 

A:

The extraordinary general meeting will be held at 9.00 a.m., Eastern Time, on                    , 2020, at the offices of Kirkland & Ellis LLP, located at 601 Lexington Avenue, New York, New York 10022, unless the extraordinary general meeting is adjourned.

We intend to hold the extraordinary general meeting in person. However, we are sensitive to the public health and travel concerns our shareholders may have and recommendations that public health officials may issue in light of the evolving coronavirus (COVID-19) situation. As a result, we may impose additional procedures or limitations on meeting attendees or may decide to hold the meeting in a different location or solely by means of remote communication (i.e., a virtual-only meeting). We plan to announce any such updates in a press release filed with the SEC and on our proxy website            , and we encourage you to check this website prior to the meeting if you plan to attend.

 

Q:

How will the COVID-19 pandemic impact in-person voting at the General Meeting?

 

A:

We intend to hold the extraordinary general meeting in person. However, we are sensitive to the public health and travel concerns our shareholders may have and recommendations that public health officials may issue in light of the evolving coronavirus (COVID-19) situation. As a result, we may impose additional procedures or limitations on meeting attendees or may decide to hold the meeting in a different location or solely by means of remote communication (i.e., a virtual-only meeting). We plan to announce any such updates in a press release filed with the SEC and on our proxy website                     , and we encourage you to check this website prior to the meeting if you plan to attend.

 

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Q:

What impact will the COVID-19 Pandemic have on the Business Combination?

 

A:

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of the coronavirus outbreak on the business of Leo and DMS, and there is no guarantee that efforts by Leo and DMS to address the adverse impacts of the coronavirus will be effective. The extent of such impact will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and actions taken to contain the coronavirus or its impact, among others. If Leo or DMS are unable to recover from a business disruption on a timely basis, the Business Combination and New DMS’s business, financial condition and results of operations following the completion of the Business Combination would be adversely affected. The Business Combination may also be delayed and adversely affected by the coronavirus outbreak and become more costly. Each of Leo and DMS may also incur additional costs to remedy damages caused by any such disruptions, which could adversely affect its financial condition and results of operations.

 

Q:

Who is entitled to vote at the extraordinary general meeting?

 

A:

We have fixed                    , 2020 as the record date for the extraordinary general meeting. If you were a shareholder of Leo at the close of business on the record date, you are entitled to vote on matters that come before the extraordinary general meeting. However, a shareholder may only vote his or her shares if he or she is present in person or is represented by proxy at the extraordinary general meeting.

 

Q:

How many votes do I have?

 

A:

Leo shareholders are entitled to one vote at the extraordinary general meeting for each ordinary share held of record as of the record date. As of the close of business on the record date for the extraordinary general meeting, there were 24,312,807 ordinary shares issued and outstanding, of which 19,312,807 were issued and outstanding public shares.

 

Q:

What constitutes a quorum?

 

A:

A quorum of Leo shareholders is necessary to hold a valid meeting. A quorum will be present at the extraordinary general meeting if the holders of a majority of the issued and outstanding ordinary shares entitled to vote at the extraordinary general meeting are represented in person or by proxy. As of the record date for the extraordinary general meeting, 12,156,404 ordinary shares would be required to achieve a quorum.

 

Q:

What vote is required to approve each proposal at the extraordinary general meeting?

 

A:

The following votes are required for each proposal at the extraordinary general meeting:

 

  (i)

BCA Proposal: The approval of the BCA Proposal requires ordinary resolution under Cayman Islands law, being the affirmative vote of holders of at least a majority of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting.

 

  (ii)

Domestication Proposal: The approval of the Domestication Proposal requires a special resolution under Cayman Islands law, being the affirmative vote of holders of at least two-thirds of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting.

 

  (iii)

Organizational Documents Proposals: The separate approval of each of the Organizational Documents Proposals requires a special resolution under Cayman Islands law, being the affirmative vote of holders of at least two-thirds of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting.

 

  (iv)

Security Issuance Proposal: The approval of the Security Issuance Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of a majority of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting.

 

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  (v)

Seller Nominee Appointment Proposal: The approval of the Seller Nominee Appointment Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of a majority of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting.

 

  (vi)

Incentive Award Plan Proposal: The approval of the Incentive Award Plan Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of a majority of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting.

 

  (vii)

Adjournment Proposal: The approval of the Adjournment Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of a majority of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting.

We intend to hold the extraordinary general meeting in person. However, we are sensitive to the public health and travel concerns our shareholders may have and recommendations that public health officials may issue in light of the evolving coronavirus (COVID-19) situation. As a result, we may impose additional procedures or limitations on meeting attendees or may decide to hold the meeting in a different location or solely by means of remote communication (i.e., a virtual-only meeting). We plan to announce any such updates in a press release filed with the SEC and on our proxy website                    , and we encourage you to check this website prior to the meeting if you plan to attend.

 

Q:

What are the recommendations of Leo’s board of directors?

 

A:

Leo’s board of directors believes that the BCA Proposal and the other proposals to be presented at the extraordinary general meeting are in the best interest of Leo’s shareholders and unanimously recommends that its shareholders vote “FOR” the BCA Proposal, “FOR” the Domestication Proposal, “FOR” each of the separate Organizational Documents Proposals, “FOR” the Security Issuance Proposal, “FOR” the Incentive Award Plan Proposal, “FOR” the Seller Nominee Appointment Proposal and “FOR” the Adjournment Proposal, in each case, if presented to the extraordinary general meeting.

The existence of financial and personal interests of one or more of Leo’s directors may result in a conflict of interest on the part of such director(s) between what he or they may believe is in the best interests of Leo and its shareholders and what he or they may believe is best for himself or themselves in determining to recommend that shareholders vote for the proposals. In addition, Leo’s officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “BCA Proposal—Interests of Leo’s Directors and Executive Officers in the Business Combination” for a further discussion of these considerations.

 

Q:

How do Sponsor and the other Class B Shareholders intend to vote their shares?

 

A:

Unlike some other blank check companies in which the initial shareholders agree to vote their shares in accordance with the majority of the votes cast by the public shareholders in connection with an initial business combination, our Class B Shareholders have agreed to vote all their public shares and Class B ordinary shares in favor of all the proposals being presented at the extraordinary general meeting. As of the date of this proxy statement/prospectus, our Class B Shareholders own 20.0% of the issued and outstanding ordinary shares.

At any time at or prior to the Business Combination, during a period when they are not then aware of any material nonpublic information regarding us or our securities, our Class B Shareholders, DMS and/or their directors, officers, advisors or respective affiliates may purchase public shares from institutional and other investors who vote, or indicate an intention to vote, against any of the Condition Precedent Proposals, or execute agreements to purchase such shares from such investors in the future, or they may enter into transactions with such investors and others to provide them with incentives to acquire public shares or vote their public shares in favor of the Condition Precedent Proposals. Such a purchase may include a contractual

 

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acknowledgement that such shareholder, although still the record or beneficial holder of our shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our Class B Shareholders, DMS and/or their directors, officers, advisors or respective affiliates purchase shares in privately negotiated transactions from public shareholders who have already elected to exercise their redemption rights, such selling shareholder would be required to revoke their prior elections to redeem their shares. The purpose of such share purchases and other transactions would be to increase the likelihood of satisfaction of the requirements that (1) holders of a majority of the ordinary shares, represented in person or by proxy and entitled to vote at the extraordinary general meeting, vote in favor of the BCA Proposal, the Security Issuance Proposal, the Incentive Award Plan Proposal, the Seller Nominee Appointment Proposal and the Adjournment Proposal, (2) holders of at least two-thirds of the ordinary shares, represented in person or by proxy and entitled to vote at the extraordinary general meeting, vote in favor of the Domestication Proposal and the Organizational Documents Proposals, (3) otherwise limit the number of public shares electing to redeem and (4) New DMS’s net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) being at least $5,000,001.

Entering into any such arrangements may have a depressive effect on the ordinary shares. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares at a price lower than market and may therefore be more likely to sell the shares he or she owns, either at or prior to the Business Combination.

If such transactions are effected, the consequence could be to cause the Business Combination to be consummated in circumstances where such consummation could not otherwise occur. Purchases of shares by the persons described above would allow them to exert more influence over the approval of the proposals to be presented at the extraordinary general meeting and would likely increase the chances that such proposals would be approved. We will file or submit a Current Report on Form 8-K to disclose any material arrangements entered into or significant purchases made by any of the aforementioned persons that would affect the vote on the proposals to be put to the extraordinary general meeting or the redemption threshold. Any such report will include descriptions of any arrangements entered into or significant purchases by any of the aforementioned persons.

 

Q:

What happens if I sell my Leo ordinary shares before the extraordinary general meeting?

 

A:

The record date for the extraordinary general meeting is earlier than the date of the extraordinary general meeting and earlier than the date that the Business Combination is expected to be completed. If you transfer your public shares after the applicable record date, but before the extraordinary general meeting, unless you grant a proxy to the transferee, you will retain your right to vote at such general meeting.

 

Q:

May I change my vote after I have mailed my signed proxy card?

 

A:

Yes. Shareholders may send a later-dated, signed proxy card to our general counsel at our address set forth below so that it is received by our general counsel prior to the vote at the extraordinary general meeting (which is scheduled to take place on                    , 2020) or attend the extraordinary general meeting in person and vote. Shareholders also may revoke their proxy by sending a notice of revocation to our general counsel, which must be received by our general counsel prior to the vote at the extraordinary general meeting. However, if your shares are held in “street name” by your broker, bank or another nominee, you must contact your broker, bank or other nominee to change your vote.

 

Q:

What happens if I fail to take any action with respect to the extraordinary general meeting?

 

A:

If you fail to vote with respect to the extraordinary general meeting and the Business Combination is approved by shareholders and the Business Combination is consummated, you will become a stockholder and/or warrant holder of New DMS. If you fail to vote with respect to the extraordinary general meeting and the Business Combination is not approved, you will remain a shareholder and/or warrant holder of Leo. However, if you fail to vote with respect to the extraordinary general meeting, you will nonetheless be able to elect to redeem your public shares in connection with the Business Combination.

 

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Q:

What should I do if I receive more than one set of voting materials?

 

A:

Shareholders may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast a vote with respect to all of your ordinary shares.

 

Q:

Who will solicit and pay the cost of soliciting proxies for the extraordinary general meeting?

 

A:

Leo will pay the cost of soliciting proxies for the extraordinary general meeting. Leo has engaged Morrow Sodali LLC (“Morrow”) to assist in the solicitation of proxies for the extraordinary general meeting. Leo has agreed to pay Morrow a fee of $22,500, plus disbursements, and will reimburse Morrow for its reasonable out-of-pocket expenses and indemnify Morrow and its affiliates against certain claims, liabilities, losses, damages and expenses. Leo will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of Class A ordinary shares for their expenses in forwarding soliciting materials to beneficial owners of Class A ordinary shares and in obtaining voting instructions from those owners. Leo’s directors and officers may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

Q:

Where can I find the voting results of the extraordinary general meeting?

 

A:

The preliminary voting results will be announced at the extraordinary general meeting. Leo will publish final voting results of the extraordinary general meeting in a Current Report on Form 8-K within four business days after the extraordinary general meeting.

 

Q:

Who can help answer my questions?

 

A:

If you have questions about the Business Combination or if you need additional copies of the proxy statement/prospectus or the enclosed proxy card you should contact:

Morrow Sodali LLC

470 West Avenue

Stamford, Connecticut 06902

Tel: (800) 662-5200

Banks and brokers call collect: (203) 658-9400

E-mail: LHC.info@investor.morrowsodali.com

You also may obtain additional information about Leo from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information; Incorporation by Reference.” If you are a holder of public shares and you intend to seek redemption of your public shares, you will need to deliver your public shares (either physically or electronically) to Continental, Leo’s transfer agent, at the address below prior to the extraordinary general meeting. Holders must complete the procedures for electing to redeem their public shares in the manner described above prior to 5:00 p.m., Eastern Time, on                     , 2020 (two business days before the extraordinary general meeting) in order for their shares to be redeemed. If you have questions regarding the certification of your position or delivery of your stock, please contact:

Continental Stock Transfer & Trust Company

1 State Street 30th Floor

New York, New York 10004

Attention: Mark Zimkind

E-mail: mzimkind@continentalstock.com

 

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SUMMARY OF THE PROXY STATEMENT/PROSPECTUS

This summary highlights selected information from this proxy statement/prospectus and does not contain all of the information that is important to you. To better understand the proposals to be submitted for a vote at the extraordinary general meeting, including the Business Combination, you should read this proxy statement/prospectus, including the Annexes and other documents referred to herein, carefully and in their entirety. The Business Combination Agreement is the legal document that governs the Business Combination and the other transactions that will be undertaken in connection with the Business Combination. The Business Combination Agreement is also described in detail in this proxy statement/prospectus in the section entitled “BCA Proposal—The Business Combination Agreement.”

Unless otherwise specified, all share calculations (1) assume no exercise of redemption rights by the public shareholders in connection with the Business Combination and (2) do not include any shares issuable upon the exercise of the warrants.

Business Summary

Unless otherwise indicated or the context otherwise requires, references in this Business Summary to the company, “we,” “us,” “our” and other similar terms refer to DMS and its subsidiaries prior to the Business Combination and to New DMS and its consolidated subsidiaries after giving effect to the Business Combination.

Our Business

DMS provides technology and digital performance marketing tools to help marketers with their most critical decision: how to optimize return on investment—i.e., the customers acquired relative to the marketing dollars spent.

DMS is a leading provider of technology and digital performance marketing solutions. We deliver a unique set of proprietary software, data assets and proven expertise to large global brands across verticals where consumer interaction is rapidly migrating online such as insurance, education, health & wellness, consumer finance and other direct-to-consumer businesses. Our primary objective is to enhance the performance and efficacy of the digital marketing dollars that brands spend to acquire customers, which has become increasingly harder for companies to do in digital and mobile environments. Our solutions are sector-agnostic, providing value to clients across multiple verticals, thereby reducing our exposure to any specific client or vertical-specific secular trends. We have proven our effectiveness and stand out as a mission-critical partner that improves client outcomes, with a 95% client retention rate across our business in 2018.

We are differentiated by the dynamic combination of solutions we provide to clients, the scale at which we operate, and the sector-agnostic approach that results in a more attractive financial profile. As media consumption has rapidly fragmented across disparate digital, mobile, social and traditional sectors, it has become more challenging for marketers to reach their target audiences at scale and to manage the costs to acquire new customers. To address this, marketers need a data-driven approach, leveraging technology to collect feedback in real-time, and quickly navigate across digital platforms. Our model stands out because we own the data assets to help deliver audiences more likely than not to take a specific action (i.e., high intent), the tools to track the success of spend in real-time, and the technology and expertise to deploy strategies regardless of the digital platform (e.g., search, social, mobile).

We operate one of the largest digital marketplace businesses, where companies in verticals like insurance and education seek to acquire new customers, who are more frequently shopping for these services entirely online. Our marketplace solutions allow brands to leverage our data assets to reach highly targeted audiences across a



 

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diverse portfolio of owned and operated websites, and deliver high-intent customers to brands looking to grow their businesses. Separately, we provide large brands with broad-based customer acquisition programs, whereby we utilize our data assets, proprietary technology and digital campaign expertise to acquire customers on behalf of brands (“brand direct” programs) and ultimately enhance the return on their marketing dollars spent. Both our marketplace and brand direct businesses leverage our unique database of 150 million consumer profiles, a high barrier to entry and key differentiator. This database has been curated based on the results of $1 billion of ad spend deployed on the DMS platform since 2012, and is constantly improving as more ad spend perpetuates more results into the database. We also provide software tools that large marketing customers use to track performance in real-time, and serve as a powerful retention tool in our business as our software becomes embedded as a critical platform used by large marketing departments. Furthermore, we use these tools to develop direct relationships with clients, with over 90% of our 2019 revenue generated directly from clients (vs. agency relationships) relative to 20% in 2014.

We believe we are the only operator to provide these services across several verticals at scale, as demonstrated by the 1.4 billion monthly ad impressions our networks delivers. Our sector-agnostic model has proven its effectiveness across industries, as our clients include a top 3 auto insurer, a Fortune 100 insurance agency, a top 3 U.S. mortgage lender, a leading home security firm, and a Top 100 ranked U.S. university. The diversification results in significant cross-sell opportunities—a potential mortgage is also likely a potential home insurance and/or home security lead—and better profitability by leveraging a single back-end platform. Our revenue diversity is evidenced by the fact that no customer represents more than 6% of revenue.

We have rapidly grown our business, driven by both a successful organic growth strategy and a proven M&A playbook. We generate highly recurring, diversified revenue streams that have been growing quickly as new and existing clients have increased their spend on DMS solutions. We have also completed 9 M&A transactions since 2016. In 2019, we generated $305 million of pro forma revenue (including the impact of acquisitions), versus reported revenue of approximately $67 million in 2017, with management’s estimate of like-for-like annualized growth of 25%. We have a model that generates profit on every client engagement, a highly flexible cost structure, and low capital expenditures that results in approximately 90% unlevered free cash flow (“UFCF”) conversion. In 2019, we generated $51.7 million of Combined Adjusted EBITDA, and $45 million of UFCF.

Our Market Opportunity

Today, marketers are confronted by the significant challenge of reaching consumers in meaningful ways through disparate media platforms. Legacy mediums of print or television represent a far smaller portion of media consumption than historically, as digital channels have proliferated, and in particular mobile devices. In an effort to adjust to this transition, digital advertising is supplanting traditional advertising to support customer acquisition efforts and has grown to an estimated $145 billion in the United States. We believe this total addressable market (“TAM”) of digital advertising in which we operate will continue to grow, as existing and new digital platforms continue this trend. However, this transition has presented new challenges as the diversity of digital platforms has grown exponentially. Meanwhile, marketers across consumer sectors (e.g. retail, automotive, insurance, financial services, CPG, healthcare and education) are constantly challenged by stakeholders to identify the return on investment (“ROI”) from advertising spend. To address this, performance-based advertising, or marketing campaigns where there is linear 1-for-1 accountability around dollars spent and customers acquired, have become increasingly important.

We are solving these issues with solutions that enable marketers to reach high-intent customers at great scale and efficiency across all digital channels. Our solutions are also uniquely designed to address the challenge of measuring ROI, as our performance-based advertising solutions deliver customers rather than leads and provide a real-time feedback loop for marketers to optimize how their ad spend is deployed.



 

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The ecosystem within which we operate includes firms which are differentiated by the value-add they provide to large marketers, and increasingly so, on an ROI basis. Traditional Ad Agencies represent a legacy media cohort that cannot guarantee customer delivery and offer limited technology capabilities while focused on creative services. Digital Marketing Consultants act to implement digital advertising strategies, though outsource execution to third parties and cannot guarantee customer delivery. Digital Ad Platforms, though pervasive, operate as mass-market distribution platforms versus a partnership model and offer limited transparency of data and no guarantee of customer delivery. Performance Marketing, DMS’s segment, offers transparent ROI measurement, predictive capabilities, and clear attribution of ad spend and associated customers acquired, all via a tech-first scalable platform.

 

 

LOGO

The importance of our unique ability to deliver results via Performance Marketing is particularly apparent in the current environment of COVID-19, where marketing teams want to ensure the dollars they spend are truly effective. In this environment where marketers still need to acquire new customers, our ability to quantify advertising spend effectiveness and institute real-time efficiency enhancements is differentiated.

Key trends impacting our market include:

Top Brands Are Transitioning Advertising Budgets From Traditional To Digital Channels

In recent years, marketers have been transitioning where marketing budgets are deployed from traditional media to digital media. We believe that this trend will continue into the foreseeable future, with digital ad expenditures growing steadily as traditional ad expenditures decline. Further, market data suggests that there is significant opportunity for continued digital ad expenditure growth among top media buyers in particular. For instance, analysis of TV ad spend versus internet ad spend reflects an under-indexing for Internet versus time spent. Currently TV ad spend is 33% over-indexed vs. time viewed while internet ad spend is 50% under-indexed vs. time viewed.

Top Digital Advertisers Are Transitioning Budgets To Performance-Based Models Where Data And Analytics Drive Decision Making

An Interactive Advertising Bureau (“IAB”) report from October 2019 categorized media spend based on pricing models and estimated that 62% of the ad spend during the first half of 2019 was purchased using performance-based revenue models. This share was up slightly from 61% the prior year, with performance-based ad spend up 19.1% during the same period. Affiliate marketing, a category of performance-based advertising where a



 

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business rewards an affiliate for visitors or customers brought by the affiliate’s own efforts, has seen significant growth over the past decade, with an estimated $6.4 billion in ad spend in 2019 and expected growth to $8.2 billion by 2022, according to available market data.

The shift to digital performance-based advertising models may be explained by mounting pressure on advertisers to demonstrate return on investment (“ROI”) and advertisers’ resulting shift of expenditures to channels that not only drive performance but also allow them to track tangible outcomes like sales. Salesforce research from 2019 shows an increase in the number of marketers planning to track customer acquisition cost (CAC), cost per lead and marketing ROI, among other marketing metrics. However, proving campaign ROI is the top challenge for marketers according to a 2020 NewsCred survey. By its very nature, digital performance-based marketing supports marketing campaign tracking objectives and solves the ROI tracking challenge by creating linear connections between digital marketing spend and campaign results.

Mobile Use Climbs And Advertising Budgets Follow

As consumers’ mobile device use has rapidly grown to surpass many traditional forms of media consumption, including television use, mobile devices are expected to comprise the dominant share of media consumption time in the years ahead. Following consumer usage trends, brands have been transitioning large shares of their advertising budgets to mobile. Based on available market data, we believe the shift to mobile – though already significant – has only just begun. We believe that we are well equipped for this shift as ~80% of our revenue is mobile originated.

New Digital Tools Enable Optionality in Shopping For Both Complex And Commodity Products

Research indicates that consumers prefer more choices over fewer choices. A large selection of choices can be ideal when consumers are making the “to buy or not to buy” decision, however, when actually selecting products to purchase, consumers often want selections narrowed and recommendations made to assist in the final decision making process.

Digital marketplaces allow consumers to see a wide array of choices when they are early in the decision making process. As consumers pinpoint their criteria, DMS’s technology allows for the narrowing of options presented, tailored using our propriety analytics platform, helping consumers make the right choices and allowing the connection of high-intent prospects with the brands that best match their needs.

With regard to insurance specifically, market data suggests that younger generations are more likely than older generations to research and purchase online. We believe that continued growth of online insurance research and purchases is likely, as consumers are increasingly willing to share personal data if it helps them get the insurance plans that match their needs.



 

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Our Business Model

We are a provider of digital performance marketing solutions to our advertising clients. Our engagements are determined by our clients based on their desired customer outcomes. Examples of our clients’ desired outcomes and needs include new product installs, execution of new insurance policies and developing better brand exposure to capture market share from competitors. We have the capacity to build targeted solutions that meet the array of our clients’ desired outcomes through our technology and direct interaction with consumers. We deliver these consumers to our clients based on achieving metrics, measured through Key Performance Indicators (“KPIs”), which enable us and our clients with mutually understood measurability and accountability.

 

 

LOGO

 

 

LOGO



 

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LOGO

Our solutions create high intent, high conversion prospective customer leads for clients. These leads typically provide clients with a very detailed summary of a prospective customer and are comprised of a detailed accounting of that individual’s information and interest level in the offering that often has been validated by our call center; in some cases this actually represents a direct customer. The lead can be served to the client as a data lead (often call center verified) or as a warm transfer – comprised of a phone call to the client with a prospective customer (whose intent has also often been validated by our call center) on the phone.

Our model works because we own the tools that enhance the two-way marketing feedback loop of sending messages to a specific audience, then expecting a response or action from the consumer that viewed it. Our proprietary tools track success of ad campaigns measured against agreed upon KPIs, and prove to marketers what is working in real-time.

This level of perspective into prospective customers makes us highly valued partners to our clients as we provide a high degree of clarity on who the lead is and subsequent measurability of its conversion into a new customer. With so much of marketing spend moving to enhance the calculation of customer acquisition cost relative to lifetime customer value, our lead curation approach provides industry leading attribution perspective to our clients. We are integral partners to our diverse set of blue-chip clients, including five of the largest U.S. home and auto insurance firms, a top three mortgage lender, a top three consumer reporting firm, several top-tier universities and scaled learning software providers, two of the leading home security companies, and numerous brands within CPG, travel, retail, and health & wellness.

Marketplace Solutions

We build, host and maintain a portfolio of owned and operated websites in a variety of verticals, such as insurance, education, home services, consumer finance and automotive. Consumers value marketplace experiences because they enable product comparisons across the market in one spot and obtain multiple quotes on products or services. Advertisers value marketplace solutions because these platforms allow advertisers to competitively bid on consumers in real-time based on their desired ROIs.

We deploy our own media expenditures to engage consumers with our marketplace solutions and facilitate consumer activity on our owned and operated websites. Advertisers bid for interaction with consumers through our marketplace solutions and pay for such actions as clicks, leads or calls based on their specific criteria sets.

Brand Direct Solutions

We also build digital performance marketing solutions particularly tailored to one of our advertising clients’ brand-specific products or services. These solutions include websites that both we and our clients host and maintain.



 

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Similar to our marketplace solutions, we deploy our own media expenditures to engage consumers. Unlike our marketplace solutions, where advertisers bid for interaction with consumers, brand direct solutions provide consumers with a 1-on-1 experience with the brand-specific products or services being offered. Also similar to our marketplace solutions, the advertisers only pay for prescribed actions such as clicks, leads or calls based on their specific criteria sets.

Software-as-a-Service and Managed Services

We make our proprietary marketing automation software available as a service to clients in the insurance, consumer finance and education verticals. We sell software as a service (“SaaS”) on a contract term and generally charge fees for set up, minimum monthly fees and transactional or volume based charges. Our SaaS offering helps our clients better understand their ad expenditures and thus enables them to make more efficient and effective buying decisions from us, which can enable us to scale their ad expenditures. We believe this embedded software makes our client relationships even stronger.

Our Proprietary Assets

At the core of our business is a proprietary and 1st party data-driven technology platform that allows us to help our clients acquire customers. Our key proprietary assets include the following:

Owned and Operated Websites—We possess vertical marketplaces in the form of owned and operated websites where we are able to attract consumer traffic via paid search placement and present relevant offers. As each customer begins their consumer journey, the complete experience when interacting with our clients’ brands, we use our engagement technology to track all user interactions and build a consumer profile. First party consumer interactions allow us to be more efficient in what leads, clicks and calls we deliver to our clients.

As an example, we own and operate a prominent website in the home security vertical. We pay to attract traffic to the site (i.e. paid search) where consumers enter basic personal information at their discretion including name, email and zip code. Leveraging our consumer profile database, we are able to classify the potential lead and match it with the appropriate offer from one of our advertiser providers.

Customer Database—We have had over $1 billion in ad expenditures flow through our marketplace and brand direct solutions since 2012. This has allowed us to build a proprietary data asset of over 150 million consumer profiles, which also represents a significant barrier to entry for our competitors. The database has allowed us to become more efficient with how we deploy dollars for our clients as we target specific consumer audiences based on millions of precedent interactions. The data warehouse also allows us to analyze the data that has already been aggregated in order to provide our clients with deeper insights into consumer habits as they continue to interact with our owned and operated websites.

As an example of how we would deploy this asset, a home insurance client may seek to acquire new customers though wants to expand their targeted audience to likely buyers with certain income attributes. We are uniquely positioned to provide an audience to target that meets certain attributes (e.g. homeowner, achieves income threshold, recent buyer of a home security system). The experience with which we can apply these audience targeting tools makes the leads, clicks and calls we provide highly valuable to our clients.

Importantly, our technology platform (including the customer database) has been developed with compliance and cybersecurity as a chief priority. As it pertains to the collection and use of first-party data, we operate in full compliance with relevant regulations and solicit consent for any personally identifiable data we collect and manage.



 

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Software-as-a-Service (“SaaS”) Solutions – We are able towhite label” our SaaS solutions for clients in different verticals. With a specific solution in place, our clients are able to track KPIs in real time from all marketing channels. This allows them to have full transparency into how their ad translates into results with the agreed upon KPIs that we measure. We also give clients the tools to seamlessly integrate with multiple third parties, thus driving efficiency. As we develop a solution for specific clients we create an extremely sticky relationship due to the embedded nature of the product within their marketing processes. The exclusive, long-term contractual relationships on our software solutions also allow us the opportunity to cross-sell additional solutions.

As an example of a client’s SaaS solution, one leading insurance client has embedded our technology platform in order to closely track ad spend at scale across their nationwide network of thousands of insurance agents. This allows them to manage the critical task of deploying marketing dollars efficiently across a disparate network of affiliate agents. This is an exclusive arrangement we have negotiated, underpinned by a 10-year contract.

Our Strengths

We believe that we are uniquely positioned to leverage our core competitive strengths to help us continue to deliver a compelling service offering of digital performance marketing solutions. In doing so, we will continue to differentiate ourselves from our competition and, as a result, will continue to provide a compelling value proposition to our advertising clients.

We view our strengths as falling into the following categories:

Proprietary and Innovative Technology Platform—Our technology platform was built to enable us to deliver end-to-end digital performance marketing solutions. We own and operate all meaningful technology utilized in our business and we believe we have better information processing and feedback loops with our clients as a result. These systems enable us to make decisions in real time to better optimize all facets of the digital performance marketing campaigns we run on behalf of our clients to continually strive to meet or exceed our clients’ key performance indicators. In addition, our proprietary technology platform leverages machine-learning capabilities to build upon our media buying experience within various channels so that we can ensure the best possible outcomes for consumers and clients as we continually optimize our ad expenditures against our marketplace and brand direct solutions.

Vertical Agnostic and Channel Agnostic Service Offering—Our ability to provide digital performance marketing solutions transcends verticals and channels, making our business truly agnostic and, as a result, adaptable to the needs of a wide variety of clients. We view the entire TAM (over $150 billion in US digital ad spend projected for 2020) as an opportunity to provide our service offering and thus we believe there is substantial opportunity for growth in existing verticals with existing clients, as well as the opportunity to expand into new verticals where we can add new clients.

Scale in Purchasing MediaOur ability to access diversified media across all digital channels, at scale, that supply targeted media to our marketplace and brand direct solutions has been critical to our growth. Since our inception, we have deployed approximately $1 billion in media expenditures which have been tracked end-to-end through our proprietary technology platform. We believe the knowledge and experience our employees have gained through these data insights and feedback loops as well as the technology we possess enables us to more predictably generate higher levels of sustained profitability across each media source and customers at the most effective cost of media against our peers. The result is our ability to supply our marketplace and brand direct solutions at attractive media costs and margins.

Substantial Database of First-Party Consumer Information—As a result of the over $1 billion in ad spend that has flown through our marketplace and brand direct solutions, we have attracted and interacted with a substantial



 

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volume of consumers on our owned and operated media properties. As a result, we have collected significant data (both demographic and behavioral) as consumers engage with our marketplace and brand direct solutions. We use this data in a variety of ways which allow us to better target ad expenditures based on consumer demographics and behaviors to create improved experiences for consumers and attract higher intent consumers for our clients. This effectively enables us to intelligently target ads now or in the future. We also store this data so that it can be analyzed and enhanced as consumers return to our websites and continue to interact with us. Enhancing data already collected allows for the development of deeper insights and also creates new monetization opportunities.

Recurring Revenue BaseWe employ a results driven model that provides accountability and transparency to the digital marketing process. Clients are able to see the return that is generated from each dollar spent across multiple distribution channels and we drive revenues based on that client success. This ROI model is deeply embedded in client’s marketing processes and creates a highly sticky revenue profile with significant switching costs. In 2018, we had a 95% customer retention rate.

Proven M&A Playbook—We have completed nine M&A deals since 2016 with an average EV / LTM EBITDA of 5.1x. All of the transactions have been self-sourced from strong industry relationships and were vetted during our thorough diligence processes. This has allowed us to completely integrate each acquisition target into our platform in order to extract synergies. From these acquisitions we have also been able to accelerate our growth. We have historically evaluated acquisition opportunities along three criteria: does the target add new verticals or strengthen existing verticals, does the target strengthen our technology platform, and is the target able to enhance our digital distribution capabilities. Most of our acquisition targets have satisfied and exceeded expectations for achieving targets along all three criteria.

Powerful Financial Engine—Throughout the history of our company we have continually outperformed internal expectations and benchmarked well against our peers. Historical organic revenue has been high at approximately 25% from 2017 to 2019 (annualized), accelerated due to significant investments in our platform. These investments have increased our ability to cross-sell leads, enhance our software capabilities and improve our proprietary technology systems. Organic revenue growth has also been paired with high UFCF conversion. Our UFCF conversion is almost 90% of EBITDA as capex needs for the business are minimal. The strong UFCF conversion provides us with the capital necessary for further investment in the business as well as pursuing M&A.

Best-in-Class Management Team—Our management team collectively has 130 years of combined industry experience. In the lifetime of our Company, there has been zero voluntary management attrition. As a result of this transaction our senior executive team will maintain a material ownership interest. At the core of the team is the commitment to strong compliance and monitoring initiatives that drive client collaboration and wins.

Our Growth Strategies

As a leading provider of digital performance marketing solutions, it is our mission to continue to find ways to help advertisers solve the biggest problems they have in the most important aspects of their ad expenditures. Simply put, we want to continue to help advertisers across a multitude of verticals deploy their ad expenditures more efficiently and effectively, while at the same time helping consumers make better and more informed decisions as quickly as they desire. Within our marketplace and brand direct solutions, we leverage proprietary technology and data to empower both advertisers and consumers to reach these goals.

We are working to build the most strategic and most trusted digital performance marketing company in the world. To achieve this goal, we intend to continue to grow our business by pursuing the following strategies:

 

   

Attract more consumers to our marketplace solutions. We plan to expand the number of consumers reaching our marketplaces while simultaneously continuing to focus on curating our engaging consumer



 

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experiences which are customized by media channel and consumer interests. Our growing data assets across our platform enable us to better target and scale all media channels and will power our expansion in developing channels like programmatic display and video.

 

   

Attract more consumers to our brand direct solutions. We plan to continue expanding our reach across paid media, email, affiliate, SMS, display, native and other channels to engage more consumers on behalf of our clients’ brands and become our clients’ single point of entry into the digital performance marketing sector.

 

   

Add more advertising clients in existing verticals. We plan to add new advertising clients by going deeper within existing vertical categories where we have a proven track record of delivering success with respect to our clients’ key performance indicators. We plan to do this by demonstrating the value proposition of our marketplace and brand direct solutions as highly accountable, scalable, and cost effective customer acquisition vehicles.

 

   

Invest in our people, process and technology. We plan to continue to invest in our people, processes and technology platform by growing all keys areas of our business including sales, data science and engineering and advertising operations, thus enabling us to improve the breadth and efficiency of our marketplace and brand direct solutions for advertisers and consumers.

 

   

Expand into new verticals. We plan to expand into additional marketplace solutions like health and life insurance for consumers and providers. We also plan to expand our brand direct solutions into the retail, e-commerce, home services and consumer packaged goods verticals. Over time, we have consistently demonstrated our ability to efficiently expand into new vertical markets by leveraging our expertise and platform.

 

   

Continue to invest in our brand awareness. We have been a recognized industry leader with respect to producing meaningful content and white papers on the advertising industry. Our corporate marketing team lead by our Chief Marketing Officer is highly efficient and effective at creating meaningful and engaging content that over time has raised our brand awareness. We believe that our continued investment in increasing our brand awareness will help us continue to grow inside of the verticals we currently serve with the solutions we currently offer, as well as helping us realize our growth and expansion strategies with respect to new verticals and solutions. Our continued investment in strengthening our brand will help to accelerate our projected growth.

 

   

Continue Executing on M&A Playbook. We believe executing on our proven playbook will continue to accelerate growth in our business. We plan to continue evaluating potential acquisition targets, leveraging our historical success in integration and our existing framework of criteria. We continuously update and foster relationships to maintain a robust pipeline of potential future inorganic opportunities. As a public company, we will have the added benefit and flexibility to offer shares in our public equity as a form of transaction consideration.

 

   

Grow internationally. We plan to selectively launch our marketplace and brand direct solutions in international markets over time. We expect to focus our efforts on those international markets with dynamics similar to the United States. Currently, less than 1% of our revenue comes from outside of the United States. We believe we can expand into these new markets by leveraging our existing technology platform and media expertise. Accordingly, there will be an accelerated growth opportunity as there are no additional development costs as a barrier to entry.

Employees

As of March 31, 2020, we had 372 employees in the U.S. and 14 in Toronto, Canada, for a combined workforce of 386 employees. Our employees were allocated across our groups as follows: 89 employees in Corporate and



 

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Shared Services, 55 in Product, Sales and Media, 126 in DMS Divisions and Solutions, 102 in DMS Call Center and 14 in DMS Toronto. None of our employees are represented by a labor union.

Technology and Infrastructure

We have developed an end-to-end marketing technology suite that connects, tracks and optimizes digital marketing spend to achieve financial success for DMS and to achieve desired outcomes for advertising clients. Our platform is a modular, expansive and API-integrated technology platform which is hosted on Amazon’s AWS cloud infrastructure, allowing the platform to scale rapidly with demand. Data security and redundancy are DMS priorities. We have a Security Operations and Compliance team focused on ensuring we comply with new regulations and policies, and continually providing new training materials for our team. Certain types of data are restricted from entering our ecosystem, including social security numbers, driver’s license numbers, credit card numbers and banking information. We utilize a distributed hosting strategy with virtualization that allows us to backup and redundantly deploy our technology across availability zones and regions. Backups include databases, operating code, and infrastructure configurations. We use a combination of open source technologies with our proprietary software to optimally match our users’ journeys with our advertising partners and marketing needs with the maximum yield. The engineering team at DMS partners with our business development, marketing and leadership teams in order to align our product roadmap and feature set with the ever changing demands of the marketplace. During fiscal years 2017, 2018, and 2019, we invested $0.4 million, $2 million, and $6 million, respectively, in product development, and we will continue to invest in our technology for DMS to remain at the forefront of the performance marketing ecosystem.

Intellectual Property

We rely on a combination of patent, trade secret, trademark and copyright laws in the United States and other jurisdictions together with confidentiality agreements and technical measures to protect the confidentiality of our proprietary rights. To protect our trade secrets, we control access to our proprietary systems and technology and enter into confidentiality and invention assignment agreements with our employees and consultants and confidentiality agreements with other third-parties. We also have registered and unregistered trademarks for the names of many of our websites, and we own the domain registrations for all of our website domains.

Government Regulation

We provide services through a number of different online and offline channels. As a result, we are subject to many federal and state laws and regulations, including restrictions on the use of unsolicited commercial email, such as the CAN-SPAM Act and state email marketing laws, and restrictions on the use of marketing activities conducted by telephone, including the Telemarketing Sales Rule and the Telephone Consumer Protection Act. Our business is also subject to federal and state laws and regulations regarding unsolicited commercial email, telemarketing, user privacy, search engines, Internet tracking technologies, direct marketing, data security, data privacy, pricing, sweepstakes, promotions, intellectual property ownership and infringement, trade secrets, export of encryption technology, acceptable content and quality of goods, and taxation, among others.

In addition, we provide services to a number of our clients that operate in highly regulated industries, particularly in our financial services and education verticals. In our financial services vertical, our websites and marketing services are subject to various federal, state and local laws, including state licensing laws, federal and state laws prohibiting unfair acts and practices, and federal and state advertising laws. In our education client vertical, nearly all of the revenue is generated from post-secondary education institutions. Post-secondary education institutions are subject to extensive federal and state regulations and accrediting agency standards, including the Higher Education Act of 1965 as amended (the “HEA”), Department of Education regulations under the HEA, individual state higher education regulations, as well as regulations of the Federal Trade Commission and Consumer Finance Protection Bureau and other federal agencies. Such state and federal regulations govern many



 

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aspects of these clients’ operations, including marketing and recruiting activities, as well as the school’s eligibility to participate in Title IV federal student financial aid programs, which is the principal source of funding for many of our education clients. Although we are not a higher education institution, we may be required to comply with such education laws and regulations as a result of our role as a vendor to higher education institutions, either directly or indirectly through our contractual arrangements with clients. Since 2010, there have been significant additions and changes to these regulations and increasing enforcement of them by regulators. In addition, Congress is considering changes to the HEA. These changes may place additional regulatory burdens on post-secondary schools generally, and specific initiatives may be targeted at companies like us that serve higher education institutions. In recent years, a particularly high level of regulatory and legislative scrutiny has been focused on for-profit higher education institutions, several of which are clients. The costs of compliance with these regulations and new laws may increase in the future and any failure on our part to comply with such laws may subject us to significant liabilities.

Legal Proceedings

From time to time, we may become involved in legal proceedings and claims arising in the ordinary course of business. Certain of our outstanding legal matters include claims for indeterminate amounts of damages. We record a liability when we believe that it is probable that a loss has been incurred and the amount can be reasonably estimated. Based on our current knowledge, we do not believe that there is a reasonable possibility that the final outcome of pending or threatened legal proceedings to which we are a party, either individually or in the aggregate, will have a material adverse effect on our financial position, results of operations and cash flows. However, the outcome of such legal matters is subject to significant uncertainties.

The Parties to the Business Combination

Leo

Leo is a blank check company incorporated on November 29, 2017 as a Cayman Islands exempted company and incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. Leo has neither engaged in any operations nor generated any revenue to date. Based on Leo’s business activities, it is a “shell company” as defined under the Exchange Act because it has no operations and nominal assets consisting almost entirely of cash.

On February 15, 2018, Leo consummated its initial public offering of its units, with each unit consisting of one public share and one-half of one public warrant. Simultaneously with the closing of the initial public offering, Leo completed the private sale of 4,000,000 private placement warrants at a purchase price of $1.50 per private placement warrant, to Sponsor generating gross proceeds to us of $6,000,000. The private placement warrants are substantially identical to the public warrants sold as part of the units in Leo’s initial public offering, except that Sponsor agreed not to transfer, assign or sell any of the private placement warrants (except to certain permitted transferees) until 30 days after the completion of Leo’s initial business combination. The private placement warrants are also not redeemable by Leo so long as they are held by Sponsor or its permitted transferees, and they may be exercised by Sponsor and its permitted transferees on a cashless basis.

Following the closing of Leo’s initial public offering, an amount equal to $200.0 million ($10.00 per unit) of the net proceeds from its initial public offering and the sale of the private placement warrants was placed in the trust account. The trust account may be invested only in U.S. government treasury bills with a maturity of 180 days or less or in money market funds investing solely in United States Treasuries and meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended, which invest only in direct U.S. government obligations. As of             , 2020, funds in the trust account totaled approximately $             and



 

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were held in money market funds. These funds will remain in the trust account, except for the withdrawal of interest to pay taxes, if any, until the earliest of (1) the completion of Leo’s initial business combination, (2) the redemption of any public shares properly tendered in connection with a shareholder vote to amend the Existing Organizational Documents to modify the substance and timing of our obligation to redeem 100% of the public shares if Leo does not complete a business combination by July 31, 2020, or (3) the redemption of all of the public shares if Leo is unable to complete a business combination by July 31, 2020 (unless such date is extended in accordance with the Existing Organizational Documents), subject to applicable law.

Leo’s units, public shares and public warrants are listed on the NYSE under the symbols “LHC.U,” “LHC” and “LHC WS,” respectively.

Leo’s principal executive office is located at 21 Grosvenor Place, London, SW1X 7HF, United Kingdom. Its telephone number is +44 20 7201 2200. Leo’s corporate website address is https://www.lioncapital.com/leo. Leo’s website and the information contained on, or that can be accessed through, the website is not deemed to be incorporated by reference in, and is not considered part of, this Proxy Statement/Prospectus.

DMS

DMS is a leading provider of technology and digital performance marketing solutions. DMS deploys a robust database of consumer intelligence and leverages significant proprietary media distribution to a diverse set of advertisers across a variety of end markets including but not limited to insurance, education, health & wellness, consumer finance and home services.

DMS’s principal executive office is located at 4800 140th Avenue N., Suite 101, Clearwater, Florida 33762. Its telephone number is (877) 236-8632. DMS’s corporate website address is https://digitalmediasolutions.com. DMS’s website and the information contained on, or that can be accessed through, the website is not deemed to be incorporated by reference in, and is not considered part of, this Proxy Statement/Prospectus.

Proposals to be Put to the Shareholders of Leo at the Extraordinary General Meeting

The following is a summary of the proposals to be put to the extraordinary general meeting of Leo and certain transactions contemplated by the Business Combination Agreement. Each of the proposals below, except the Adjournment Proposal, is cross-conditioned on the approval of each other. The Adjournment Proposal is not conditioned upon the approval of any other proposal set forth in this proxy statement/prospectus. The transactions contemplated by the Business Combination Agreement will be consummated only if the Condition Precedent Proposals are approved at the extraordinary general meeting.

BCA Proposal

As discussed in this proxy statement/prospectus, Leo is asking its shareholders to approve by special resolution the Business Combination Agreement, pursuant to which, among other things, following the Domestication of Leo to Delaware as described below, Leo will effect the Equity Purchase in exchange for the Business Combination Consideration, certain related agreements (including the Subscription Agreements, the Amended Partnership Agreement, the Tax Receivable Agreement and the Surrender Agreement) and the transactions contemplated thereby. After consideration of the factors identified and discussed in the section entitled “BCA Proposal—Leo’s Board of Directors’ Reasons for the Business Combination,” Leo’s board of directors concluded that the Business Combination met all of the requirements disclosed in the prospectus for Leo’s initial public offering, including that the businesses of DMS had a fair market value of at least 80% of the



 

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balance of the funds in the trust account at the time of execution of the Business Combination Agreement. For more information about the transactions contemplated by the Business Combination Agreement, see “BCA Proposal.”

Business Combination Consideration

In accordance with the terms and subject to the conditions of the Business Combination Agreement, Leo will, in connection with the Equity Purchase, purchase the equity interests of Blocker Corp and a portion of the units of DMS held by Prism and Clairvest Direct Seller (which units will be immediately contributed to the capital of Blocker Corp) in exchange for a combination of cash consideration, the Seller Warrants and shares of New DMS Class B Common Stock, and shares of New DMS Class C Common Stock pursuant to a conversion ratio to be determined at the Closing. The cash consideration, Seller Warrants, shares of New DMS Class B Common Stock, and shares of New DMS Class C Common Stock constitute the Business Combination Consideration.

For further details, see “BCA Proposal—The Business Combination Agreement—Business Combination Consideration.”

Closing Conditions

The consummation of the Business Combination is conditioned upon, among other things, (1) the approval of the BCA Proposal, the Domestication Proposal, the Security Issuance Proposal and certain of the Organizational Documents Proposals being obtained; (2) all required waiting periods or approvals under the HSR Act and all applicable antitrust laws shall have expired, been received or terminated; (3) the consummation of the Domestication immediately prior to the Closing; (4) the consummation of the PIPE Investment immediately prior to the Closing; (5) 1,500,000 Class B ordinary shares and 2,000,000 private placement warrants of Leo shall have been surrendered and forfeited by Sponsor and the Leo independent directors, as applicable, in accordance with the Surrender Agreement; (6) the absence of a Material Adverse Effect (as defined in the Business Combination Agreement); (7) the net tangible assets of New DMS (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) being at least $5,000,001; (8) cash proceeds from the trust account established for the purpose of holding the net proceeds of Leo’s initial public offering and certain of the proceeds from its concurrent private placement of warrants, together with the proceeds from the PIPE Investment, net of any amounts paid to Leo shareholders that exercise their redemption rights in connection with the Business Combination, equaling no less than $200,000,000 at the Closing; and (9) the shares of New DMS Class A Common Stock to be issued in connection with the Business Combination Agreement will have been approved for listing on the NYSE. Therefore, unless these conditions are waived by the applicable parties to the Business Combination Agreement, the Business Combination Agreement could terminate and the proposed business combination may not be consummated.

For further details, see “BCA Proposal—The Business Combination Agreement—Closing Conditions.”

Domestication Proposal

As discussed in this proxy statement/prospectus, Leo will ask its shareholders to approve by special resolution the Domestication Proposal. As a condition to closing the Business Combination pursuant to the terms of the Business Combination Agreement, the board of directors of Leo has unanimously approved the Domestication Proposal. The Domestication Proposal, if approved, will authorize a change of Leo’s jurisdiction of incorporation from the Cayman Islands to the State of Delaware. Accordingly, while Leo is currently incorporated as an exempted company under the Cayman Islands Companies Law, upon Domestication, New DMS will be governed by the DGCL. There are differences between Cayman Islands corporate law and



 

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Delaware corporate law as well as the Existing Organizational Documents and the Proposed Organizational Documents. Accordingly, we encourage shareholders to carefully consult the information set out below under “Comparison of Corporate Governance and Shareholder Rights.”

On the effective date of the Domestication, (1) the issued and outstanding Class A ordinary shares will convert automatically by operation of law, on a one-for-one basis, into shares of New DMS Class A Common Stock; (2) the issued and outstanding redeemable warrants that were registered pursuant to the IPO registration statement will automatically become redeemable warrants to acquire shares of New DMS Class A Common Stock (no other changes will be made to the terms of any issued and outstanding public warrants as a result of the Domestication); (3) each issued and outstanding unit will be cancelled and will entitle the holder thereof to one share of New DMS Class A Common Stock and one-half of one redeemable warrant to acquire one share of New DMS Class A Common Stock; (4) each issued and outstanding Class B ordinary share, par value $0.0001 per share, of Leo will convert automatically by operation of law, on a one-for-one basis without giving effect to any rights of adjustment or other anti-dilution protections which adjustment and protections will have been waived by the holders of the Class B ordinary shares pursuant to the Surrender Agreement, into shares of New DMS Class A Common Stock; and (5) the issued and outstanding warrants of Leo issued in a private placement will automatically become warrants to acquire shares of New DMS Class A Common Stock (no other changes will be made to the terms of any issued and outstanding private placement warrants as a result of the Domestication).

For further details, see “Domestication Proposal.”

Organizational Documents Proposals

Leo will ask its shareholders to approve by special resolution six separate proposals (collectively, the “Organizational Documents Proposals”) in connection with the replacement of the Existing Organizational Documents, under Cayman Islands law, with the Proposed Organizational Documents, under the DGCL. Leo’s board has unanimously approved each of the Organizational Documents Proposals and believes such proposals are necessary to adequately address the needs of New DMS after the Business Combination. Approval of each of the Organizational Documents Proposals is a condition to the consummation of the Business Combination. A brief summary of each of the Organizational Documents Proposals is set forth below. These summaries are qualified in their entirety by reference to the complete text of the Proposed Organizational Documents.

 

  A.

Organizational Documents Proposal A—to authorize the change in the authorized capital stock of Leo from (i) 200,000,000 Class A ordinary shares, 20,000,000 Class B ordinary shares and 1,000,000 preferred shares of Leo to (ii) 600,000,000 shares of common stock, par value $0.0001 per share, of New DMS, consisting of (a)                      shares of New DMS Class A Common Stock, (b)                      shares of New DMS Class B Common Stock, (c)                      shares of New DMS Class C common stock, and (d) 100,000,000 shares of New DMS Preferred Stock.

 

  B.

Organizational Documents Proposal B—to authorize the New DMS Board to issue any or all shares of New DMS Preferred Stock in one or more classes or series, with such terms and conditions as may be expressly determined by the New DMS Board and as may be permitted by the DGCL.

 

  C.

Organizational Documents Proposal C—to provide that certain provisions of the certificate of incorporation of New DMS are subject to the Director Nomination Agreement.

 

  D.

Organizational Documents Proposal D—to authorize the removal of the ability of New DMS stockholders to take action by written consent in lieu of a meeting, from and after the first date that Prism, Clairvest and any of their respective affiliates ceases to collectively own, in the aggregate, at least fifty percent (50%) of the outstanding voting stock of New DMS.

 

  E.

Organizational Documents Proposal E—to authorize the grant of an explicit waiver regarding corporate opportunities to New DMS and its directors.



 

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  F.

Organizational Documents Proposal F—to authorize all other changes in connection with the replacement of Existing Organizational Documents with the Proposed Organizational Documents as part of the Domestication, including (1) changing the post-Business Combination corporate name from “Leo Holdings Corp.” to “Digital Media Solutions, Inc.” (which is expected to occur after the Domestication in connection with the Business Combination), (2) making New DMS’s corporate existence perpetual, (3) adopting Delaware as the exclusive forum for certain stockholder litigation, (4) electing to not be governed by Section 203 of the DGCL and limiting certain corporate takeovers by interested stockholders and (5) removing certain provisions related to our status as a blank check company that will no longer be applicable upon consummation of the Business Combination, all of which Leo’s board of directors believes is necessary to adequately address the needs of New DMS after the Business Combination.

The Proposed Organizational Documents differ in certain material respects from the Existing Organizational Documents and we encourage shareholders to carefully consult the information set out in the section entitled “Organizational Documents Proposals” and the full text of the Proposed Organizational Documents of New DMS, attached hereto as Annexes C and D.

Security Issuance Proposal

Our shareholders are also being asked to approve, by ordinary resolution, the Security Issuance Proposal.

Our public shares are listed on the NYSE and, as such, we are seeking shareholder approval of the issuance of shares of New DMS Class A Common Stock to the PIPE Investors, including an affiliate of Sponsor, and the issuance of the Seller Warrants, New DMS Class B Common Stock, including the New DMS Class A Common Stock into which the DMS Units redeemable in accordance with the Amended Partnership Agreement, and New DMS Class C Common Stock, including the New DMS Class A Common Stock into which the DMS Units are convertible in accordance with the Proposed Certificate of Incorporation, to the Sellers, to the extent such issuance would require a shareholder vote under NYSE Listing Rule 312.03, in each case, in order to comply with NYSE Listing Rule 312.03. For additional information, see “Security Issuance Proposal.”

Seller Nominee Appointment Proposal

Our shareholders are also being asked to approve, by ordinary resolution, the Seller Nominee Appointment Proposal.

Pursuant to Section 9.14(g) of the Business Combination Agreement, Prism intends to nominate Fernando Borghese, Clairvest intends to nominate Robbie Isenberg and James Miller, and Prism and Clairvest intend to mutually nominate Mary Minnick to serve on the New DMS Board as of the Closing. For additional information, see “Seller Nominee Appointment Proposal.”

Incentive Award Plan Proposal

Our shareholders are also being asked to approve, by ordinary resolution, the Incentive Award Plan Proposal. Pursuant to the Plan, a copy of which is attached to this proxy statement/prospectus as Annex E,                      of New DMS Class A Common Stock outstanding immediately following the consummation of the Business Combination will be reserved for issuance under the Plan. For additional information, see “Incentive Award Plan Proposal.”

Adjournment Proposal

If, based on the tabulated vote, there are not sufficient votes at the time of the extraordinary general meeting to authorize Leo to consummate the Business Combination (because any of the Condition Precedent Proposals



 

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have not been approved), Leo’s board of directors may submit a proposal to adjourn the extraordinary general meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies. For additional information, see “Adjournment Proposal.”

Each of the BCA Proposal, the Domestication Proposal, the Required Organizational Documents Proposals and Security Issuance Proposal is conditioned on the approval and adoption of each of the other Condition Precedent Proposals. The Organizational Documents Proposals that are not Required Organizational Documents Proposals, the Seller Nominee Appointment Proposal and the Incentive Award Plan Proposal, are conditioned on the approval of the Condition Precedent Proposals. The Adjournment Proposal is not conditioned on any other proposal.

Leo’s Board of Directors’ Reasons for the Business Combination

Leo was organized for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.

In evaluating the Business Combination, the Leo board of directors consulted with Leo’s senior management and considered a number of factors.

In particular, the Leo board of directors considered, among other things, the following factors, although not weighted or in any order of significance:

 

  A.

Proprietary and innovative technology platform;

 

  B.

Services adaptable to a variety of clients;

 

  C.

Ability to purchase at scale;

 

  D.

Database of consumer information;

 

  E.

Strong customer retention;

 

  F.

History of financial performance and successful acquisitions;

 

  G.

Proven and experienced management team;

 

  H.

Strategic plan with multiple levers of growth;

 

  I.

Financial condition;

 

  J.

Terms of transaction;

 

  K.

Results of review of transactions;

 

  L.

Continued ownership by sellers; and

 

  M.

Results of due diligence

The Leo board of directors also identified and considered the following factors and risks weighing negatively against pursuing the Business Combination, although not weighted or in any order of significance:

 

   

Potential inability to complete the Business Combination;

 

   

Business risks of DMS;

 

   

The post-Business Combination corporate governance and the terms of the Director Nomination Agreement;

 

   

The limits of the board’s review of the Business Combination;



 

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No survival of remedies for breach of representations, warranties or covenants of DMS; and

 

   

Interests of Leo’s directors and executive officers in the Business Combination.

For a more complete description of the Leo board of directors’ reasons for approving the Business Combination and the factors and risks considered by the Leo board of directors, see the section entitled “BCA Proposal—Leo’s Board of Directors’ Reasons for the Business Combination.”

Related Agreements

This section describes certain additional agreements entered into or to be entered into pursuant to the Business Combination Agreement. For additional information, see “BCA Proposal—Related Agreements.”

PIPE Investment

Leo has entered into the Subscription Agreements with the PIPE Investors pursuant to which the PIPE Investors have collectively subscribed for 10,000,000 shares of New DMS Class A Common Stock for an aggregate purchase price of $100.0 million, 7,200,000 shares of which were subscribed for and $72.0 million of which will be funded by Sponsor PIPE Entity. The closing of the PIPE Investment is contingent upon, among other things, the substantially concurrent consummation of the Business Combination. Pursuant to the Subscription Agreements, the PIPE Investors will be entitled to certain customary registration rights. The shares of New DMS Class A Common Stock to be offered and sold in connection with the PIPE Investment have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and/or Regulation D or Regulation S promulgated thereunder without any form of general solicitation or general advertising. For additional information, see “BCA Proposal—Related Agreements—PIPE Investment.”

Director Nomination Agreement

At the Closing, New DMS intends to enter into the Director Nomination Agreement, pursuant to which, among other things, Sponsor, Sponsor PIPE Entity, Prism and Clairvest will each have certain rights to designate individuals to be nominated for election to the New DMS Board, and the Chief Executive officer of New DMS will be appointed as a member of the New DMS Board. For additional information, see “BCA Proposal—Related Agreements— Director Nomination Agreement.”

Surrender Agreement

Leo, Sponsor and the Leo independent directors entered into the Surrender Agreement on April 23, 2020, pursuant to which, as a condition to the Closing and the PIPE Investment, among other things, (a) Sponsor will surrender and forfeit to Leo 2,000,000 private placement warrants and, together with the Leo independent directors, an aggregate of 1,500,000 Class B ordinary shares, in each case for no consideration and as a contribution to the capital of Leo to be effectuated in connection with the consummation of the Business Combination and (b) Sponsor and the Leo independent directors agreed to waive any adjustment to the conversion ratio set forth in the Existing Organizational Documents or any other anti-dilution or similar protection with respect to the Class B ordinary shares of Leo held by them that may result from the PIPE Investment and the transactions contemplated by the Business Combination, in each case on the terms and conditions set forth in the Surrender Agreement. For further details, see “BCA Proposal—Related Agreements—Surrender Agreement.”

Amended and Restated Registration Rights Agreement

At the Closing, New DMS, Prism, Clairvest Direct Seller, Blocker Seller 1, Blocker Seller 2, Sponsor PIPE Entity and the holders of ordinary shares of Leo who are parties to the existing registration rights agreement in



 

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respect to ordinary shares held by such holders will enter into an amended and restated registration rights agreement, providing for, among other things, customary registration rights, including demand and piggy-back rights, subject to cooperation and cut-back provisions. For additional information, see “BCA Proposal—Related Agreements—Amended and Restated Registration Rights Agreement.”

Amended Partnership Agreement

Following the Business Combination, Clairvest Direct Seller and Prism will continue to hold DMS Units subject to and in accordance with the Amended Partnership Agreement. In connection with the reorganization of New DMS in an Up-C structure, DMS and its current equity holders will amend and restate the limited liability company agreement of DMS in its entirety as the Amended Partnership Agreement to, among other things, provide Clairvest Direct Seller and Prism the right to redeem their DMS Units for cash or, at New DMS’s option, New DMS may acquire such DMS Units (which DMS Units are expected to be contributed to Blocker Corp) in exchange for cash or shares of New DMS Class A Common Stock, in each case subject to certain restrictions set forth therein. DMS Units acquired by New DMS are expected to be contributed to Blocker Corp. For additional information, see “BCA Proposal—Related Agreements—Amended Partnership Agreement.”

Tax Receivable Agreement

In connection with the Business Combination and the reorganization of the post-business combination company in an Up-C structure, New DMS and Blocker Corp will enter into the Tax Receivable Agreement with the Sellers. Pursuant to the Tax Receivable Agreement, New DMS will be required to pay the Sellers (i) 85% of the amount of savings, if any, in U.S. federal, state and local income tax that New DMS and Blocker Corp actually realize as a result of (A) certain existing tax attributes of Blocker Corp acquired in the Business Combination, and (B) increases in Blocker Corp’s allocable share of the tax basis of the tangible and intangible assets of DMS and certain other tax benefits related to the payment of the cash consideration pursuant to the Business Combination Agreement and any redemptions of DMS Units or exchanges of DMS Units for cash or shares of New DMS Class A Common Stock after the Business Combination and (ii) 100% of certain refunds of pre-Closing taxes of DMS and Blocker Corp received during a taxable year beginning within two (2) years after the Closing. All such payments to the Sellers will be New DMS’s obligation, and not that of DMS. For additional information, see “BCA Proposal—Related Agreements—Tax Receivable Agreement.”

Amended and Restated Warrant Agreement

At the Closing and in connection with the issuance of the Seller Warrants to the Sellers as part of the Business Combination Consideration, New DMS and Continental will amend the warrant agreement that is governing the terms of the warrants of Leo. For additional information, see “BCA Proposal—Related Agreements—Amended and Restated Warrant Agreement.”

Lock-Up Agreement

At the Closing, Sellers will execute and deliver to New DMS the Lock-Up Agreement, pursuant to which, among other things, Sellers will agree to certain restrictions regarding the transfer of New DMS Class A Common Stock held or to be received by them, from the Closing until the earlier of 180 days after the date of the Closing. For additional information, see “BCA Proposal—Related Agreements—Lock-Up Agreement.”



 

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Organizational Structure

The following diagrams illustrate the ownership structure of DMS and Leo as of the date of this proxy statement/prospectus.

 

LOGO   LOGO


 

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The following diagram illustrates the ownership structure of New DMS immediately following consummation of the Business Combination.

 

LOGO

Our organizational structure following the completion of the Business Combination will be an Up-C structure. This organizational structure will allow the Sellers (other than Blocker Seller 1 and Blocker Seller 2) to retain their equity ownership in DMS, an entity that is classified as a partnership, or “passthrough entity”, for U.S. federal income (and certain state and local) tax purposes, in the form of DMS Units. Blocker Seller 1, Blocker Seller 2 and those investors who, prior to the Business Combination, held Class A ordinary shares or Class B ordinary shares of Leo will, by contrast, hold their equity ownership in New DMS, a Delaware corporation that is a domestic corporation for U.S. federal income tax purposes. We believe that the Sellers (other than Blocker Seller 1 and Blocker Seller 2) will generally find it advantageous to continue to hold their equity interests in an entity that is not taxable as a corporation for U.S. federal income tax purposes. We do not believe that our Up-C structure will give rise to any significant business or strategic benefit or detriment to us.

Following the business combination, we will receive the same benefits as a result of our ownership of Blocker Corp which will own equity in DMS, an entity that is classified as a partnership, or “passthrough” entity, for U.S. federal income (and certain state and local) tax purposes, in the form of DMS Units. As a result of the Business Combination, Blocker Corp will obtain a step-up in tax basis in the portion of the DMS assets treated as purchased with the Cash Consideration. This step-up in tax basis will provide us with certain tax benefits, such as future depreciation and amortization deductions that can reduce the taxable income allocable to us. As described immediately below, a portion of these benefits will be payable to the Sellers under the Tax Receivable Agreement. See the section entitled “Risk Factors—Risks Related to Business Combination and Leo” and “Risk Factors—Risks Related to the Consummation of the Domestication for additional information on our organizational structure.



 

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Following the Closing, pursuant to the Tax Receivable Agreement, New DMS will be required to pay the Sellers (i) 85% of the amount of savings, if any, in U.S. federal, state and local income tax that New DMS and Blocker Corp actually realize as a result of (A) certain existing tax attributes of Blocker Corp acquired in the Business Combination, and (B) increases in Blocker Corp’s allocable share of the tax basis of the tangible and intangible assets of DMS and certain other tax benefits related to the payment of the cash consideration pursuant to the Business Combination Agreement and any redemptions of DMS Units or exchanges of DMS Units for cash or shares of New DMS Class A Common Stock after the Business Combination and (ii) 100% of certain refunds of pre-Closing taxes of DMS and Blocker Corp received during a taxable year beginning within two (2) years after the Closing. All such payments to the Sellers will be New DMS’s obligation, and not that of DMS. For additional information on the Tax Receivable Agreement, see “BCA Proposal—Related Agreements—Tax Receivable Agreement.

Ownership of New DMS

As of the date of this proxy statement/prospectus, there are 24,312,807 ordinary shares issued and outstanding, which includes an aggregate of 5,000,000 Class B ordinary shares. As of the date of this proxy statement/prospectus, there is outstanding an aggregate of 14,000,000 warrants, comprised of 4,000,000 private placement warrants held by Sponsor and the 10,000,000 public warrants. Each whole warrant entitles the holder thereof to purchase one Class A ordinary share and, following the Domestication, will entitle the holder thereof to purchase one share of New DMS Class A Common Stock. Therefore, as of the date of this proxy statement/prospectus (without giving effect to the Business Combination and assuming that none of Leo’s outstanding Class A ordinary shares are redeemed in connection with the Business Combination), the Leo fully-diluted share capital would be 38,312,807 ordinary shares.

It is anticipated that, upon completion of the Business Combination, (1) Leo’s public shareholders are expected to own approximately 33.0% of the outstanding New DMS Class A Common Stock on an as-converted and as-redeemed basis, representing approximately 19.2% of the total outstanding voting interests in New DMS capital stock, (2) Prism and Clairvest Direct Seller (without taking into account any public shares held by such DMS equityholders prior to the consummation of the Business Combination), are expected to collectively own all of the outstanding New DMS Class B Common Stock, representing approximately 25.9% of the outstanding New DMS Class A Common Stock on an as-converted and as-redeemed basis and approximately 39.8% of the total outstanding voting interests of the New DMS capital stock, (3) Blocker Sellers (without taking into account any public shares held by Blocker Sellers prior to the consummation of the Business Combination), are expected to collectively own all of the New DMS Class C Common Stock, representing approximately 18% of the outstanding New DMS Class A Common Stock on an as-converted and as-redeemed basis and approximately 27.6% of the total outstanding voting interests of the New DMS capital stock, (4) the Class B Shareholders are expected to own approximately 6% of the outstanding New DMS Class A Common Stock on an as-converted and as-redeemed basis, representing approximately 3.5% of the total outstanding voting interests in New DMS capital stock and (5) the PIPE Investors (including Sponsor PIPE Entity) are expected to own approximately 17.1% of the outstanding New DMS Class A Common Stock on an as-converted and as-redeemed basis, representing approximately 9.9% of the total outstanding voting interests in New DMS capital stock. These percentages (i) assume that none of Leo’s outstanding Class A ordinary shares are redeemed in connection with the Business Combination, (ii) reflect the surrender and forfeiture by Sponsor and the Leo independent directors of 1,500,000 Class B ordinary shares of Leo pursuant to the Surrender Agreement, (iii) assume 10,000,000 shares of New DMS Class A Common Stock are issued to the PIPE Investors upon the consummation of the PIPE Investment, (iv) do not take into account public warrants or private placement warrants to purchase New DMS Class A Common Stock that will be outstanding immediately following the completion of the Business Combination and (v) do not assume the issuance of any shares upon completion of the Business Combination under the Plan. If the actual facts are different than these assumptions, the percentage ownership retained by the Company’s existing stockholders in New DMS will be different.



 

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The following table illustrates varying ownership levels in New DMS Class A Common Stock on an as-converted and as-redeemed basis immediately following the consummation of the Business Combination based on the assumptions above except for varying levels of redemptions by the public shareholders:

 

     Share Ownership in New DMS  
     No redemptions     Maximum redemptions(1)  
     Percentage of Outstanding
Shares
    Percentage of Outstanding
Shares
 

Sellers(2)

     43.9     60.7

Leo’s public shareholders

     33.0     16.4

Former Leo Class B Shareholders

     6.0     5.9

PIPE Investors(3)

     17.1     17.0

 

(1)

Assumes that 9,656,404 public shares are redeemed in connection with the Business Combination.

(2)

Includes DMS Units, New DMS Class B Common Stock and New DMS Class C Common Stock to be owned by Sellers. In the maximum redemption scenario, Sellers will own New DMS Class B Common Stock and New DMS Class C Common Stock representing the same percentage of the voting interests of New DMS capital stock as in the no redemption scenario: 67.4%.

(3)

Includes 7,200,000 shares to be owned by Sponsor PIPE Entity.

For further details, see “BCA Proposal—The Business Combination Agreement—Business Combination Consideration.”

Date, Time and Place of Extraordinary General Meeting of Leo’s Shareholders

The extraordinary general meeting of Leo, will be held at 9:00 a.m., Eastern Time, on                 , 2020, at the offices of Kirkland & Ellis LLP, located at 601 Lexington Avenue, New York, New York 10022, to consider and vote upon the proposals to be put to the extraordinary general meeting, including if necessary, the Adjournment Proposal, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the extraordinary general meeting, each of the Condition Precedent Proposals have not been approved.

Voting Power; Record Date

Leo shareholders will be entitled to vote or direct votes to be cast at the extraordinary general meeting if they owned ordinary shares at the close of business on                 , 2020, which is the “record date” for the extraordinary general meeting. Shareholders will have one vote for each ordinary share owned at the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted. Our warrants do not have voting rights. As of the close of business on the record date, there were 24,312,807 ordinary shares issued and outstanding, of which 19,312,807 were issued and outstanding public shares.

Quorum and Vote of Leo Shareholders

A quorum of Leo shareholders is necessary to hold a valid meeting. A quorum will be present at the extraordinary general meeting if the holders of a majority of the issued and outstanding ordinary shares entitled to vote at the extraordinary general meeting are represented in person or by proxy. As of the record date for the extraordinary general meeting, 12,156,404 ordinary shares would be required to achieve a quorum.

The Class B Shareholders have agreed to vote all of their ordinary shares in favor of the proposals being presented at the extraordinary general meeting. As of the date of this proxy statement/prospectus, the Class B Shareholders own approximately 20.0% of the issued and outstanding ordinary shares.



 

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The proposals presented at the extraordinary general meeting require the following votes:

 

  (i)

BCA Proposal: The approval of the BCA Proposal requires ordinary resolution under Cayman Islands law, being the affirmative vote of holders of at least a majority of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting.

 

  (ii)

Domestication Proposal: The approval of the Domestication Proposal requires a special resolution under Cayman Islands law, being the affirmative vote of holders of at least two-thirds of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting.

 

  (iii)

Organizational Documents Proposals: The separate approval of each of the Organizational Documents Proposals requires a special resolution under Cayman Islands law, being the affirmative vote of holders of at least two-thirds of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting.

 

  (iv)

Security Issuance Proposal: The approval of the Security Issuance Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of a majority of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting.

 

  (v)

Seller Nominee Appointment Proposal: The approval of the Seller Nominee Appointment Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of a majority of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting.

 

  (vi)

Incentive Award Plan Proposal: The approval of the Incentive Award Plan Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of a majority of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting.

 

  (vii)

Adjournment Proposal: The approval of the Adjournment Proposal requires an ordinary resolution under Cayman Islands law, being the affirmative vote of a majority of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at the extraordinary general meeting.

We intend to hold the extraordinary general meeting in person. However, we are sensitive to the public health and travel concerns our shareholders may have and recommendations that public health officials may issue in light of the evolving coronavirus (COVID-19) situation. As a result, we may impose additional procedures or limitations on meeting attendees or may decide to hold the meeting in a different location or solely by means of remote communication (i.e., a virtual-only meeting). We plan to announce any such updates in a press release filed with the SEC and on our proxy website                     , and we encourage you to check this website prior to the meeting if you plan to attend.

Redemption Rights

Pursuant to the Existing Organizational Documents, a public shareholder may request of Leo that New DMS redeem all or a portion of its public shares for cash if the Business Combination is consummated. As a holder of public shares, you will be entitled to receive cash for any public shares to be redeemed only if you:

 

  (i)

(a) hold public shares, or (b) if you hold public shares through units, you elect to separate your units into the underlying public shares and warrants prior to exercising your redemption rights with respect to the public shares;

 

  (ii)

submit a written request to Continental, Leo’s transfer agent, in which you (i) request that New DMS redeem all or a portion of your public shares for cash, and (ii) identify yourself as the beneficial holder of the public shares and provide your legal name, phone number and address; and



 

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  (iii)

deliver your public shares to Continental, Leo’s transfer agent, physically or electronically through DTC.

Holders must complete the procedures for electing to redeem their public shares in the manner described above prior to 5:00 p.m. Eastern Time on                 , 2020 (two business days before the extraordinary general meeting) in order for their shares to be redeemed.

Holders of units must elect to separate the units into the underlying public shares and public warrants prior to exercising redemption rights with respect to the public shares. If holders hold their units in an account at a brokerage firm or bank, holders must notify their broker or bank that they elect to separate the units into the underlying public shares and public warrants, or if a holder holds units registered in its own name, the holder must contact Continental, Leo’s transfer agent, directly and instruct them to do so. The redemption rights include the requirement that a holder must identify itself in writing as a beneficial holder and provide its legal name, phone number and address to Continental in order to validly redeem its shares. Public shareholders may elect to redeem all or a portion of the public shares held by them regardless of if or how they vote in respect of the BCA Proposal. If the Business Combination is not consummated, the public shares will be returned to the respective holder, broker or bank. If the Business Combination is consummated, and if a public shareholder properly exercises its right to redeem all or a portion of the public shares that it holds and timely delivers its shares to Continental, Leo’s transfer agent, New DMS will redeem such public shares for a per-share price, payable in cash, equal to the pro rata portion of the trust account, calculated as of two business days prior to the consummation of the Business Combination. For illustrative purposes, as of                 , 2020, this would have amounted to approximately $                per issued and outstanding public share. If a public shareholder exercises its redemption rights in full, then it will be electing to exchange its public shares for cash and will no longer own public shares. The redemption takes place following the Domestication and accordingly it is shares of New DMS Class A Common Stock that will be redeemed immediately after consummation of the Business Combination. See “Extraordinary General Meeting of Leo—Redemption Rights” in this proxy statement/prospectus for a detailed description of the procedures to be followed if you wish to redeem your public shares for cash.

Notwithstanding the foregoing, a public shareholder, together with any affiliate of such public shareholder or any other person with whom such public shareholder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from redeeming its public shares with respect to more than an aggregate of 15% of the public shares. Accordingly, if a public shareholder, alone or acting in concert or as a group, seeks to redeem more than 15% of the public shares, then any such shares in excess of that 15% limit would not be redeemed for cash.

The Class B Shareholders have agreed to vote all of their ordinary shares in favor of the proposals being presented at the extraordinary general meeting and waive their redemption rights with respect to such ordinary shares in connection with the consummation of the Business Combination. The Class B ordinary shares will be excluded from the pro rata calculation used to determine the per-share redemption price. As of the date of this proxy statement/prospectus, the Class B Shareholders own approximately 20.0% of the issued and outstanding ordinary shares.

Holders of the warrants will not have redemption rights with respect to the warrants.

Appraisal Rights

Neither Leo shareholders nor Leo warrant holders have appraisal rights in connection with the Business Combination or the Domestication under the Cayman Islands Companies Law or under the DGCL.



 

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Proxy Solicitation

Proxies may be solicited by mail, telephone or in person. Leo has engaged Morrow Sodali LLC to assist in the solicitation of proxies.

If a shareholder grants a proxy, it may still vote its shares in person if it revokes its proxy before the extraordinary general meeting. A shareholder also may change its vote by submitting a later-dated proxy as described in the section entitled “Extraordinary General Meeting of Leo —Revoking Your Proxy.”

Interests of Leo’s Directors and Executive Officers in the Business Combination

When you consider the recommendation of Leo’s board of directors in favor of approval of the BCA Proposal, you should keep in mind that the Class B Shareholders, including Leo’s directors and executive officers, have interests in such proposal that are different from, or in addition to, those of Leo shareholders and warrant holders generally. These interests include, among other things, the interests listed below:

 

   

If Leo does not consummate a business combination by July 31, 2020 (unless such date is extended in accordance with the Existing Organizational Documents), it would cease all operations except for the purpose of winding up, redeeming all of the outstanding public shares for cash and, subject to the approval of its remaining shareholders and its board of directors, dissolving and liquidating, subject in each case to its obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. In such event, the 5,000,000 Class B ordinary shares owned by the Class B Shareholders would be worthless because following the redemption of the public shares, Leo would likely have few, if any, net assets and because our Class B Shareholders have agreed to waive their rights to liquidating distributions from the trust account with respect to the Class B ordinary shares if we fail to complete a Business Combination within the required period. Sponsor purchased the Class B ordinary shares prior to our initial public offering for approximately $0.004 per share. The 3,500,000 Converted Founder Shares that the Class B Shareholders will hold following the Business Combination, if unrestricted and freely tradable, would have had aggregate market value of $         based upon the closing price of $         per public share on the NYSE on                 , 2020, the most recent closing price. Given such Converted Founder Shares will be subject to such restrictions, we believe such shares have less value.

 

   

Sponsor paid $6,000,000 for its 4,000,000 private placement warrants to purchase Class A ordinary shares and such private placement warrants will expire worthless if a business combination is not consummated by July 31, 2020 (unless such date is extended in accordance with the Existing Organizational Documents).

 

   

Lyndon Lea, Leo’s Chairman and Chief Executive Officer, Robert Darwent, Leo’s Chief Financial Officer and member of Leo’s Board of Directors, and Mary E. Minnick, a member of Leo’s Board of Directors, are each expected to be directors of New DMS after the consummation of the Business Combination.

 

   

Leo’s existing directors and officers will be eligible for continued indemnification and continued coverage under Leo’s directors’ and officers’ liability insurance after the Business Combination.

 

   

In order to protect the amounts held in the trust account, Sponsor has agreed that it will be liable to Leo if and to the extent any claims by a vendor for services rendered or products sold to Leo, or a prospective target business with which Leo has discussed entering into a transaction agreement, reduce the amount of funds in the trust account. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the trust account or to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act.



 

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Following the consummation of the Business Combination, Lion Capital would be entitled to the repayment of certain working capital loan and advances that have been made to Leo and remain outstanding unless such loans and advances constitute Transaction Costs (as defined in the Business Combination Agreement). If Leo does not complete an initial business combination by July 31, 2020 (unless such date is extended in accordance with the Existing Organizational Documents), Leo may use a portion of its working capital held outside the trust account to repay these working capital loans, but no proceeds held in the trust account would be used to repay the working capital loans.

 

   

Following consummation of the Business Combination, Sponsor, our officers and directors and their respective affiliates would be entitled to reimbursement for certain reasonable out-of-pocket expenses related to identifying, investigating and consummating an initial business combination, and repayment of any other loans, if any, and on such terms as to be determined by Leo from time to time, made by Sponsor or certain of our officers and directors to finance transaction costs in connection with an intended initial business combination. However, if Leo fails to consummate a business combination within the required period, Sponsor and Leo’s officers and directors and their respective affiliates will not have any claim against the trust account for reimbursement.

 

   

In connection with the PIPE Investment, assuming Sponsor PIPE Entity finances $72 million of the PIPE Investment, Sponsor PIPE Entity will receive 7,200,000 shares of New DMS Class A Common Stock.

 

   

Pursuant to the Director Nomination Agreement, pursuant to which, among other things, Sponsor, Sponsor PIPE Entity, Prism and Clairvest will each have certain rights to designate individuals to be nominated for election to the New DMS Board, and the Chief Executive Officer of New DMS will be appointed as a member of the New DMS Board.

 

   

Pursuant to the Amended and Restated Registration Rights Agreement, Prism, Clairvest Direct Seller, Blocker Seller 1, Blocker Seller 2, Sponsor PIPE Entity and the holders of ordinary shares of Leo who are parties to the existing registration rights agreement in respect to ordinary shares held by such holders and certain other shareholders will have customary registration rights, including demand and piggy-back rights, subject to cooperation and cut-back provisions with respect to the shares of New DMS Class A Common Stock and warrants held by such parties.

 

   

The Proposed Certificate of Incorporation will contain provisions that have the same effect as Section 203 and prevent New DMS from engaging in a business combination with an “interested stockholder,” unless certain conditions are met.

Leo’s directors and executive officers have agreed to vote all of their ordinary shares in favor of the proposals being presented at the extraordinary general meeting and waive their redemption rights with respect to such ordinary shares in connection with the consummation of the Business Combination. The Class B ordinary shares will be excluded from the pro rata calculation used to determine the per-share redemption price. As of the date of this proxy statement/prospectus, Leo’s directors and executive officers own approximately 20.0% of the issued and outstanding ordinary shares.

At any time at or prior to the Business Combination, during a period when they are not then aware of any material nonpublic information regarding us or our securities, our Class B Shareholders, DMS and/or their directors, officers, advisors or respective affiliates may purchase public shares from institutional and other investors who vote, or indicate an intention to vote, against any of the Condition Precedent Proposals, or execute agreements to purchase such shares from such investors in the future, or they may enter into transactions with such investors and others to provide them with incentives to acquire public shares or vote their public shares in favor of the Condition Precedent Proposals. Such a purchase may include a contractual acknowledgement that such shareholder, although still the record or beneficial holder of our shares, is no longer the beneficial owner



 

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thereof and therefore agrees not to exercise its redemption rights. In the event that our Class B Shareholders, DMS and/or their directors, officers, advisors or respective affiliates purchase shares in privately negotiated transactions from public shareholders who have already elected to exercise their redemption rights, such selling shareholder would be required to revoke their prior elections to redeem their shares. The purpose of such share purchases and other transactions would be to increase the likelihood of satisfaction of the requirements that (1) holders of a majority of the ordinary shares, represented in person or by proxy and entitled to vote at the extraordinary general meeting, vote in favor of the BCA Proposal, the Security Issuance Proposal, the Incentive Award Plan Proposal, the Seller Nominee Appointment Proposal and the Adjournment Proposal, (2) holders of at least two-thirds of the ordinary shares, represented in person or by proxy and entitled to vote at the extraordinary general meeting, vote in favor of the Domestication Proposal and the Organizational Documents Proposals, (3) otherwise limit the number of public shares electing to redeem and (4) New DMS’s net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) being at least $5,000,001.

Entering into any such arrangements may have a depressive effect on the ordinary shares. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares at a price lower than market and may therefore be more likely to sell the shares he or she owns, either at or prior to the Business Combination.

If such transactions are effected, the consequence could be to cause the Business Combination to be consummated in circumstances where such consummation could not otherwise occur. Purchases of shares by the persons described above would allow them to exert more influence over the approval of the proposals to be presented at the extraordinary general meeting and would likely increase the chances that such proposals would be approved. We will file or submit a Current Report on Form 8-K to disclose any material arrangements entered into or significant purchases made by any of the aforementioned persons that would affect the vote on the proposals to be put to the extraordinary general meeting or the redemption threshold. Any such report will include descriptions of any arrangements entered into or significant purchases by any of the aforementioned persons.

The existence of financial and personal interests of one or more of Leo’s directors may result in a conflict of interest on the part of such director(s) between what he or they may believe is in the best interests of Leo and its shareholders and what he or they may believe is best for himself or themselves in determining to recommend that shareholders vote for the proposals. In addition, Leo’s officers have interests in the Business Combination that may conflict with your interests as a shareholder.

Recommendation to Shareholders of Leo

Leo’s board of directors believes that the BCA Proposal and the other proposals to be presented at the extraordinary general meeting are in the best interest of Leo’s shareholders and unanimously recommends that its shareholders vote “FOR” the BCA Proposal, “FOR” the Domestication Proposal, “FOR” each of the separate Organizational Documents Proposals, “FOR” the Security Issuance Proposal, “FOR” the Incentive Award Plan Proposal, “FOR” the Seller Nominee Appointment Proposal and “FOR” the Adjournment Proposal, in each case, if presented to the extraordinary general meeting.

The existence of financial and personal interests of one or more of Leo’s directors may result in a conflict of interest on the part of such director(s) between what he or they may believe is in the best interests of Leo and its shareholders and what he or they may believe is best for himself or themselves in determining to recommend that shareholders vote for the proposals. In addition, Leo’s officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “BCA Proposal—Interests of Leo’s Directors and Executive Officers in the Business Combination” for a further discussion of these considerations.



 

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Sources and Uses of Funds for the Business Combination

The following tables summarize the sources and uses for funding the Business Combination assuming a                     , 2020 Closing Date, and (i) assuming that none of Leo’s outstanding Class A ordinary shares are redeemed in connection with the Business Combination and (ii) assuming that 9,656,404 of Leo’s outstanding Class A ordinary shares are redeemed in connection with the Business Combination (representing the maximum amount of public shares that can be redeemed to satisfy the closing condition pursuant to which the cash proceeds from the trust account established for the purpose of holding the net proceeds of Leo’s initial public offering and certain of the proceeds from its concurrent private placement of warrants, together with the proceeds from the PIPE Investment, net of any amounts paid to public shareholders that exercise their redemption rights in connection with the Business Combination, equals no less than $200,000,000 at the Closing).

No Redemption

 

Source of Funds(1)
(in millions)

    

Uses(1)
(in millions)

 

Existing Cash in Trust Account(2)

   $ 200      Net Debt    $ 165  

Net Debt(3)

     165      Seller Cash Proceeds      238  

Leo Founder Shares

     35      Leo Founder Shares      35  

Shares of New DMS issued to DMS Equityholders(4)

     257     

Shares of New DMS issued to DMS Equityholders(4)

     257  

PIPE Investment

     100     

Repayment of Debt/Additional Cash on Balance Sheet

     40  
      Transaction Fees and Expenses(5)      22  
  

 

 

       

 

 

 

Total Sources

   $ 757      Total Uses    $ 757  
  

 

 

       

 

 

 

 

(1)

Totals might be affected by rounding.

(2)

As of March 31, 2020, approximately.

(3)

Does not include transaction bonus to be paid at Closing.

(4)

Shares issued to DMS are at a deemed value of $10.00 per share.

(5)

Includes deferred underwriting commission of $7.0 million from Leo’s initial public offering.

Maximum Redemption

 

Source of Funds(1)
(in millions)

    

Uses(1)
(in millions)

 

Existing Cash in Trust Account(2)

   $ 100      Net Debt    $ 165  

Net Debt(3)

     165      Seller Cash Proceeds      138  

Leo Founder Shares

     35      Leo Founder Shares      35  

Shares of New DMS issued to DMS Equityholders(4)

     357     

Shares of New DMS issued to DMS Equityholders(4)

     357  

PIPE Investment

     100     

Repayment of Debt/Additional Cash on Balance Sheet

     40  
      Transaction Fees and Expenses(5)      22  

Total Sources

   $ 757      Total Uses    $ 757  
  

 

 

       

 

 

 

 

(1)

Totals might be affected by rounding.

(2)

Assumes that 9,656,404 of Leo’s outstanding Class A ordinary shares are redeemed.

(3)

Does not include transaction bonus to be paid at Closing.



 

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(4)

Shares issued to DMS are at a deemed value of $10.00 per share.

(5)

Includes deferred underwriting commission of $7.0 million from Leo’s IPO.

U.S. Federal Income Tax Considerations

For a discussion summarizing the U.S. federal income tax considerations of the Domestication and exercise of redemption rights, please see “U.S. Federal Income Tax Considerations.”

Expected Accounting Treatment

The Domestication

There will be no accounting effect or change in the carrying amount of the consolidated assets and liabilities of Leo as a result of the Domestication. The business, capitalization, assets and liabilities and financial statements of New DMS immediately following the Domestication will be the same as those of Leo immediately prior to the Domestication.

The Business Combination

The Business Combination will be accounted for as a reverse recapitalization in conformity with GAAP. Under this method of accounting, Leo has been treated as the “acquired” company for financial reporting purposes. This determination was primarily based on existing DMS stockholders comprising a majority of the voting power of the combined company, DMS operations comprising a majority of the ongoing operations of New DMS, and DMS’s senior management comprising a majority of the senior management of New DMS combined entity. Accordingly, for accounting purposes, the acquisition will be treated as the equivalent of DMS issuing stock for the net assets of Leo, accompanied by a recapitalization. Net assets of Leo will be stated at historical costs, with no goodwill or other intangible assets recorded.

Regulatory Matters

Under the HSR Act and the rules that have been promulgated thereunder by the U.S. Federal Trade Commission (“FTC”), certain transactions may not be consummated unless information has been furnished to the Antitrust Division of the Department of Justice (“Antitrust Division”) and the FTC and certain waiting period requirements have been satisfied. The Leo portion of the Business Combination is subject to these requirements and may not be completed until the expiration of a 30-day waiting period following the filing of the required Notification and Report Forms with the Antitrust Division and the FTC or until early termination is granted. Leo and DMS will file the required forms under the HSR Act with the Antitrust Division and the FTC and requesting early termination within five (5) Business Days following the date hereof.

 

At any time before or after consummation of the Business Combination, notwithstanding termination of the waiting period under the HSR Act, the applicable competition authorities in the United States or any other applicable jurisdiction could take such action under applicable antitrust laws as such authority deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the Business Combination, conditionally approving the Business Combination upon divestiture of New DMS’s assets, subjecting the completion of the Business Combination to regulatory conditions or seeking other remedies. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. Leo cannot assure you that the Antitrust Division, the FTC, any state attorney general, or any other government authority will not attempt to challenge the Business Combination on antitrust grounds, and, if such a challenge is made, Leo cannot assure you as to its result.



 

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None of Leo and DMS are aware of any material regulatory approvals or actions that are required for completion of the Business Combination other than the expiration or early termination of the waiting period under the HSR Act. It is presently contemplated that if any such additional regulatory approvals or actions are required, those approvals or actions will be sought. There can be no assurance, however, that any additional approvals or actions will be obtained.

Emerging Growth Company

Leo is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. Leo has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, Leo, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of Leo’s financial statements with certain other public companies difficult or impossible because of the potential differences in accounting standards used.

We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of Leo’s initial public offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” shall have the meaning associated with it in the JOBS Act.

Smaller Reporting Company

Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our ordinary shares held by non-affiliates exceeds $250 million as of the prior June 30, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the prior June 30.

Risk Factors

In evaluating the proposals to be presented at the Leo extraordinary general meeting, a shareholder should carefully read this proxy statement/prospectus and especially consider the factors discussed in the section entitled “Risk Factors.”



 

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SELECTED HISTORICAL FINANCIAL INFORMATION OF LEO

Leo is providing the following selected historical financial information to assist you in your analysis of the financial aspects of the Business Combination.

Leo’s balance sheet data as of December 31, 2019, and statement of operations data for the years ended December 31, 2019 are derived from Leo’s audited financial statements included elsewhere in this proxy statement/prospectus. Leo’s balance sheet data as of March 31, 2020 and statement of operations data for the three months ended March 31, 2020 and 2019 are derived from Leo’s unaudited interim financial statements included elsewhere in this proxy statement/prospectus. The information is only a summary and should be read in conjunction with Leo’s consolidated financial statements and related notes and “Leo’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this proxy statement/prospectus. Our historical results are not necessarily indicative of future results, and the results for any interim period are not necessarily indicative of the results that may be expected for a full fiscal year.

 

     As of  
     March 31,
2020
    December 31,
2019
 
     (unaudited)     (audited)  

Balance Sheet Data:

    

Working Capital (deficiency)

   $ (6,252,113   $ (4,841,647

Total Assets

   $ 200,778,685     $ 207,230,550  

Total Liabilities

   $ 13,337,348     $ 11,881,457  

Class A ordinary shares, $0.0001 par value; 18,244,133 and 19,034,909 shares subject to possible redemption as of March 31, 2020 and December 31, 2019, respectively

   $ 182,441,330     $ 190,349,090  

Total Shareholders’ Equity

   $ 5,000,007     $ 5,000,003  

 

     Three months ended
March 31,
    Year Ended
December 31,
    Year Ended
December 31,
 
     2020     2019     2019     2018  
     (unaudited)     (audited)  

Statement of Operations Data:

      

General and administrative expenses

     1,410,466       1,587,728       5,426,176       489,780  
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest Income

   $ 633,249     $ 1,125,994     $ 4,108,987     $ 3,085,067  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income/(loss)

   $ (777,217   $ (461,734   $ (1,317,189   $ 2,595,287  
  

 

 

   

 

 

   

 

 

   

 

 

 


 

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SELECTED HISTORICAL FINANCIAL INFORMATION OF DMS

The following selected financial data is only a summary for DMS’s consolidated financial statements and should be read in conjunction with DMS’s consolidated financial statements and related notes and “DMS’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this proxy statement/prospectus. DMS’s historical results are not necessarily indicative of future results, and the results for any interim period are not necessarily indicative of the results that may be expected for the full fiscal year.

 

     Year Ended December 31,  
           2019                 2018                  2017        
     (U.S. dollars in thousands, except per unit amounts)  

Net revenue

   $ 238,296     $ 137,681      $ 66,794  

Cost of revenue

     161,575       81,496        35,665  

Salaries and related costs

     27,978       22,078        14,191  

General and administrative expenses

     19,927       12,104        9,758  

Acquisition costs

     19,234       10,388        2,271  

Depreciation and amortization

     9,745       5,295        2,145  

Other income

     —         —          (2,311
  

 

 

   

 

 

    

 

 

 

(Loss) income from operations

   $ (163   $ 6,320      $ 5,075  

Interest expense

     10,930       4,614        800  

Loss on extinguishment of debt

     —         303        —    
  

 

 

   

 

 

    

 

 

 

Net (loss) income before income taxes

   $ (11,093   $ 1,403      $ 4,275  

Income tax expense

     137       —          —    
  

 

 

   

 

 

    

 

 

 

Net (loss) income

   $ (11,230   $ 1,403      $ 4,275  
  

 

 

   

 

 

    

 

 

 

Basic and diluted weighted average units outstanding of Class A units

     23,960,000    

 

23,860,000

 

  

 

23,760,000

 

Basic and diluted net (loss) income per unit, Class A

   $ (0.25   $ 0.02      $ 0.17  

Basic and diluted weighted average units outstanding of Class B units

     20,500,000    

 

20,500,000

 

  

 

20,500,000

 

Basic and diluted net (loss) income per unit, Class B

   $ (0.26   $ 0.05      $ 0.02  

 

     Year Ended December 31,  
     2019      2018      2017  

Statement of Cash Flows Data

        

Net cash (used in) provided by operating activities

   $ (9,555    $ 18,642      $ 11,156  

Net cash used in investing activities

   $ (63,160    $ (27,444    $ (9,589

Net cash provided by (used in) financing activities

   $ 71,134      $ 12,592      $ (3,667


 

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Table of Contents
     December 31, 2019      December 31, 2018  
     (U.S. dollars in thousands)  

ASSETS

     

Current assets:

     

Cash

   $ 3,008      $ 4,589  

Accounts receivable, net

     30,137        24,965  

Prepaid and other current assets

     2,217        961  
  

 

 

    

 

 

 

Total current assets

   $ 35,362      $ 30,515  

Property and equipment, net

     8,728        3,511  

Goodwill

     41,826        12,103  

Intangible assets, net

     57,935        27,447  

Other assets

     254        284  
  

 

 

    

 

 

 

Total assets

   $ 144,105      $ 73,860  
  

 

 

    

 

 

 

LIABILITIES AND EQUITY

     

Current liabilities:

     

Accounts payable

   $ 24,160      $ 21,532  

Accrued expenses and other current liabilities

     10,839        10,156  

Current portion of long-term debt

     4,150        1,985  

Contingent consideration payable (current)

     1,000        10,073  
  

 

 

    

 

 

 

Total current liabilities

   $ 40,149      $ 43,746  

Long-term debt

     201,048        102,907  

Deferred tax liability

     8,675        —    

Other non-current liabilities

     491        610  
  

 

 

    

 

 

 

Total liabilities

   $ 250,363      $ 147,263  

Members’ deficit

     (106,258      (73,403
  

 

 

    

 

 

 

Total liabilities and members’ deficit

   $ 144,105      $ 73,860  
  

 

 

    

 

 

 


 

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SUMMARY UNAUDITED PRO FORMA

CONDENSED COMBINED FINANCIAL INFORMATION

The following summary unaudited pro forma condensed combined financial information has been derived from the unaudited pro forma condensed combined balance sheet as of March 31, 2020 and the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2019 and the three months ended March 31, 2020, included in “Unaudited Pro Forma Condensed Combined Financial Information.”

The summary unaudited pro forma condensed combined financial information should be read in conjunction with the unaudited pro forma combined balance sheet and the unaudited pro forma condensed combined statement of operations, and the accompanying notes. In addition, the unaudited condensed combined pro forma financial information was based on and should be read in conjunction with the historical financial statements of Leo, DMS and UE Authority, Co., including the accompanying notes, which are included elsewhere in this proxy statement/prospectus.

The Business Combination is accounted for as a reverse merger, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, Leo is treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination is treated as the equivalent of DMS issuing stock for the net assets of Leo, accompanied by a recapitalization. The net assets of Leo are stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of DMS.

The unaudited pro forma condensed combined financial information has been prepared assuming two alternative levels of redemption into cash of Leo’s ordinary shares:

 

   

Assuming Minimum Redemptions: This presentation assumes that no current Leo’s public stockholders exercise redemption rights with respect to their shares for a pro rata portion of the fund in Leo’s trust account.

 

   

Assuming Maximum Redemption: This presentation assumes that $100 million is withdrawn from the Trust Account to fund the Leo public stockholders’ exercise of their redemption rights with respect to 10,069,300 Class A ordinary shares at $10.00 per share, which is the maximum number of shares redeemable that would allow Leo to maintain at least $200 million required as “Cash Proceeds” in order to close the Business Combination.

 

     As of
March 31,
2020
     As of
December 31,
2019
    As of March 31, 2020  

Unaudited Pro Forma Condensed Balance

Sheet Data

(in thousands)

  Pro Forma  
   Leo      DMS     Minimum
Redemptions
    Maximum
Redemptions
 

Total current assets

   $ 86      $ 35,362     $ 65,448     $ 65,448  

Total assets

   $ 200,779      $ 144,105     $ 174,191     $ 174,191  

Total liabilities

   $ 13,337      $ 250,363     $ 246,701     $ 246,701  

Total stockholders’ equity

   $ 5,000      $ (106,258   $ (72,510   $ (72,510


 

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                  Pro Forma  

Unaudited Pro Forma Condensed

Combined Statement of Operations Data

For the Fiscal Year

Ended December 31, 2019

(in thousands, except per share data)

   Leo      DMS     Minimum
Redemptions
     Maximum
Redemptions
 

Total revenues

   $ 0      $ 238,296     $ 305,310      $ 305,310  

Operating loss

   $ (5,426    $ (163   $ (4,970    $ (4,970

Net loss

   $ (1,317    $ (11,230   $ (20,052    $ (20,052

Income (loss) per share or unit (basic and diluted)

   $ 0.21    $ (0.25 )***    $ [●]      $ [●]  

Loss per share or unit (basic and diluted)

   $ (1.09 )**     $ (0.26 )****    $ [●]      $ [●]  

 

     For the Three
Months
Ended March 31,
2020
    For the Three
Months
Ended December 31,
2019
    For the Three Months
Ended March 31, 2020
 
    Pro Forma  

Unaudited Pro Forma Condensed

Combined Statement of Operations Data

(in thousands, except per share or unit data)

   Leo     DMS     Minimum
Redemptions
    Maximum
Redemptions
 

Total revenues

   $ 0     $ 65,134     $ 72,214     $ 72,214  

Operating loss

   $ (1,410   $ 1,447     $ (1,757   $ (1,757

Net loss

   $ (777   $ (2,232   $ (6,291   $ (6,291

Income per share (basic and diluted)

   $ 0.03     N/A     $ [●]     $ [●]  

Loss per share (basic and diluted)

   $ (0.28 )**      N/A     $ [●]     $ [●]  

 

*

Class A ordinary shares

**

Class B ordinary shares

***

Class A units

****

Class B units



 

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Table of Contents

COMPARATIVE PER SHARE DATA

The following table sets forth:

 

   

historical per share information of Leo for the year ended December 31, 2019 and the three months ended March 31, 2020;

 

   

historical per share information of DMS for the year ended December 31, 2019; and

 

   

unaudited pro forma per share information of the combined company for the year ended December 31, 2019 after giving effect to the Business Combination, assuming two redemption scenarios as follows:

 

   

Assuming Minimum Redemptions: This presentation assumes that no current Leo’s public stockholders exercise redemption rights with respect to their shares for a pro rata portion of the fund in Leo’s trust account; and

 

   

Assuming Maximum Redemption: This presentation assumes that $100 million is withdrawn from the Trust Account to fund the Leo public stockholders’ exercise of their redemption rights with respect to 10,069,300 Class A ordinary shares at $10.00 per share, which is the maximum number of shares redeemable that would allow Leo to maintain at least $200 million required as “Cash Proceeds” in order to close the Business Combination.

The following table is also based on the following assumptions: (1) 1,500,000 Class B ordinary shares of Leo are forfeited by Sponsor and the Leo independent directors pursuant to the Surrender Agreement and (2) 10,069,300 shares of New DMS Class A Common Stock are issued to the PIPE Investors upon the consummation of the PIPE Investment. If the actual facts are different than these assumptions, the below numbers will be different. These numbers also do not take into account public warrants to purchase New DMS Class A Common Stock that will be outstanding immediately following the completion of the Business Combination.

The historical information should be read in conjunction with “—Selected Historical Financial Information of Leo,” “—Selected Historical Financial Information of DMS,” “Leo’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “DMS’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this proxy statement/prospectus and the historical financial statements and related notes of each of Leo and DMS contained elsewhere in this proxy statement/ prospectus. The unaudited pro forma combined share information is derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial information and related notes included elsewhere in this proxy statement/prospectus. The unaudited pro forma combined net income per share information below does not purport to represent what the actual results of operations of New DMS would have been had the Business Combination been completed or to project New DMS’s results of operations that may be achieved after the Business Combination. The unaudited pro forma book value per share information below does not purport to represent what the book value of New DMS would have been had the Business Combination been completed nor the book value per share for any future date or period.

 

     DMS
(Historical)
for the year ended
December 31, 2019
    Leo
(Historical)
for the year ended
December 31, 2019
    Leo
(Historical)
for the three months ended
March 31, 2020
 
     Class A units     Class B units     Class A
ordinary
shares
    Class B
ordinary
shares
    Class A
ordinary
shares
    Class B
ordinary
shares
 

Book Value per Unit or Share (1)

   $ (2.39   $ (2.39   $ 10.01 (2)     $ (0.97) (3)     $ 9.68 (2)     $ (1.25) (3)  

Units or shares outstanding

     23,960,000       20,500,000       20,000,000       5,000,000       20,000,000       5,000,000  

Basic and diluted income (loss) available for common stockholders per unit or share

   $ (0.25   $ (0.26   $ 0.21     $ (1.09   $ 0.03     $ (0.28

 

(1)

Book value per share = (Total equity/units or shares outstanding)

(2)

Book value per share — Class A ordinary shares represents investments held in the trust account minus deferred underwriting commissions divided by total Class A ordinary shares outstanding.

(3)

Book value per share — Class B ordinary shares represents net assets except for investments held in the trust account and deferred underwriting commissions divided by total Class B ordinary shares outstanding.



 

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Table of Contents
    For the year ended
December 31, 2019
    For the three months ended
March 31, 2020
 
    Pro Forma
Assuming Minimum
Redemptions of
Outstanding Class A
ordinary shares
    Pro Forma
Assuming
Maximum
Redemptions of
Outstanding Class A
ordinary shares
    Pro Forma Assuming
Minimum Redemptions
of Outstanding Class A
ordinary shares
    Pro Forma Assuming
Maximum Redemptions
of Outstanding Class A
ordinary shares
 
    Class A
Common
Stock
    Class C
Common
Stock
    Class A
Common
Stock
    Class C
Common
Stock
    Class A
Common
Stock
    Class C
Common
Stock
    Class A
Common
Stock
    Class C
Common
Stock
 

Book Value per Unit or Share (1)

  $ [10.00   $ [10.00   $ [10.00   $ [10.00   $ [10.00   $ [10.00   $ [10.00   $ [10.00

Units or shares outstanding

  $ [●   $ [●   $ [●   $ [●   $ [●   $ [●   $ [●   $ [●

Basic and diluted income (loss) available for common stockholders per unit or share

  $ [●   $ [●   $ [●   $ [●   $ [●   $ [●   $ [●   $ [●

 

(1)

Book value per share = (Total equity/units or shares outstanding)



 

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RISK FACTORS

Leo shareholders should carefully consider the following risk factors, together with all of the other information included in this proxy statement/prospectus, before they decide whether to vote or instruct their vote to be cast to approve the relevant proposals described in this proxy statement/prospectus. These risk factors are not exhaustive and investors are encouraged to perform their own investigation with respect to our business, financial condition and prospects.

Risks Related to DMS’s Business and to New DMS’s Business Following the Business Combination

Unless the context otherwise requires, any reference in the below sections of this proxy statement/prospectus to the “Company,” “we,” “us” or “our” refers to DMS and its consolidated subsidiaries prior to the consummation of the Business Combination and to New DMS and its consolidated subsidiaries following the Business Combination. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and accompanying notes, and other financial information included elsewhere within this proxy statement/prospectus. This discussion includes forward-looking information regarding our business, results of operations and cash flows and contractual obligations and arrangements that involves risks, uncertainties and assumptions. Our actual results may differ materially from any future results expressed or implied by such forward-looking statements as a result of various factors, including, but not limited to, those discussed in the sections of this proxy statement/prospectus entitled “Cautionary Note Regarding Forward-Looking Statements” and “DMS’s Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Our business is dependent on our relationships with advertisers with few long-term contractual commitments. If advertisers stop purchasing consumer referrals from us, decrease the amount they are willing to spend per referral, or if we are unable to establish and maintain new relationships with advertisers, our business, results of operations and financial condition could be materially adversely affected.

A substantial majority of our revenue is derived from sales of consumer referrals to advertisers. Our relationships with advertisers are dependent on our ability to deliver quality referrals at attractive volumes and prices. If advertisers are not able to acquire their preferred referrals in our marketplaces and through our brand direct solutions, they may stop buying referrals from us or may decrease the amount they are willing to spend for referrals. Our agreements with advertisers are almost entirely short-term agreements, and advertisers can stop participating in our marketplaces and through our brand direct solutions at any time with no notice. As a result, we cannot guarantee that advertisers will continue to work with us or, if they do, the number of referrals they will purchase from us, the price they will pay per referral or their total spend with us. In addition, we may not be able to attract new advertisers to our marketplaces and our brand direct solutions or increase the amount of revenue we earn from advertisers over time.

If we are unable to maintain existing relationships with advertisers in our marketplaces and through our brand direct solutions or unable to add new advertisers, we may be unable to offer our consumers the experience they expect. This deficiency could reduce consumers’ confidence in our services, making us less popular with consumers. As a result, consumers could cease to use us or use us at a decreasing rate.

We depend on search engines, display advertising, social media, email, content-based online advertising and other online sources to attract consumers to our websites, marketplaces, or through our brand direct solutions and if we are unable to cost-effectively attract consumers and convert them into sales for our advertisers, our business and financial results may be harmed.

Our success depends on our ability to attract online consumers to our websites, marketplaces or through our brand direct solutions and convert those consumers into sales for our advertisers. We depend, in part, on search engines, display advertising, social media, email, content-based online advertising and other online sources for

 

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our website traffic. We are included in search results as a result of both paid search listings, where we purchase specific search terms that result in the inclusion of our advertisement and, separately, organic searches that depend upon the content on our sites.

Search engines, social media platforms and other online sources often revise their algorithms and introduce new advertising products. If one or more of the search engines or other online sources on which we rely for website traffic were to modify its general methodology for how it displays our advertisements, resulting in fewer consumers clicking through to our websites, our business could suffer. In addition, if our online display advertisements are no longer effective or are not able to reach certain consumers due to consumers’ use of ad-blocking software, our business could suffer.

If one or more of the search engines or other online sources on which we rely for purchased listings modifies or terminates its relationship with us, our expenses could rise, we could lose consumer traffic to our websites, and a decrease in consumer traffic to our websites, for any reason, could have a material adverse effect on our business, financial condition and results of operations. Consumer traffic to our websites and the volume of sales generated by consumer traffic varies and can decline from to time. Additionally, even if we are successful in generating traffic to our websites, we may not be able to convert these visits into consumer sales.

We currently compete with numerous other online marketing companies, and we expect that competition will intensify. Some of these existing competitors may have more capital or complementary products or services than we do, and they may leverage their greater capital or diversification in a manner that adversely affects our competitive position. In addition, other newcomers, including major search engines and content aggregators, may be able to leverage their existing products and services to our disadvantage. We may be forced to expend significant resources to remain competitive with current and potential competitors. If any of our competitors are more successful than we are at attracting and retaining consumers, or if we are unable to effectively convert visits into consumer sales, our business, financial condition and results of operations could be materially adversely affected.

We compete with other media for advertising spend from our advertisers, and if we are unable to maintain or increase our share of the advertising spend of our advertisers, our business could be harmed.

We compete for advertising spend with traditional offline media such as television, billboards, radio, magazines and newspapers, as well as online sources such as websites, social media and websites dedicated to providing information comparable to that provided in our websites, marketplaces and through our brand direct solutions. Our ability to attract and retain advertisers, and to generate advertising revenue from them, depends on a number of factors, including:

 

   

the ability of our advertisers to earn an attractive return on investment from their spending with us;

 

   

our ability to increase the number of consumers using our marketplaces and brand direct solutions;

 

   

our ability to compete effectively with other media for advertising spending; and

 

   

our ability to keep pace with changes in technology and the practices and offerings of our competitors.

We may not succeed in retaining or capturing a greater share of our advertisers’ advertising spending compared to alternative channels. If our current advertisers reduce or end their advertising spending with us and we are unable to increase the spending of our other advertisers or attract new advertisers, our revenue and business and financial results would be materially adversely affected.

In addition, advertising spend remains concentrated in traditional offline media channels. Some of our current or potential advertisers have little or no experience using the internet for advertising and marketing purposes and have allocated only limited portions of their advertising and marketing budgets to the internet. The adoption of online marketing may require a cultural shift among advertisers as well as their acceptance of a new

 

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way of conducting business, exchanging information and evaluating new advertising and marketing technologies and services. This shift may not happen at all or at the rate we expect, in which case our business could suffer. Furthermore, we cannot assure you that the market for online marketing services will continue to grow. If the market for online marketing services fails to continue to develop or develops more slowly than we anticipate, the success of our business may be limited, and our revenue may decrease.

If consumers do not find value in our services or do not like the consumer experience on our platform, the number of referrals in our marketplaces and through our brand direct solutions may decline, and our business, results of operations and financial condition could be materially adversely affected.

If we fail to provide a compelling experience to our consumers through our web platforms (i.e., our desktop and mobile experiences which include both tablets and phones), the number of consumer referrals purchased from us will decline, and advertisers may terminate their relationships with us or reduce their spending with us. If advertisers stop offering products in our marketplaces and through our brand direct solutions, we may not be able to maintain and grow our consumer traffic, which may cause other advertisers to stop using our marketplaces and our brand direct solutions. We believe that our ability to provide a compelling web platform experience is subject to a number of factors, including:

 

   

our ability to maintain marketplaces and brand direct solutions for consumers and advertisers that efficiently captures user intent and effectively delivers relevant information to each individual consumer;

 

   

our ability to continue to innovate and improve our marketplaces and our brand direct solutions;

 

   

our ability to launch new vertical offerings that are effective and have a high degree of consumer and advertiser engagement;

 

   

our ability to maintain the compatibility of our mobile applications with operating systems, such as iOS and Android, and with popular mobile devices running such operating systems; and

 

   

our ability to access a sufficient amount of data to enable us to provide relevant information to consumers.

If the use of our marketplaces and brand direct solutions declines or does not continue to grow, our business and operating results would be harmed.

We rely on the data provided to us by consumers and advertisers to improve our product and service offerings, and if we are unable to maintain or grow such data we may be unable to provide consumers with an experience that is relevant, efficient and effective, which could adversely affect our business.

Our business relies on the data provided to us by consumers and advertisers using our marketplaces brand direct solutions. The large amount of information we use in operating our marketplaces and brand direct solutions is critical to the web platform experience we provide for consumers. If we are unable to maintain or grow the data provided to us, the value that we provide to consumers and advertisers using our marketplaces and our brand direct solutions may be limited. In addition, the quality, accuracy and timeliness of this information may suffer, which may lead to a negative experience for consumers using our marketplaces and our brand direct solutions and could materially adversely affect our business and financial results.

If our emails are not delivered and accepted or are routed by email providers less favorably than other emails, or if our sites are not accessible or treated disadvantageously by internet service providers, our business may be substantially harmed.

If email providers or internet service providers, or ISPs, implement new or more restrictive email or content delivery or accessibility policies, including with respect to net neutrality, it may become more difficult to deliver

 

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emails to consumers or for consumers to access our websites and services. For example, certain email providers, including Google, may categorize our emails as “promotional,” and these emails may be directed to an alternate, and less readily accessible, section of a consumer’s inbox. If email providers materially limit or halt the delivery of our emails, or if we fail to deliver emails to consumers in a manner compatible with email providers’ email handling or authentication technologies, our ability to contact consumers through email could be significantly restricted. In addition, if we are placed on “spam” lists or lists of entities that have been involved in sending unwanted, unsolicited emails, our operating results and financial condition could be substantially harmed. Further, if ISPs prioritize or provide superior access to our competitors’ content, our business and results of operations may be adversely affected.

Advertisers who use our marketplaces and brand direct solutions can offer products and services outside of our marketplaces and brand direct solutions or obtain similar services from our competitors.

Because generally we do not have exclusive relationships with advertisers, consumers may purchase products from them without having to use our marketplaces and brand direct solutions. Advertisers can attract consumers directly through their own marketing campaigns or other traditional methods of distribution, such as referral arrangements, physical storefront operations or broker agreements. Advertisers also may offer information to prospective customers online directly, through one or more online competitors of our business, or both. If our advertisers determine to compete directly with us or choose to favor one or more of our competitors, they could cease providing us with information and terminate any direct interactions we have with their online workflows, customer relationship management systems and internal platforms, which would reduce the breadth of the information available to us and could put us at a competitive disadvantage against their direct marketing efforts or our competitors that retain such access. If consumers seek products directly from advertisers or through our competitors, or if advertisers cease providing us with access to their systems or information, the number of consumers searching for products on our marketplaces and through our brand direct solutions may decline, and our business, financial condition and results of operations could be materially adversely affected.

If we are unable to develop new offerings, achieve increased consumer adoption of those offerings or penetrate new vertical markets, our business and financial results could be materially adversely affected.

Our success depends on our continued innovation to provide product and service offerings that make our marketplaces, brand direct solutions and websites useful for consumers. These new offerings must be widely adopted by consumers in order for us to continue to attract advertisers to our marketplaces and brand direct solutions. Accordingly, we must continually invest resources in product, technology and development in order to improve the comprehensiveness and effectiveness of our marketplaces and brand direct solutions and their related product and service offerings and effectively incorporate new internet technologies into them. These product, technology and development expenses may include costs of hiring additional personnel and of engaging third-party service providers and other research and development costs.

Without innovative marketplaces and brand direct solutions and related product and service offerings, we may be unable to attract additional consumers or retain current consumers, which could adversely affect our ability to attract and retain advertisers who want to participate in our marketplaces and through our brand direct solutions, which could, in turn, harm our business and financial results. In addition, while we have historically concentrated our efforts on the home and auto insurance, consumer finance, education home services and health and wellness markets, we will need to penetrate additional vertical markets, such as health insurance, life insurance and charitable giving / non-profits, in order to achieve our long-term growth goals. Our success in the home and auto insurance, consumer finance, education home services and health and wellness markets depends on our deep understanding of these industries. In order to penetrate new vertical markets, we will need to develop a similar understanding of those new markets and the associated business challenges faced by participants in them. Developing this level of understanding may require substantial investments of time and resources and we may not be successful. In addition, these new vertical markets may have specific risks associated with them. If we fail to penetrate new vertical markets successfully, our revenue may grow at a slower rate than we anticipate and our financial condition could suffer.

 

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If we fail to build and maintain our brand, our ability to expand the use of our marketplaces and brand direct solutions by consumers and advertisers may be adversely affected.

Our future success depends upon our ability to create and maintain brand recognition and a reputation for delivering easy, efficient and personal. A failure by us to build our brand and deliver on these expectations could harm our reputation and damage our ability to attract and retain consumers, which could adversely affect our business. If consumers do not perceive our marketplaces and brand direct solutions as a better web platform experience, our reputation and the strength of our brand may be adversely affected.

Some of our competitors have more resources than we do and can spend more advertising their brands and services. As a result, we are required to spend considerable money and other resources to create brand awareness and build our reputation. Should the need or competition for top-of-mind awareness and brand preference increase, we may not be able to build brand awareness, and our efforts at building, maintaining and enhancing our reputation could fail. Even if we are successful in our branding efforts, such efforts may not be cost-effective. If we are unable to maintain or enhance consumer awareness of our brand cost-effectively, our business, results of operations and financial condition could be materially adversely affected.

Complaints or negative publicity about our business practices, our marketing and advertising campaigns, our compliance with applicable laws and regulations, the integrity of the data that we provide to consumers, data privacy and security issues, and other aspects of our business, whether valid or not, could diminish confidence and participation in our marketplaces and brand direct solutions and could adversely affect our reputation and business. There can be no assurance that we will be able to maintain or enhance our brand, and failure to do so would harm our business growth prospects and operating results.

Our marketing efforts may not be successful.

We currently rely on performance marketing channels that must deliver on metrics that are selected by our advertisers and are subject to change at any time. We are unable to control how our advertisers evaluate our performance. Certain of these metrics are subject to inherent challenges in measurement, and real or perceived inaccuracies in such metrics may harm our reputation and adversely affect our business. In addition, the metrics we provide may differ from estimates published by third parties or from similar metrics of our competitors due to differences in methodology. If our advertisers do not perceive our metrics to be accurate, or if we discover material inaccuracies in our metrics, it could adversely affect our online marketing efforts and business.

If we fail to manage future growth effectively, our business could be materially adversely affected.

We have at times experienced rapid growth and anticipate further growth. This growth has placed significant demands on management and our operational infrastructure. As we continue to grow, we must effectively integrate, develop and motivate a large number of new employees, while maintaining the beneficial aspects of our company culture. If we do not manage the growth of our business and operations effectively, the quality of our services and efficiency of our operations could suffer and we may not be able to execute on our business plan, which could harm our brand, results of operations and overall business.

Failure to increase our revenue or reduce our sales and marketing expense as a percentage of revenue would adversely affect our financial condition and profitability.

We expect to make significant future investments to support the further development and expansion of our business, and these investments may not result in increased revenue or growth on a timely basis or at all. Furthermore, these investments may not decrease as a percentage of revenue if our business grows. There can be no assurance that these investments will increase revenue or that we will eventually be able to decrease our sales and marketing expense as a percentage of revenue, and failure to do so would adversely affect our financial condition and profitability.

 

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We participate in a highly competitive market, and pressure from existing and new companies may adversely affect our business and operating results.

We face significant competition from companies that provide information and services designed to help consumers shop for products comparable to those offered through our websites, marketplaces and through our brand direct solutions and to enable advertisers to reach these consumers. Our competitors offer various products and services that compete with us. Some of these competitors include:

 

   

companies that operate, or could develop, insurance search websites, consumer finance search websites, educational / career enhancement search websites, home services search websites, and other comparison search type websites in the verticals in which we compete with marketplace and brand direct solutions;

 

   

media sites, including websites dedicated to providing multiple quote insurance information and financial services information generally;

 

   

internet search engines; and

 

   

individual insurance providers, including through the operation of their own websites, physical storefront operations and broker arrangements.

We compete with these and other companies for a share of advertisers’ overall budget for online and offline media marketing and referral spend. To the extent that advertisers view alternative marketing and media strategies to be superior to our marketplaces and brand direct solutions, we may not be able to maintain or grow the number of advertisers using, and advertising on, our marketplaces and through our brand direct solutions, and our business and financial results may be harmed.

We also expect that new competitors will enter the industries in which we operate with competing marketplaces and brand direct solutions, products and services, which could have an adverse effect on our business and financial results.

Our competitors could significantly impede our ability to maintain or expand the number of consumers and advertisers using our marketplaces and brand direct solutions. Our competitors also may develop and market new technologies that render our marketplaces and brand direct solutions less competitive, unmarketable or obsolete. In addition, if our competitors develop marketplaces and brand direct solutions with similar or superior functionality to ours, and our web traffic declines, we may need to decrease our referral and advertising fees. If we are unable to maintain our current pricing structure due to competitive pressures, our revenue would likely be reduced and our financial results would be adversely affected.

Our existing and potential competitors may have significantly more financial, technical, marketing and other resources than we have, and the ability to devote greater resources to the development, promotion and support of their marketplaces and brand direct solutions, products and services. In addition, they may have more extensive industry relationships than we have, longer operating histories and greater name recognition. As a result, these competitors may be able to respond more quickly with new technologies and to undertake more extensive marketing or promotional campaigns than we can. In addition, to the extent that any of our competitors have existing relationships with advertisers for marketing or data analytics solutions, those advertisers may be unwilling to partner with us. If we are unable to compete with these competitors, the demand for our marketplaces and brand direct solutions and related products and services could substantially decline.

In addition, if one or more of our competitors were to merge or partner with another of our competitors, the change in the competitive landscape could adversely affect our ability to compete effectively. We may not be able to compete successfully against current or future competitors, and competitive pressures may harm our business and financial results.

 

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Advertisers on our marketplaces and through our brand direct solutions may not provide competitive levels of service to consumers, which could materially adversely affect our brand and business and our ability to attract consumers.

Our ability to provide consumers with a high-quality and compelling web platform experience depends, in part, on consumers receiving competitive prices, convenience, customer service and responsiveness from advertisers with whom they are matched on our marketplaces and through our brand direct solutions. If these providers do not meet or exceed consumer expectations with competitive levels of convenience, customer service, price and responsiveness, the value of our brand may be harmed, our ability to attract consumers to our marketplaces and brand direct solutions may be limited and the number of consumers matched through our marketplaces and brand direct solutions may decline, which could have a material adverse effect on our business, financial condition and results of operations.

Our business depends on our ability to maintain and improve the technology infrastructure necessary to send marketing messages, which include emails, SMS and push notifications and operate our websites, and any significant disruption in service on our email network infrastructure or websites could result in a loss of consumers, which could harm our business, brand, operating results and financial condition.

Our brand, reputation and ability to attract consumers and advertisers depend on the reliable performance of our technology infrastructure and content delivery. We use messages to attract consumers to our marketplaces and brand direct solutions. Our systems may not be adequately designed with the necessary reliability and redundancy to avoid performance delays or outages that could be prolonged and harmful to our business. If our websites are unavailable when users attempt to access them, or if they do not load as quickly as expected, users may not return as often in the future, or at all. As our user base and the amount of information shared on our websites continue to grow, we will need an increasing amount of network capacity and computing power. We have spent and expect to continue to spend substantial amounts on our infrastructure and services to handle the traffic on our websites and to help shorten the length of or prevent system interruptions. The operation of these systems is expensive and complex and we could experience operational failures. Interruptions, delays or failures in these systems, whether due to earthquakes, adverse weather conditions, other natural disasters, power loss, computer viruses, cybersecurity attacks, physical break-ins, terrorism, errors in our software, architecture flaws or performance defects in our proprietary technology or otherwise, could be prolonged and could affect the security or availability of our websites and applications, and prevent consumers from accessing our services. Such interruptions also could result in third parties accessing our confidential and proprietary information, including our intellectual property or consumer information. Problems with the reliability or security of our systems could harm our reputation, our ability to protect our confidential and proprietary information, result in a loss of users of our marketplaces and brand direct solutions or result in additional costs. If we do not maintain or expand our network infrastructure successfully or if we experience operational failures or prolonged disruptions or delays in the availability of our systems or a significant search engine, we could lose current and potential consumers, which could harm our operating results and financial condition.

Substantially all of the communications, network and computer hardware used to operate our websites are located in the United States in Amazon Web Services data centers. Although we believe our systems are fully redundant, there may be exceptions for certain hardware. In addition, we do not own or control the operation of these facilities. Our systems and operations are vulnerable to damage or interruption from fire, flood, power loss, telecommunications failure, terrorist attacks, acts of war, electronic and physical break-ins, computer viruses, earthquakes and similar events. The occurrence of any of these events could result in damage to our systems and hardware or could cause them to fail. In addition, we may not have sufficient protection or recovery plans in certain circumstances.

Problems faced by our third-party web hosting providers could adversely affect the experience of users of our marketplaces and through our brand direct solutions. Our third-party web hosting providers could close their facilities without adequate notice. Any financial difficulties, up to and including bankruptcy, faced by our third-

 

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party web hosting providers or any of the service providers with whom they contract may have adverse effects on our business, the nature and extent of which are difficult to predict. If our third-party web hosting providers are unable to keep up with our growing capacity needs, our business could be harmed.

Any errors, defects, disruptions or other performance or reliability problems with our network operations could cause interruptions in access to our marketplaces and brand direct solutions as well as delays and additional expense in arranging new facilities and services and could harm our reputation, business, operating results and financial condition. Although we carry business interruption insurance, it may not be sufficient to compensate us for the potentially significant losses, including the potential harm to the future growth of our business that may result from interruptions in our service as a result of system failures.

We depend on third-party website publishers for a significant portion of our visitors, and any decline in the supply of media available through these websites or increase in the price of this media could cause our revenue to decline or our cost to reach visitors to increase.

A portion of our revenue is attributable to visitors originating from advertising placements that we purchase on third party websites. In some instances, website publishers may change the advertising inventory they make available to us at any time and, therefore, impact our revenue. In addition, website publishers may place restrictions on our offerings. These restrictions may prohibit advertisements from specific clients or specific industries, or restrict the use of certain creative content. If a website publisher decides not to make advertising inventory available to us, or decides to demand a higher revenue share or places significant restrictions on the use of such inventory, we may not be able to find advertising inventory from other websites that satisfy our requirements in a timely and cost-effective manner. In addition, the number of competing online marketing service providers and advertisers that acquire inventory from websites continues to increase. Consolidation of website publishers could eventually lead to a concentration of desirable inventory on a small number of websites or networks, which could limit the supply of inventory available to us or increase the price of inventory to us. If any of the foregoing occurs, our revenue could decline or our operating costs may increase.

We depend on key personnel to operate our business, and if we are unable to retain, attract and integrate qualified personnel, our ability to develop and successfully grow our business could be harmed.

We believe our success has depended, and continues to depend, on the efforts and talents of our executives and employees. Our future success depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. Qualified individuals are in high demand, and we may incur significant costs to attract and retain them. Experienced information technology personnel, who are critical to the success of our business, are in particularly high demand. This demand is particularly acute in the greater Tampa Bay, Florida area, where we are headquartered. Competition for their talents is intense, and retaining such individuals can be difficult. The loss of any of our executive officers or key employees could materially adversely affect our ability to execute our business plan and strategy, and we may not be able to find adequate replacements on a timely basis, or at all. Many of our executive officers and other employees are at-will employees, which means they may terminate their employment relationships with us at any time, and their knowledge of our business and industry would be extremely difficult to replace. We cannot ensure that we will be able to retain the services of any members of our senior management or other key employees. If we do not succeed in attracting well-qualified employees or retaining and motivating existing employees, our business could be materially adversely affected.

Our management team has limited experience managing a public company.

Most members of our management team have limited experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws, rules and regulations that govern public companies. As a public company following completion of the Business Combination, we will be subject to significant obligations relating to reporting, procedures and internal controls, and our management team may not successfully or efficiently manage such obligations. These obligations and

 

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scrutiny will require significant attention from our management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, financial condition and results of operations.

Our corporate culture has contributed to our success and, if we are unable to maintain it as we grow, our business, financial condition and results of operations could be harmed.

We have experienced and may continue to experience rapid expansion of our employee ranks. We believe our corporate culture has been a key element of our success. However, as our organization grows, it may be difficult to maintain our culture, which could reduce our ability to innovate and operate effectively. The failure to maintain the key aspects of our culture as our organization grows could result in decreased employee satisfaction, increased difficulty in attracting top talent, increased turnover and could compromise the quality of our client service, all of which are important to our success and to the effective execution of our business strategy. In the event we are unable to maintain our corporate culture as we grow to scale, our business, financial condition and results of operations could be harmed.

If we are unable to successfully respond to changes in the market, our business could be harmed.

While our business has grown rapidly as consumers and advertisers have increasingly accessed our marketplaces and brand direct solutions, we expect that our business will evolve in ways that may be difficult to predict. For example, we anticipate that over time we may reach a point when investments in new user traffic are less productive and the continued growth of our revenue will require more focus on developing new product and service offerings for consumers and advertisers, expanding our marketplaces and brand direct solutions into new international markets and new industries to attract new advertisers, and increasing our referral and advertising fees. It is also possible that consumers and advertisers could broadly determine that they no longer believe in the efficiency and effectiveness of our marketplaces and brand direct solutions. Our continued success will depend on our ability to successfully adjust our strategy to meet the changing market dynamics. If we are unable to do so, our business could be harmed and our results of operations and financial condition could be materially adversely affected.

We expect our results of operations to fluctuate on a quarterly and annual basis.

Our revenue and results of operations could vary significantly from period to period and may fail to match expectations as a result of a variety of factors, some of which are outside of our control. Our results may vary as a result of fluctuations in the number of consumers and advertisers using our marketplaces and brand direct solutions and the size and seasonal variability of the marketing budgets of our advertisers. In addition, our advertisers’ industries are each subject to their own cyclical trends and uncertainties. Fluctuations and variability across these different verticals may affect our revenue. As a result of the potential variations in our revenue and results of operations, period-to-period comparisons may not be meaningful and the results of any one period should not be relied on as an indication of future performance. In addition, our results of operations may not meet the expectations of investors or public market analysts who follow us, which may adversely affect our stock price.

Unfavorable global economic conditions, including as a result of health and safety concerns related to the coronavirus outbreak, could adversely affect our business, financial condition or results of operations.

Our results of operations could be adversely affected by general conditions in the global economy, including conditions that are outside of our control, such as the impact of health and safety concerns from the current coronavirus (COVID-19) outbreak. The most recent global financial crisis caused by the coronavirus outbreak has resulted in extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn could result in a variety of risks to our business, including weakened demand for our marketplaces and brand direct solutions and related products and services or delays in advertiser payments. A weak or declining economy could also strain our media supply channels.

 

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Additionally, our business relies heavily on people, and adverse events such as health-related concerns about working in our offices, the inability to travel and other matters affecting the general work environment could harm our business. While we do not anticipate any material impact to our business operations as a result of the coronavirus outbreak, in the event of a major disruption caused by the coronavirus outbreak, we may lose the services of a number of our employees or experience system interruptions, which could lead to diminishment of our regular business operations, inefficiencies and reputational harm. We are also unsure what actions our advertisers and other partners may take in response to the coronavirus outbreak. For example, to the extent our advertisers shift their workforces from offices to remote locations, we may see a decrease in demand while they relocate these operations. Any of the foregoing could harm our business and we cannot anticipate all the ways in which the current global health crisis and financial market conditions could adversely impact our business.

We have taken temporary precautionary measures intended to help minimize the risk of the coronavirus outbreak to our employees, our advertisers and the communities in which we participate, which could negatively impact our business. To this end, we have implemented mandatory closures of certain of our offices, encouraged all of our employees to telework, banned non-critical business travel, implemented a Coronavirus Communications Plan setting forth both internal and external communications strategies, implemented a 90-day furlough of 20% of the salaries of all of our employees at or above the director level, with such furloughed salaries to be repaid at a future date with a 5% bonus (subject to the satisfaction of certain conditions) and negotiated rent abatements at several of our leased locations for the months of April, May and June 2020. Our employees travel frequently to establish and maintain relationships with our advertisers and other partners. Although we continue to monitor the situation and may adjust our current policies as more information and guidance become available, temporarily suspending travel and limitations on doing business in-person could negatively impact our marketing and business development efforts, slow down our recruiting efforts or create operational or other challenges, any of which could harm our business, financial condition and results of operations.

We often have long sales cycles, which can result in significant time between initial contact with a prospect and execution of an advertiser agreement, making it difficult to project when, if at all, we will obtain new advertisers and when we will generate revenue from those advertisers.

Our sales cycle, from initial contact to contract execution and implementation can take significant time. Our sales efforts involve educating our advertisers about the use, technical capabilities and benefits of our marketplaces and brand direct solutions. Some of our advertisers undertake an evaluation process that frequently involves not only our marketplaces and brand direct solutions but also the offerings of our competitors. As a result, it is difficult to predict when we will obtain new advertisers and begin generating revenue from these new advertisers. Even if our sales efforts result in obtaining a new advertiser, under our usage-based pricing model, the advertiser controls when and to what extent it uses our marketplaces and brand direct solutions. As a result, we may not be able to add advertisers, or generate revenue, as quickly as we may expect, which could harm our revenue growth rates.

Our past growth may not be indicative of our future growth, and our revenue growth rate may decline in the future.

Our revenue grew from $67 million in 2017 to $138 million in 2018 and to $240 million in 2019, increases of 106% and 73%, respectively. This growth may not be indicative of our future growth, if any, and we will not be able to grow as expected, or at all, if we do not accomplish the following:

 

   

increase the number of consumers using our marketplaces and brand direct solutions;

 

   

maintain and expand the number of advertisers that use our marketplaces and brand direct solutions or our revenue per provider;

 

   

further improve the quality of our marketplaces and brand direct solutions, and introduce high-quality new products;

 

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increase the number of shoppers acquired by advertisers on our marketplaces and brand direct solutions;

 

   

timely adjust marketing expenditures in relation to changes in demand for the underlying products and services offered by our advertisers;

 

   

maintain brand recognition and effectively leverage our brand; and

 

   

attract and retain management and other skilled personnel for our business.

Our revenue growth rates may also be limited if we are unable to achieve high market penetration rates as we experience increased competition. If our revenue or revenue growth rates decline, investors’ perceptions of our business may be adversely affected and the market price of our common stock could decline.

Our dedication to making decisions based primarily on the best interests of our company and stockholders may cause us to forgo short-term gains in pursuit of potential but uncertain long-term growth.

Our guiding principle is to build our business by making decisions based primarily upon the best interests of our entire marketplaces, including consumers and advertisers, which we believe has been essential to our success in increasing our user growth rate and engagement and best serves the long-term interests of our company and our stockholders. In the past, we have forgone, and we will in the future continue to forgo, certain expansion or short-term revenue opportunities that we do not believe are in the best interests of our marketplaces and brand direct solutions and its users, even if such decisions adversely affect our results of operations in the short term. However, this strategy may not result in the long-term benefits that we expect, in which case our user traffic and engagement, business and financial results could be harmed.

We collect, process, store, share, disclose and use consumer information and other data, and our actual or perceived failure to protect such information and data or respect users’ privacy could damage our reputation and brand and harm our business and operating results.

Use of our marketplaces and brand direct solutions involves the storage and transmission of consumers’ information, including personal information, and security breaches could expose us to a risk of loss or exposure of this information which could result in potential liability, litigation and remediation costs, as well as reputational harm, all of which could materially adversely affect our business and financial results. For example, unauthorized parties could steal our users’ names, email addresses, physical addresses, phone numbers and other information that we collect when providing referrals. While we use encryption and authentication technology licensed from third parties designed to effect secure transmission of such information, we cannot guarantee the security of the transfer and storage of the personal information we collect from advertisers.

Like all information systems and technology, our websites and information systems may be subject to computer viruses, break-ins, phishing impersonation attacks, attempts to overload our servers with denial-of-service or other attacks, ransomware and similar incidents or disruptions from unauthorized use of our computer systems, as well as unintentional incidents causing data leakage, any of which could lead to interruptions, delays or website shutdowns, or could cause loss of critical data or the unauthorized disclosure, access, acquisition, alteration or use of personal or other confidential information. Although we have a chief information officer who coordinates our cybersecurity measures, policies and procedures, and our chief information officer regularly reports to our board of directors regarding these matters, we cannot be certain that our efforts will be able to prevent breaches of the security of our information systems and technology. If we experience compromises to our security that result in websites performance or availability problems, the complete shutdown of our websites or the loss or unauthorized disclosure, access, acquisition, alteration or use of confidential information, consumers and advertisers may lose trust and confidence in us, and consumers and advertisers may decrease the use of our website or stop using our website entirely. Further, outside parties may attempt to fraudulently induce employees, consumers or advertisers to disclose sensitive information in order to

 

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gain access to our information or consumers’ or advertisers’ information. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, often are not recognized until launched against a target, and may originate from less regulated and remote areas around the world, we may be unable to proactively address these techniques or to implement adequate preventative measures.

Any or all of the issues above could adversely affect our ability to attract new users and increase engagement by existing users, cause existing users to curtail or stop use of our marketplaces and brand direct solutions, cause existing advertisers to cancel their contracts or subject us to governmental or third-party lawsuits, investigations, regulatory fines or other actions or liability, thereby harming our business, results of operations and financial condition. Although we are not aware of any material information security incidents to date, we have detected common types of attempts to attack our information systems and data using means that have included viruses and phishing.

There are numerous federal, state and local laws in the United States and around the world regarding privacy and the collection, processing, storing, sharing, disclosing, using, cross-border transfer and protecting of personal information and other data, the scope of which are changing, subject to differing interpretations, and which may be costly to comply with, may result in regulatory fines or penalties, and may be inconsistent between countries and jurisdictions or conflict with other rules.

We are subject to the terms of our privacy policies and privacy-related obligations to third parties. We strive to comply with all applicable laws, policies, legal obligations and industry codes of conduct relating to privacy and data protection, to the extent possible. However, it is possible that these obligations may be interpreted and applied in new ways or in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices or that new regulations could be enacted. Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to consumers or other third parties, or our privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of sensitive information, which could include personally identifiable information or other user data, may result in governmental investigations, enforcement actions, regulatory fines, litigation or public statements against us by consumer advocacy groups or others, and could cause consumers and advertisers to lose trust in us, all of which could be costly and have an adverse effect on our business. In addition, new and changed rules and regulations regarding privacy, data protection and cross-border transfers of consumer information could cause us to delay planned uses and disclosures of data to comply with applicable privacy and data protection requirements. Moreover, if third parties that we work with violate applicable laws or our policies, such violations also may put consumer or advertiser information at risk and could in turn harm our reputation, business and operating results.

We may be unable to halt the operations of websites that aggregate or misappropriate our data.

From time to time, third parties may misappropriate our data through website scraping, robots or other means and aggregate this data on their websites with data from other companies. In addition, copycat websites may misappropriate data in our marketplaces and brand direct solutions and attempt to imitate our brand or the functionality of our website. If we become aware of such websites, we intend to employ technological or legal measures in an attempt to halt their operations. However, we may be unable to detect all such websites in a timely manner and, even if we could, technological and legal measures may be insufficient to halt their operations. In some cases, particularly in the case of websites operating outside of the United States, our available remedies may not be adequate to protect us against the effect of the operation of such websites. Regardless of whether we can successfully enforce our rights against the operators of these websites, any measures that we may take could require us to expend significant financial or other resources, which could harm our business, results of operations or financial condition. In addition, to the extent that such activity creates confusion among consumers or advertisers, our brand and business could be harmed.

 

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We are subject to a number of risks related to the credit card and debit card payments we accept from advertisers.

We sometimes accept payments from advertisers through credit and debit card transactions. For credit and debit card payments, we pay interchange and other fees, which may increase over time. An increase in those fees may require us to increase the prices we charge and would increase our operating expenses, either of which could harm our business, financial condition and results of operations.

We currently rely on multiple third-party vendors to provide payment processing services, including the processing of payments from credit cards and debit cards, and our business may be disrupted if these vendors becomes unwilling or unable to provide these services to us and we are unable to find a suitable replacement on a timely basis. If our processing vendors fail to maintain adequate systems for the authorization and processing of credit card transactions, it could cause one or more of the major credit card companies to disallow our continued use of their payment products. In addition, if these systems fail to work properly and, as a result, we do not charge our advertisers’ credit cards on a timely basis or at all, our business, revenue, results of operations and financial condition could be harmed.

We may acquire other companies or technologies, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results.

Our success will depend, in part, on our ability to grow our business in response to the demands of consumers, advertisers and other constituents within our advertisers’ industries as well as competitive pressures. In some circumstances, we may determine to do so through the acquisition of complementary businesses and technologies rather than through internal development. The identification of suitable acquisition candidates can be difficult, time-consuming and costly, and we may not be able to successfully complete identified acquisitions. The risks we face in connection with acquisitions include:

 

   

regulatory hurdles;

 

   

failure of anticipated benefits to materialize;

 

   

diversion of management time and focus from operating our business to addressing acquisition integration challenges;

 

   

coordination of technology, research and development, and sales and marketing functions;

 

   

transition of the acquired company’s consumers and data to our marketplaces and brand direct solutions;

 

   

retention of employees from the acquired company;

 

   

cultural challenges associated with integrating employees from the acquired company into our organization;

 

   

integration of the acquired company’s products or technology;

 

   

integration of the acquired company’s accounting, management information, human resources and other administrative systems;

 

   

the need to implement or improve controls, procedures and policies at a business that prior to the acquisition may have lacked effective controls, procedures and policies;

 

   

potential write-offs of intangibles or other assets acquired in such transactions that may have an adverse effect on our operating results in a given period;

 

   

potential liabilities for activities of the acquired company before the acquisition, including patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; and

 

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litigation or other claims in connection with the acquired company, including claims from terminated employees, consumers, former stockholders or other third parties.

Our failure to address these risks or other problems encountered in connection with future acquisitions and investments could cause us to fail to realize the anticipated benefits of these acquisitions or investments, cause us to incur unanticipated liabilities and harm our business generally. Future acquisitions also could result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, amortization expense or impairment charges associated with acquired intangible assets or goodwill, any of which could harm our financial condition. Also, the anticipated benefits of any acquisitions may not be realized.

We have operations in Canada, which may subject us to additional cost and economic risks that can adversely affect our business, financial condition and results of operations.

Our Canadian operations create challenges associated with supporting a rapidly growing business across different legal and regulatory systems and commercial infrastructures.

We have limited personnel in Canada. To the extent we are unable to effectively manage and expand our Canadian operations due to our limited personnel, we may be unable to effectively grow in our Canadian operations.

Our Canadian operations subject us to a variety of additional risks, including:

 

   

risks related to compliance with local laws and regulations, including those relating to privacy, cybersecurity, data security, antitrust, data localization, anti-bribery, import and export controls, economic sanctions, tax and withholding (including overlapping of different tax regimes), varied labor and employment laws (including those relating to termination of employees); corporate formation and other regulatory limitations or obligations on our operations (such as obtaining requisite licenses), and the increased administrative costs and risks associated with such compliance; and

 

   

operational and execution risk, and other challenges caused by distance and cultural differences, which may burden management, increase travel, infrastructure and legal compliance costs, and add complexity to our enforcement of advertising standards across countries.

We may incur significant operating expenses as a result of our Canadian operations. Our Canadian operations also subject us to the impact of differing regulatory requirements, costs and difficulties in managing a distributed workforce, and potentially adverse tax consequences in the United States and abroad. If our Canadian operations were found to be in violation of any existing or future international laws or regulations or if interpretations of those laws and regulations were to change, our business in Canada could be subject to fines and other financial penalties, have licenses revoked, or be forced to restructure operations or shut down entirely. Any failure to successfully manage the risks and challenges related to our Canadian operations could adversely affect our business, financial condition and results of operations.

Exposure to foreign currency exchange rate fluctuations could negatively impact our results of operations.

While the majority of the transactions through our platforms are denominated in U.S. dollars, we have transacted minimally in the Canadian dollar, both for inventory and for payments by advertisers from use of our platforms. We also have expenses denominated in the Canadian dollar. While we generally require a fee from our advertisers that pay in non-U.S. currency, this fee may not always cover foreign currency exchange rate fluctuations. We may require additional capital to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances. If capital is not available to us, our business, operating results and financial condition may be harmed.

 

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We may require additional capital to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances. If capital is not available to us, our business, operating results and financial condition may be harmed.

We intend to continue to make investments to support our growth and may require additional capital to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances, including to increase our marketing expenditures to improve our brand awareness, develop new product and service offerings or further improve our marketplaces and brand direct solutions and existing product and service offerings, enhance our operating infrastructure and acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. However, additional funds may not be available when we need them, on terms that are acceptable to us, or at all. Volatility in the credit markets also may have an adverse effect on our ability to obtain debt financing.

If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to pursue our business objectives and to respond to business opportunities, challenges or unforeseen circumstances could be significantly limited, and our business, operating results, financial condition and prospects could be materially adversely affected.

Litigation could distract management, increase our expenses or subject us to material money damages and other remedies.

We may be involved from time to time in various additional legal proceedings, including, but not limited to, actions relating to breach of contract, breach of federal and state privacy laws, and intellectual property infringement that might necessitate changes to our business or operations. Regardless of whether any claims against us have merit, or whether we are ultimately held liable or subject to payment of damages, claims may be expensive to defend and may divert management’s time away from our operations. If any legal proceedings were to result in an unfavorable outcome, it could have a material adverse effect on our business, financial position and results of operations. Any adverse publicity resulting from actual or potential litigation may also materially and adversely affect our reputation, which in turn could adversely affect our results.

We conduct marketing activities, directly and indirectly, via telephone, email and/or through other online and offline marketing channels, which general marketing activities are governed by numerous federal and state regulations, such as the Telemarketing Sales Rule, state telemarketing laws, federal and state privacy laws, the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or CAN-SPAM Act, the Telephone Consumer Protection Act, or TCPA, and the Federal Trade Commission Act and its accompanying regulations and guidelines, among others. In addition to being subject to action by regulatory agencies, some of these laws, like the TCPA, allow private individuals to bring litigation against companies for breach of these laws. We are also dependent on our third-party partners to comply with applicable laws. For example, we often depend upon our third-party partners to obtain consent from consumers to receive telemarking calls in compliance with the TCPA. We may be alleged to have indemnification obligations to third-party for alleged breaches of privacy laws like the TCPA, which could increase our defense costs and require that we pay damages if there were an adverse ruling in any such claims. Any of these events may have a material adverse effect on our business, results of operations, financial condition and prospects.

Companies in the internet, technology and media industries are frequently subject to allegations of infringement or other violations of intellectual property rights. We plan to vigorously defend our intellectual property rights and our freedom to operate our business; however, regardless of the merits of the claims, intellectual property claims are often time consuming and extremely expensive to litigate or settle and are likely to continue to divert managerial attention and resources from our business objectives. Successful infringement

 

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claims against us could result in significant monetary liability or prevent us from operating our business or portions of our business. Resolution of claims may require us to obtain licenses to use intellectual property rights belonging to third parties, which may be expensive to procure, or we may be required to cease using intellectual property of third parties altogether. Many of our contracts require us to provide indemnification against third-party intellectual property infringement claims, which would increase our defense costs and may require that we pay damages if there were an adverse ruling in any such claims. Any of these events may have a material adverse effect on our business, results of operations, financial condition and prospects.

Our existing indebtedness, and any future indebtedness could adversely affect our ability to operate our business.

 

As of March 31, 2020, we had $15 million available for borrowing under our revolving line of credit, and in the future we could incur indebtedness beyond our revolving line of credit.

Borrowing on our revolving line of credit, combined with our other financial obligations and contractual commitments, could have significant adverse consequences, including:

 

   

requiring us to dedicate a portion of our cash resources to the payment of interest and principal, reducing money available to fund working capital, capital expenditures, product development and other general corporate purposes;

 

   

increasing our vulnerability to adverse changes in general economic, industry and market conditions;

 

   

subjecting us to restrictive covenants that may reduce our ability to take certain corporate actions or obtain further debt or equity financing;

 

   

limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and

 

   

placing us at a competitive disadvantage compared to our competitors that have less debt or better debt servicing options.

In addition, any indebtedness we incur under our current revolving line of credit will bear interest at a variable rate, which would make us vulnerable to increases in the market rate of interest. If the market rate of interest increases substantially, we would have to pay additional interest, which would reduce cash available for our other business needs. We intend to satisfy any future debt service obligations with our existing cash and cash equivalents and cash flows from operations. Under our credit agreement with Monroe Capital, our failure to make payments when due, comply with specified covenants, or undergo a Change of Control is an event of default. A Change of Control is deemed to occur under our credit agreement if, among other things, (1) the permitted holders (as defined under the credit agreement to include Clairvest and its affiliates, Joseph Marinucci and Fernando Borghese) cease to (x) directly or indirectly own and control at least 50.01% of our equity interests, whether voting or non-voting, and (y) possess the right to elect a majority of our board and to direct our management, or (2) either of Joseph Marinucci or Fernando Borghese cease to be employed by us in the roles as Chief Executive Officer and Chief Operating Officer, respectively, other than an event caused by the death or disability of either. If an event of default occurs and the lender accelerates any indebtedness then outstanding, we may need to seek additional financing, which may not be available on acceptable terms, in a timely manner or at all. In such event, we may not be able to make accelerated payments, and the lender could seek to enforce security interests in the collateral securing such indebtedness, which includes substantially all of our assets. In addition, the covenants under our existing debt instruments, the pledge of our assets as collateral and the negative pledge with respect to our intellectual property could limit our ability to obtain additional debt financing. Any of these events could have a material adverse effect on our results of operations or financial condition.

 

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We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs, which may in turn impair our growth.

We intend to continue to grow our business, which will require additional capital to develop new features or enhance our platforms, improve our operating infrastructure, finance working capital requirements, or acquire complementary businesses and technologies. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under our existing credit facility in an amount sufficient to fund our working capital needs. Accordingly, we may need to engage in additional equity or debt financings to secure additional capital. We cannot assure you that we would be able to locate additional financing on commercially reasonable terms or at all. Any debt financing that we secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. If our cash flows and credit facility borrowings are insufficient to fund our working capital requirements, we may not be able to grow at the rate we currently expect or at all. In addition, in the absence of sufficient cash flows from operations, we might be unable to meet our obligations under our credit facility, and we may therefore be at risk of default thereunder. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. If we are unable to secure additional funding on favorable terms, or at all, when we require it, our ability to continue to grow our business to react to market conditions could be impaired and our business may be harmed.

We have entered into, and may in the future enter into, credit facilities which may contain operating and financial covenants that restrict our business and financing activities.

We have entered into, and may in the future enter into, credit facilities which contain restrictions that limit our flexibility in operating our business. Our credit facility contains, and any future credit facility may contain, various covenants that limit our ability to engage in specified types of transactions. Subject to limited exceptions, these covenants limit our ability to, among other things:

 

   

sell assets or make changes to the nature of our business;

 

   

engage in mergers or acquisitions;

 

   

incur, assume or permit additional indebtedness;

 

   

make restricted payments, including paying dividends on, repurchasing, redeeming or making distributions with respect to our capital stock;

 

   

make specified investments;

 

   

engage in transactions with our affiliates; and

 

   

make payments in respect of subordinated debt.

Our obligations under our credit facility are collateralized by a pledge of substantially all of our assets, including accounts receivable, deposit accounts, intellectual property, and investment property and equipment. The covenants in our credit facility may limit our ability to take actions and, in the event that we breach one or more covenants, our lenders may choose to declare an event of default and require that we immediately repay all amounts outstanding, terminate the commitment to extend further credit and foreclose on the collateral granted to them to collateralize such indebtedness, which includes our intellectual property. In addition, if we fail to meet the required covenants, we will not have access to further draw-downs under our credit facility.

Risks Related to Our Intellectual Property

We may not be able to adequately protect our intellectual property rights.

Our business depends on our intellectual property, the protection of which is crucial to the success of our business. We rely on a combination of patent, trademark, trade secret and copyright law and contractual

 

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restrictions to protect our intellectual property. In addition, we attempt to protect our intellectual property, technology and confidential information by requiring our employees and consultants to enter into confidentiality and assignment of inventions agreements and third parties to enter into nondisclosure agreements as we deem appropriate. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our website and market features, software and functionality or obtain and use information that we consider proprietary.

We may not be able to discover or determine the extent of any unauthorized use or infringement or violation of our intellectual property or proprietary rights. Third parties also may take actions that diminish the value of our proprietary rights or our reputation. The protection of our intellectual property may require the expenditure of significant financial and managerial resources. Litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement or invalidity. Such litigation could be costly, time-consuming and distracting to management, result in a diversion of resources, the impairment or loss of portions of our intellectual property and could materially adversely affect our business, financial condition and operating results. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. These steps may be inadequate to protect our intellectual property. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Despite our precautions, it may be possible for unauthorized third parties to use information that we regard as proprietary to create product offerings that compete with ours. We also cannot be certain that others will not independently develop or otherwise acquire equivalent or superior technology or other intellectual property rights, which could materially adversely affect our business, financial condition and operating results.

Competitors may adopt service names similar to ours, thereby harming our ability to build brand identity and possibly leading to user confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of the term Digital Media Solutions.” We currently hold the “digitalmediasolutions.com” internet domain name as well as various other related domain names. The regulation of domain names in the United States is subject to change. Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars, or modify the requirements for holding domain names. As a result, we may not be able to acquire or maintain all domain names that use the name Digital Media Solutions.

We currently operate primarily in the United States. To the extent that we determine to expand our business internationally, we will encounter additional risks, including different, uncertain or more stringent laws relating to intellectual property rights and protection.

We may in the future be subject to intellectual property disputes, which are costly to defend and could harm our business and operating results.

We may from time to time face allegations or claims that we have infringed the trademarks, copyrights, patents and other intellectual property rights of third parties, including from our competitors or non-practicing entities. Such claims, regardless of their merit, could result in litigation or other proceedings and could require us to expend significant financial resources and attention by our management and other personnel that otherwise would be focused on our business operations, result in injunctions against us that prevent us from using material intellectual property rights, or require us to pay damages to third parties. Patent and other intellectual property litigation may be protracted and expensive, and the results are difficult to predict and may result in significant settlement costs or require us to stop offering some features, or purchase licenses or modify our products and features while we develop non-infringing substitutes, but such licenses may not be available on terms acceptable to us or at all, which would require us to develop alternative intellectual property.

 

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Even if these matters do not result in litigation or are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, could harm our business, our operating results and our reputation.

As our business expands, we may be subject to intellectual property claims against us with increasing frequency, scope and magnitude. We may also be obligated to indemnify affiliates or other partners who are accused of violating third parties’ intellectual property rights by virtue of those affiliates or partners’ agreements with us, and this could increase our costs in defending such claims and our damages. For example, many of our agreements with advertisers and other partners require us to indemnify these entities against third-party intellectual property infringement claims. Furthermore, such advertisers and partners may discontinue their relationship with us either as a result of injunctions or otherwise. The occurrence of these results could harm our brand or materially adversely affect our business, financial position and operating results.

Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.

In order to protect our technologies and processes, we rely in part on confidentiality agreements with our employees, independent contractors and other advisors. These agreements may not effectively prevent disclosure of confidential information, including trade secrets, and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover our trade secrets and proprietary information, and in such cases we may not be able to assert our trade secret rights against such parties. To the extent that our employees, contractors or other third parties with whom we do business use intellectual property owned by others in their work for us, disputes may arise as to the rights to related or resulting know-how and inventions. The loss of confidential information or intellectual property rights, including trade secret protection, could make it easier for third parties to compete with our products. In addition, any changes in, or unexpected interpretations of, intellectual property laws may compromise our ability to enforce our trade secret and intellectual property rights. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain protection of our trade secrets or other proprietary information could harm our business, results of operations, reputation and competitive position.

Our use of “open source” software could adversely affect our ability to protect our proprietary software and subject us to possible litigation.

We use open source software in connection with our software development. From time to time, companies that use open source software have faced claims challenging the use of open source software and/or compliance with open source license terms. We could be subject to suits by parties claiming ownership of what we believe to be open source software or claiming non-compliance with open source licensing terms. Some open source licenses require users who distribute software containing open source to make available all or part of such software, which in some circumstances could include valuable proprietary code of the user. While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, in part because open source license terms are often ambiguous. Any requirement to disclose our proprietary source code or pay damages for breach of contract could be harmful to our business, results of operations or financial condition, and could help our competitors develop services that are similar to or better than ours.

 

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Risks Related to Government Regulation

Our businesses are heavily regulated. We are, and may in the future become, subject to a variety of international, federal, state, and local laws, many of which are unsettled and still developing and which could subject us to claims or otherwise harm our business.

Our activities are subject to extensive regulation under the laws of the United States and its various states and the other jurisdictions in which we operate. We are currently subject to a variety of, and may in the future become subject to additional, international, federal, state and local laws that are continuously evolving and developing, including laws regarding internet-based businesses and other businesses that rely on advertising, as well as privacy and consumer protection laws, including the TCPA, the Telemarketing Sales Rule, the CAN-SPAM Act, the Fair Credit Reporting Act, the Federal Trade Commission Act and employment laws, including those governing wage and hour requirements. In addition, there is increasing attention by state and other jurisdictions to regulation in this area. These laws are complex and can be costly to comply with, require significant management time and effort, and could subject us to claims, government enforcement actions, civil and criminal liability or other remedies, including suspension of business operations. These laws may conflict with each other, further complicating compliance efforts.

If we are alleged not to comply with these laws or regulations, we may be required to modify affected products and services, which could require a substantial investment and loss of revenue, or cease providing the affected product or service altogether. If we are found to have violated laws or regulations, we may be subject to significant fines, penalties and other losses.

We assess customer needs, collect customer contact information and provide other product offerings, which results in us receiving personally identifiable information. This information is increasingly subject to legislation and regulation in the United States. This legislation and regulation is generally intended to protect individual privacy and the privacy and security of personal information. We could be adversely affected if government regulations require us to significantly change our business practices with respect to this type of information or if the advertisers who use our marketplaces and brand direct solutions violate applicable laws and regulations.

Changes in applicable laws and regulations may materially increase our direct and indirect compliance and other expenses of doing business, having a material adverse effect on our business, financial condition and results of operations. If there were to be changes to statutory or regulatory requirements, we may be unable to comply fully with or maintain all required licenses and approvals. Regulatory authorities have relatively broad discretion to grant, renew and revoke licenses and approvals. If we do not have all requisite licenses and approvals, or do not comply with applicable statutory and regulatory requirements, the regulatory authorities could preclude or temporarily suspend us from carrying on some or all of our activities or monetarily penalize us, which could have a material adverse effect on our business, results of operations and financial condition.

We cannot predict whether any proposed legislation or regulatory changes will be adopted, or what impact, if any, such proposals or, if enacted, such laws could have on our business, results of operations and financial condition. If we are alleged to have failed to comply with applicable laws and regulations, we may be subject to investigations, criminal penalties or civil remedies, including fines, injunctions, loss of an operating license or approval, increased scrutiny or oversight by regulatory authorities, the suspension of individual employees, limitations on engaging in a particular business or redress to customers. The cost of compliance and the consequences of non-compliance could have a material adverse effect on our business, results of operations and financial condition. In addition, a finding that we have failed to comply with applicable laws and regulations could have a material adverse effect on our business, results of operations and financial condition by exposing us to negative publicity and reputational damage or by harming our customer or employee relationships.

In most jurisdictions, government regulatory authorities have the power to interpret and amend applicable laws and regulations, and have discretion to grant, renew and revoke the various licenses and approvals we need to conduct our activities. Such authorities may require us to incur substantial costs in order to comply with such

 

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laws and regulations. Regulatory statutes are broad in scope and subject to differing interpretation. In some areas of our businesses, we act on the basis of our own or the industry’s interpretations of applicable laws or regulations, which may conflict from jurisdiction to jurisdiction. In the event those interpretations eventually prove different from the interpretations of regulatory authorities, we may be penalized or precluded from carrying on our previous activities.

Federal, state and international laws regulating telephone and messaging marketing practices impose certain obligations on advertisers, which could reduce our ability to expand our business.

We, and the advertisers using our marketplaces and brand direct solutions, make telephone calls and send messages to consumers who request information through our marketplaces and through our brand direct solutions. The United States regulates marketing by telephone and messaging, including email, SMS and push messaging. The TCPA prohibits companies from making certain telemarketing calls to numbers listed in the Federal Do-Not-Call Registry and imposes other obligations and limitations on making phone calls and sending text messages to consumers. The CAN-SPAM Act regulates commercial email messages and specifies penalties for the transmission of commercial email messages that do not comply with certain requirements, such as providing an opt-out mechanism for stopping future emails from senders. We and the advertisers who use our marketplaces and brand direct solutions may need to comply with such laws and any associated rules and regulations. States and other countries have similar laws related to telemarketing and commercial emails. Additional or modified laws and regulations, or interpretations of existing, modified or new laws, regulations and rules, could prohibit or increase the cost of engaging with consumers and impair our ability to expand the use of our products, including our demand response solution, to more users. Alleged failure to comply with obligations and restrictions related to telephone, text message and email marketing could subject us to lawsuits, fines, statutory damages, consent decrees, injunctions, adverse publicity and other losses that could harm our business. Moreover, over the past several years there has been a sustained increase in litigation alleging violations of laws relating to telemarketing, which has increased the exposure of companies that operate telephone and text messaging campaigns to class action litigation alleging violations of the TCPA. If we or the advertisers who use our marketplaces and brand direct solutions become subject to such litigation, it could result in substantial costs to and materially adversely affect our business.

Changes in the regulation of the internet could adversely affect our business.

Laws, rules and regulations governing internet communications, advertising and e-commerce are dynamic and the extent of future government regulation is uncertain. Federal and state regulations govern various aspects of our online business, including intellectual property ownership and infringement, trade secrets, the distribution of electronic communications, marketing and advertising, user privacy and data security, search engines and internet tracking technologies. In addition, changes in laws or regulations that adversely affect the growth, popularity or use of the internet, including potentially the recent repeal in the United States of net neutrality, could decrease the demand for our offerings and increase our cost of doing business. Future taxation on the use of the internet or e-commerce transactions could also be imposed. Existing or future regulation or taxation could hinder growth in or adversely affect the use of the internet generally, including the viability of internet e-commerce, which could reduce our revenue, increase our operating expenses and expose us to significant liabilities.

U.S. (state and federal) and foreign governments are considering enacting additional legislation related to privacy and data protection and we expect to see an increase in, or changes to, legislation and regulation in this area. For example, in the United States, a federal privacy law is the subject of active discussion and several bills have been introduced. Additionally, industry groups in the United States and their international counterparts have self-regulatory guidelines that are subject to periodic updates. High profile incidents involving breaches of personal information or misuse of consumer information may increase the likelihood of new U.S. federal, state, or international laws or regulations in addition to those set out above, and such laws and regulations may be inconsistent across jurisdictions.

 

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In addition to laws regulating the processing of personal information, we are also subject to regulation with respect to political advertising activities, which are governed by various federal and state laws in the United States, and national and provincial laws worldwide. Online political advertising laws are rapidly evolving, and in certain jurisdictions have varying transparency and disclosure requirements. We have already seen publishers impose varying restrictions on the types of political advertising and breadth of targeted advertising allowed on their platforms with respect to advertisements for the 2020 U.S. presidential election in response to political advertising scandals like Cambridge Analytica. The lack of uniformity and increasing requirements on transparency and disclosure could adversely impact the inventory made available for political advertising and the demand for such inventory on our platforms, and otherwise increase our operating and compliance costs.

Changes in data residency and cross-border transfer restrictions may also impact our operations. As the advertising industry evolves, and new ways of collecting, combining and using data are created, governments may enact legislation in response to technological advancements and changes that could result in our having to re-design features or functions of our platforms, therefore incurring unexpected compliance costs.

These laws and other obligations may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our platforms. If so, in addition to the possibility of fines, lawsuits and other claims, we could be required to fundamentally change our business activities and practices or modify our products, which could have an adverse effect on our business. We may be unable to make such changes and modifications in a commercially reasonable manner or at all, and our ability to develop new products and features could be limited. All of this could impair our or our advertisers’ ability to collect, use, or disclose information relating to consumers, which could decrease demand for our platforms, increase our costs, and impair our ability to maintain and grow our client base and increase our revenue.

Risks from third-party products could adversely affect our businesses.

We offer third-party products and we provide marketing services with respect to other products. Certain of these products, by their nature, involve a transfer of risk. If risk is not transferred in the way the customer expects, our reputation may be harmed and we may become a target for litigation. In addition, if these products do not generate competitive risk-adjusted returns that satisfy clients in a variety of asset classes, we will have difficulty maintaining existing business and attracting new business. This risk may be heightened during periods when credit, equity or other financial markets are deteriorating in value or are particularly volatile, or when clients or investors are experiencing losses. Significant declines in the performance of these third-party products could subject us to reputational damage and litigation risk.

If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately or timely report our financial condition or results of operations. If our internal control over financial reporting is not effective, it may adversely affect investor confidence in us and the price of our common stock.

As a public company following completion of the Business Combination, we will be required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act will require that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report on our internal control over financial reporting.

Our platform system applications are complex, multi-faceted and include applications that are highly customized in order to serve and support our advertisers, advertising inventory and data suppliers, as well as support our financial reporting obligations. We regularly make improvements to our platforms to maintain and enhance our competitive position. In the future, we may implement new offerings and engage in business transactions, such as acquisitions, reorganizations or implementation of new information systems. These factors will require us to develop and maintain our internal controls, processes and reporting systems, and we expect to

 

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incur ongoing costs in this effort. We may not be successful in developing and maintaining effective internal controls, and any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods.

If we identify material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective. If we are unable to assert that our internal control over financial reporting is effective, if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, or if we are unable to comply with the requirements of the Sarbanes-Oxley Act in a timely manner, then, we may be late with the filing of our periodic reports, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected. Such failures could also subject us to investigations by the New York Stock Exchange, the stock exchange on which our securities will be listed, the SEC or other regulatory authorities, and to litigation from stockholders, which could harm our reputation, financial condition or divert financial and management resources from our core business.

Risks Related to the Business Combination and Leo

Unless the context otherwise requires, any reference in this section of this proxy statement/prospectus to the “Company,” “we,” “us” or “our” refers to Leo prior to the Business Combination and to New DMS and its subsidiaries following the Business Combination.

Our Class B Shareholders have entered into letter agreements with us to vote in favor of the Business Combination, regardless of how our public shareholders vote.

Unlike some other blank check companies in which the initial shareholders agree to vote their shares in accordance with the majority of the votes cast by the public shareholders in connection with an initial business combination, our Class B Shareholders have agreed to vote all their public shares and Class B ordinary shares in favor of all the proposals being presented at the extraordinary general meeting, including the BCA Proposal. As of the date of this proxy statement/prospectus, our Class B Shareholders own 20.0% of the issued and outstanding ordinary shares.

Neither the Leo board of directors nor any committee thereof obtained a third-party valuation in determining whether or not to pursue the Business Combination.

Neither the Leo board of directors nor any committee thereof is required to obtain an opinion from an independent investment banking or accounting firm that the price that Leo is paying for DMS is fair to Leo from a financial point of view. Neither the Leo board of directors nor any committee thereof obtained a third party valuation in connection with the Business Combination. In analyzing the Business Combination, the Leo board of directors and management conducted due diligence on DMS and researched the industry in which DMS operates. The Leo board of directors reviewed, among other things, financial due diligence materials prepared by professional advisors, including quality of earnings reports and tax due diligence reports, financial and market data information on selected comparable companies, the implied purchase price multiple of DMS and the financial terms set forth in the Business Combination Agreement, and concluded that the Business Combination was in the best interest of its shareholders. Accordingly, investors will be relying solely on the judgment of the Leo board of directors and management in valuing DMS, and the Leo board of directors and management may not have properly valued DMS’s business. The lack of a third-party valuation may also lead an increased number of shareholders to vote against the Business Combination or demand redemption of their shares, which could potentially impact our ability to consummate the Business Combination.

 

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The COVID-19 pandemic triggered an economic crisis which may delay or prevent the consummation of the Business Combination.

In December 2019, a coronavirus (COVID-19) outbreak was reported in China, and, in March 2020, the World Health Organization declared it a pandemic. Since being initially reported in China, the coronavirus has spread throughout the world and has resulted in unprecedented restrictions and limitations on operations of many businesses, educational institutions and governmental entities, including in the United States and Canada. Given the ongoing and dynamic nature of the COVID-19 crisis, it is difficult to predict the impact on the business of Leo, DMS and New DMS, and there is no guarantee that efforts by Leo, DMS and New DMS to address the adverse impact of COVID-19 will be effective. If Leo or DMS are unable to recover from a business disruption on a timely basis, the Business Combination and New DMS’s business and financial conditions and results of operations following the completion of the Business Combination would be adversely affected. The Business Combination may also be delayed and adversely affected by the coronavirus outbreak, and become more costly. Each of Leo and DMS may also incur additional costs to remedy damages caused by such disruptions, which could adversely affect its financial condition and results of operations.

Since the Class B Shareholders, including Leo’s directors and executive officers, have interests that are different, or in addition to (and which may conflict with), the interests of our shareholders, a conflict of interest may have existed in determining whether the Business Combination with DMS is appropriate as our initial business combination. Such interests include that Sponsor, as well as our executive officers and directors, will lose their entire investment in us if our business combination is not completed.

When you consider the recommendation of Leo’s board of directors in favor of approval of the BCA Proposal, you should keep in mind that the Class B Shareholders, including Leo’s directors and executive officers, have interests in such proposal that are different from, or in addition to (which may conflict with), those of Leo shareholders and warrant holders generally.

These interests include, among other things, the interests listed below:

 

   

If Leo does not consummate a business combination by July 31, 2020 (unless such date is extended in accordance with the Existing Organizational Documents), it would cease all operations except for the purpose of winding up, redeeming all of the outstanding public shares for cash and, subject to the approval of its remaining shareholders and its board of directors, dissolving and liquidating, subject in each case to its obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. In such event, the 5,000,000 Class B ordinary shares owned by the Class B Shareholders would be worthless because following the redemption of the public shares, Leo would likely have few, if any, net assets and because our Class B Shareholders have agreed to waive their rights to liquidating distributions from the trust account with respect to the Class B ordinary shares if we fail to complete a Business Combination within the required period. Sponsor purchased the Class B ordinary shares prior to our initial public offering for approximately $0.004 per share. The 3,500,000 Converted Founder Shares that the Class B Shareholders will hold following the Business Combination, if unrestricted and freely tradable, would have had aggregate market value of $                based upon the closing price of $                per share of public share on the NYSE on                 , 2020, the most recent closing price. Given such Converted Founder Shares will be subject to such restrictions, we believe such shares have less value.

 

   

Sponsor paid $6,000,000 for its 4,000,000 private placement warrants to purchase Class A ordinary shares and such private placement warrants will expire worthless if a business combination is not consummated by July 31, 2020 (unless such date is extended in accordance with the Existing Organizational Documents).

 

   

Lyndon Lea, Leo’s Chairman and Chief Executive Officer, Robert Darwent, Leo’s Chief Financial Officer and member of Leo’s Board of Directors, and Mary E. Minnick, a member of Leo’s Board of Directors, are each expected to be directors of New DMS after the consummation of the Business Combination.

 

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Leo’s existing directors and officers will be eligible for continued indemnification and continued coverage under Leo’s directors’ and officers’ liability insurance after the Business Combination.

 

   

In order to protect the amounts held in the trust account, Sponsor has agreed that it will be liable to Leo if and to the extent any claims by a vendor for services rendered or products sold to Leo, or a prospective target business with which Leo has discussed entering into a transaction agreement, reduce the amount of funds in the trust account. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the trust account or to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act.

 

   

Following the consummation of the Business Combination, Lion Capital would be entitled to the repayment of certain working capital loan and advances that have been made to Leo and remain outstanding unless such loans and advances constitute Transaction Costs (as defined in the Business Combination Agreement). If Leo does not complete an initial business combination by July 31, 2020 (unless such date is extended in accordance with the Existing Organizational Documents), Leo may use a portion of its working capital held outside the trust account to repay these working capital loans, but no proceeds held in the trust account would be used to repay the working capital loans.

 

   

Following consummation of the Business Combination, Sponsor, our officers and directors and their respective affiliates would be entitled to reimbursement for certain reasonable out-of-pocket expenses related to identifying, investigating and consummating an initial business combination, and repayment of any other loans, if any, and on such terms as to be determined by Leo from time to time, made by Sponsor or certain of our officers and directors to finance transaction costs in connection with an intended initial business combination. However, if Leo fails to consummate a business combination within the required period, Sponsor and Leo’s officers and directors and their respective affiliates will not have any claim against the trust account for reimbursement.

 

   

In connection with the PIPE Investment, assuming Sponsor PIPE Entity finances $72 million of the PIPE Investment, Sponsor PIPE Entity will receive 7,200,000 shares of New DMS Class A Common Stock.

 

   

Pursuant to the Director Nomination Agreement, Sponsor will have the right to designate one director to the New DMS Board, subject to certain conditions, Sponsor PIPE Entity will have the right to designate one director to the New DMS Board, subject to certain conditions, Prism and Clairvest will have the right to designate up to four directors to the New DMS Board, subject to certain conditions, and the Chief Executive officer of New DMS will be a member of the New DMS Board.

 

   

Pursuant to the Amended and Restated Registration Rights Agreement, Prism, Clairvest Direct Seller, Blocker Seller 1, Blocker Seller 2, Sponsor PIPE Entity and the holders of ordinary shares of Leo who are parties to the existing registration rights agreement in respect to ordinary shares held by such holders and certain other shareholders will have customary registration rights, including demand and piggy-back rights, subject to cooperation and cut-back provisions with respect to the shares of New DMS Class A Common Stock and warrants held by such parties.

 

   

The Proposed Certificate of Incorporation will contain provisions that have the same effect as Section 203, except that they provide that Sponsor, Seller, certain of their affiliates and respective transferees will not be deemed to be “interested stockholders.”

See “BCA Proposal—Interests of Leo’s Directors and Executive Officers in the Business Combination” for additional information on interests of Leo’s directors and executive officers.

The personal and financial interests of the Class B Shareholders as well as Leo’s directors and executive officers may have influenced their motivation in identifying and selecting DMS as business combination targets, completing an initial business combination with DMS and influencing the operation of the business following the

 

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initial business combination. In considering the recommendations of Leo’s board of directors to vote for the proposals, its shareholders should consider these interests.

New DMS will be a holding company and its only material asset after completion of the Business Combination will be its indirect interest in DMS, and it is accordingly dependent upon distributions made by DMS and its subsidiaries to pay taxes, make payments under the Tax Receivable Agreement and pay dividends.

Upon completion of the Business Combination, New DMS will be a holding company with no material assets other than its ownership of equity interests of Blocker Corp (as a wholly-owned subsidiary of New DMS). Blocker Corp will be a holding company with no material assets other than its ownership of DMS Units. As a result, New DMS will have no independent means of generating revenue or cash flow. New DMS’s ability to pay taxes, make payments under the Tax Receivable Agreement and pay dividends will depend on the financial results and cash flows of DMS and its subsidiaries and the distributions it receives (via Blocker Corp) from DMS. Deterioration in the financial condition, earnings or cash flow of DMS and its subsidiaries for any reason could limit or impair DMS’s ability to pay such distributions. Additionally, to the extent that New DMS needs funds and DMS and/or any of its subsidiaries are restricted from making such distributions under applicable law or regulation or under the terms of any financing arrangements, or DMS is otherwise unable to provide such funds, it could materially adversely affect New DMS’s liquidity and financial condition.

DMS will continue to be treated as a partnership for U.S. federal income tax purposes and, as such, generally will not be subject to any entity-level U.S. federal income tax. Instead, taxable income will be allocated to holders of DMS Units (including Blocker Corp). New DMS will include Blocker Corp as a corporate member on its consolidated federal corporate income tax returns. Accordingly, New DMS will be required to pay income taxes on Blocker Corp’s allocable share of any net taxable income of DMS. Under the terms of the Amended Partnership Agreement, DMS is obligated to make tax distributions pro rata to holders of DMS Units (including Blocker Corp) calculated at certain assumed tax rates. In addition to tax expenses, New DMS will also incur expenses related to its operations, including payment obligations under the Tax Receivable Agreement (and the cost of administering such payment obligations), which could be significant. See the section entitled “BCA Proposal—Related Agreements—Tax Receivable Agreement.” The Amended Partnership Agreement requires, and New DMS intends to cause, DMS to make “tax distributions” pro rata to holders of DMS Units (including Blocker Corp) in amounts sufficient for New DMS and Blocker Corp to cover all applicable taxes (calculated at assumed tax rates), relevant operating expenses, payments under the Tax Receivable Agreement and dividends, if any, declared by New DMS. However, as discussed below, DMS’s ability to make such distributions may be subject to various limitations and restrictions including, but not limited to, restrictions on distributions that would either violate any contract or agreement to which DMS is then a party, including debt agreements, or any applicable law, or that would have the effect of rendering DMS insolvent. If New DMS’s cash resources are insufficient to pay taxes, meet its obligations under the Tax Receivable Agreement and to fund its other obligations, New DMS may be required to incur additional indebtedness from lenders to provide the liquidity needed to make such payments, which could materially adversely affect its liquidity and financial condition and subject New DMS to various restrictions imposed by any such lenders. To the extent that New DMS is unable to make payments under the Tax Receivable Agreement for any reason, such payments generally will be deferred and will accrue interest until paid; however, nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable Agreement and therefore accelerate payments due under the Tax Receivable Agreement.

Additionally, although DMS generally will not be subject to any entity-level U.S. federal income tax, it may be liable under recent federal tax legislation for adjustments to its tax return, absent an election to the contrary. In the event DMS’s calculations of taxable income are incorrect, its members, including Blocker Corp, in later years may be subject to material liabilities pursuant to this federal legislation and its related guidance.

New DMS anticipates that the distributions Blocker Corp will receive from DMS may, in certain periods, exceed New DMS’s and Blocker Corp’s actual tax liabilities and obligations to make payments under the Tax

 

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Receivable Agreement. The New DMS Board, in its sole discretion, will make determinations from time to time with respect to the use of any such excess cash so accumulated, which may include, among other uses, acquiring (or causing Blocker Corp to acquire) additional newly issued DMS Units from DMS at a per-unit price determined by reference to the market value of the shares of New DMS Class A Common Stock at such time (which DMS Units, if acquired by New DMS, are expected to be contributed to Blocker Corp); to pay dividends, which may include special dividends, on New DMS Class A Common Stock and New DMS Class C Common Stock; to fund repurchases of New DMS Class A Common Stock or New DMS Class C Common Stock; or any combination of the foregoing. New DMS will have no obligation to distribute such cash (or other available cash other than any declared dividend) to its stockholders. To the extent that New DMS does not distribute such excess cash as dividends on New DMS Class A Common Stock or otherwise undertake ameliorative actions between DMS Units and shares of New DMS Class A Common Stock and instead, for example, holds such cash balances, holders of DMS Units other than Blocker Corp may benefit from any value attributable to such cash balances as a result of their ownership of shares of New DMS Class A Common Stock following an exchange of their DMS Units, notwithstanding that such holders may previously have participated as holders of DMS Units in distributions by DMS that resulted in such excess cash balances at New DMS. We also expect, if necessary, to undertake ameliorative actions, which may include pro rata or non-pro rata reclassifications, combinations, subdivisions or adjustments of outstanding DMS Units, to maintain one-for-one parity between DMS Units and shares of New DMS Class A Common Stock of DMS. See the section entitled “BCA Proposal—Related Agreements—Amended Partnership Agreement.

Dividends on New DMS Class A Common Stock, if any, will be paid at the discretion of the New DMS Board, which will consider, among other things, New DMS’s business, operating results, financial condition, current and expected cash needs, plans for expansion and any legal or contractual limitations on its ability to pay such dividends. Financing arrangements may include restrictive covenants that restrict New DMS’s ability to pay dividends or make other distributions to its stockholders. In addition, DMS is generally prohibited under Delaware law from making a distribution to a member to the extent that, at the time of the distribution, after giving effect to the distribution, liabilities of DMS (with certain exceptions) exceed the fair value of its assets. DMS’s subsidiaries are generally subject to similar legal limitations on their ability to make distributions to DMS. If DMS does not have sufficient funds to make distributions, New DMS’s ability to declare and pay cash dividends may also be restricted or impaired.

Under the Tax Receivable Agreement, New DMS will be required to make payments to the Sellers in respect of certain tax benefits and certain refunds of pre-Closing taxes of DMS and Blocker Corp, and such payments may be substantial.

Pursuant to the Amended Partnership Agreement, the Sellers may redeem their DMS Units from DMS for cash, or, at New DMS’s option, New DMS may acquire such DMS Units (which DMS Units are expected to be contributed to Blocker Corp) in exchange for cash or shares of New DMS Class A Common Stock, subject to certain conditions and transfer restrictions as set forth therein and in the Investor Rights Agreement. DMS Units acquired by New DMS are expected to be contributed to Blocker Corp. These redemptions and exchanges are expected to result in increases in Blocker Corp’s allocable share of the tax basis of the tangible and intangible assets of DMS. These increases in tax basis may increase (for income tax purposes) depreciation and amortization deductions and therefore reduce the amount of income (or, if applicable, franchise) tax that New DMS and Blocker Corp would otherwise be required to pay in the future had such exchanges never occurred.

In connection with the Business Combination, New DMS will enter into the Tax Receivable Agreement, pursuant to which New DMS will be required to pay the Sellers (i) 85% of the amount of savings, if any, in U.S. federal, state and local income tax that New DMS and Blocker Corp actually realizes as a result of (A) certain existing tax attributes of Blocker Corp acquired in the Business Combination, and (B) increases in Blocker Corp’s allocable share of the tax basis of the tangible and intangible assets of DMS and certain other tax benefits the increases in tax basis and certain other tax benefits related to the payment of the cash consideration pursuant to the Business Combination Agreement and any redemptions of DMS Units or exchanges of DMS Units for

 

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cash or shares of New DMS Class A Common Stock after the Business Combination and (ii) 100% of certain refunds of pre-Closing taxes of DMS and Blocker Corp received during a taxable year beginning within two (2) years after the Closing. All such payments to the Sellers will be New DMS’s obligation, and not that of DMS. The actual increase in Blocker Corp’s allocable share of DMS’s tax basis in its assets, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors, including the timing of redemptions and exchanges, the market price of the shares of New DMS Class A Common Stock at the time of the redemption or exchange, the extent to which such redemptions or exchanges are taxable and the amount and timing of the recognition of New DMS’s or Blocker Corp’s taxable income. While many of the factors that will determine the amount of payments that New DMS will make under the Tax Receivable Agreement are outside of its control, New DMS expects that the payments it will make under the Tax Receivable Agreement will be substantial and could have a material adverse effect on New DMS’s financial condition. Any payments made by New DMS under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise been available to New DMS. To the extent that New DMS is unable to make timely payments under the Tax Receivable Agreement for any reason, the unpaid amounts generally will be deferred and will accrue interest until paid; however, nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable Agreement and therefore accelerate payments due under the Tax Receivable Agreement, as further described below. Furthermore, New DMS’s future obligation to make payments under the Tax Receivable Agreement could make it a less attractive target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the tax benefits that may be deemed realized under the Tax Receivable Agreement. See the section entitled “BCA Proposal—Related Agreements—Tax Receivable Agreement.”

In certain cases, payments under the Tax Receivable Agreement may exceed the actual tax benefits New DMS or Blocker Corp realizes or may be accelerated.

Payments under the Tax Receivable Agreement will be based on the tax reporting positions that New DMS or Blocker Corp determines, and the Internal Revenue Service (the “IRS”) or another taxing authority may challenge all or any part of the tax basis increases, as well as other tax positions that New DMS or Blocker Corp takes, and a court may sustain such a challenge. In the event that any tax benefits initially claimed by New DMS or Blocker Corp are disallowed (for example, due to adjustments resulting from examinations by taxing authorities), the Sellers will not be required to reimburse New DMS for any excess payments that may previously have been made under the Tax Receivable Agreement. Rather, excess payments made to such Sellers will be netted against any future cash payments otherwise required to be made by New DMS, if any, after the determination of such excess. However, a challenge to any tax benefits initially claimed by New DMS or Blocker Corp may not arise for a number of years following the initial time of such payment or, even if challenged early, such excess cash payment may be greater than the amount of future cash payments that New DMS might otherwise be required to make under the terms of the Tax Receivable Agreement and, as a result, there might not be future cash payments from which to net against. As a result, in certain circumstances New DMS could make payments under the Tax Receivable Agreement in excess of New DMS’s and Blocker Corp’s actual income (or, if applicable franchise) tax savings, which could materially impair New DMS’s financial condition.

Moreover, the Tax Receivable Agreement provides that, in the event that (i) New DMS exercise its early termination rights under the Tax Receivable Agreement, (ii) the Tax Receivable Agreement is rejected in a bankruptcy or similar proceeding, (iii) certain changes of control of New DMS occur (as described in the Tax Receivable Agreement) or (iv) New DMS is more than three months late in making of a payment due under the Tax Receivable Agreement (unless New DMS has insufficient funds to make such payment), New DMS’s obligations under the Tax Receivable Agreement could accelerate and New DMS could be required to make an immediate lump-sum cash payment to the Sellers equal to the present value of all forecasted future payments that would have otherwise been made under the Tax Receivable Agreement, which lump-sum payment would be based on certain assumptions, including those relating to New DMS’s future taxable income. The lump-sum payment to the Sellers could be substantial and could exceed the actual tax benefits that New DMS or Blocker Corp realizes subsequent to such payment.

 

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There may be a material negative effect on New DMS’s liquidity if the payments under the Tax Receivable Agreement exceed the actual income (or, if applicable franchise) tax savings that New DMS or Blocker Corp realizes. Furthermore, New DMS’s obligations to make payments under the Tax Receivable Agreement could also have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control. New DMS may need to incur additional indebtedness to finance payments under the Tax Receivable Agreement to the extent its cash resources are insufficient to meet its obligations under the Tax Receivable Agreement as a result of timing discrepancies or otherwise. Such indebtedness may have a material adverse effect on New DMS’s financial condition.

The exercise of Leo’s directors’ and executive officers’ discretion in agreeing to changes or waivers in the terms of the Business Combination may result in a conflict of interest when determining whether such changes to the terms of the Business Combination or waivers of conditions are appropriate and in Leo’s shareholders’ best interest.

In the period leading up to the closing of the Business Combination, events may occur that, pursuant to the Business Combination Agreement, would require Leo to agree to amend the Business Combination Agreement, to consent to certain actions taken by DMS or to waive rights that Leo is entitled to under the Business Combination Agreement. Such events could arise because of changes in the course of DMS’s business, a request by DMS to undertake actions that would otherwise be prohibited by the terms of the Business Combination Agreement or the occurrence of other events that would have a material adverse effect on DMS’s business and would entitle Leo to terminate the Business Combination Agreement. In any of such circumstances, it would be at Leo’s discretion, acting through its board of directors, to grant its consent or waive those rights. The existence of financial and personal interests of one or more of the directors described in the preceding risk factors may result in a conflict of interest on the part of such director(s) between what he or they may believe is best for Leo and its shareholders and what he or they may believe is best for himself or themselves in determining whether or not to take the requested action. As of the date of this proxy statement/prospectus, Leo does not believe there will be any changes or waivers that Leo’s directors and executive officers would be likely to make after shareholder approval of the BCA Proposal has been obtained. While certain changes could be made without further shareholder approval, Leo will circulate a new or amended proxy statement/prospectus and resolicit Leo’s shareholders if changes to the terms of the transaction that would have a material impact on its shareholders are required prior to the vote on the BCA Proposal.

The Sellers and Sponsor will have significant influence over us after completion of the Business Combination.

Upon the completion of the Business Combination, Prism, Clairvest Direct Seller and Blocker Sellers will own approximately 43.9% of the outstanding New DMS Class A Common Stock on an as-converted and as-redeemed basis, representing approximately 67.4% of the total outstanding voting interests in New DMS capital stock, and the Class B Shareholders and Sponsor PIPE Entity will own approximately 18.3% of the outstanding New DMS Class A Common Stock on an as-converted and as-redeemed basis, representing approximately 10.6% of the total outstanding voting interests in New DMS capital stock, assuming that none of Leo’s outstanding Class A ordinary shares are redeemed in connection with the Business Combination or approximately 60.7% and 18.2%, respectively, of the outstanding New DMS Class A Common Stock on an as-converted and as-redeemed basis (representing approximately 67.4% and 15.1%, respectively, of the total outstanding voting interests in New DMS capital stock), assuming that 9,656,404 of Leo’s outstanding Class A ordinary shares are redeemed in connection with the Business Combination. As long as Prism, Clairvest Direct Seller, Sponsor and Blocker Sellers each own or control a significant percentage of outstanding voting power, they will have the ability to strongly influence all corporate actions requiring stockholder approval, including the election and removal of directors and the size of our board of directors, any amendment of our certificate of incorporation or bylaws, or the approval of any merger or other significant corporate transaction, including a sale of substantially all of our assets. In addition, pursuant to the Director Nomination Agreement, Sponsor will have the right to designate one director to the New DMS Board, subject to certain conditions, Sponsor PIPE Entity will have the right to designate one director to the New DMS Board, subject to certain conditions, Prism and

 

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Clairvest will have the right to designate up to four directors to the New DMS Board, subject to certain conditions, and the Chief Executive officer of New DMS will be a member of the board of New DMS. For additional information, see “BCA Proposal—Related Agreements—Director Nomination Agreement.” Sponsor’s and Seller’s interests may not align with the interests of our other stockholders.

As a “controlled company” within the meaning of NYSE listing standards, New DMS will qualify for exemptions from certain corporate governance requirements. New DMS has the opportunity to elect any of the exemptions afforded a controlled company.

Because the Sellers will control more than a majority of the total voting power of New DMS’s common stock following the consummation of the Business Combination, New DMS will be a “controlled company” within the meaning of NYSE listing standards. Under NYSE rules, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a “controlled company” and may elect not to comply with the following NYSE rules regarding corporate governance:

 

   

the requirement that a majority of its board of directors consist of independent directors;

 

   

the requirement that the board have a nominating and governance committee that its compensation committee composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

 

   

the requirement that the board have a compensation committee composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

New DMS currently expects that upon consummation of the Business Combination, five of its seven directors will be independent directors, and it is expected that the New DMS Board will have an independent compensation committee (in addition to an independent audit committee). However it does not anticipate that its board will have a nominating and governance committee. Rather, actions with respect to director nominations and corporate governance will be taken by the full board. In addition, for as long as the “controlled company” exemption is available, the New DMS Board in the future may not consist of a majority of independent directors and may not have an independent compensation committee. As a result, you may not have the same protections afforded to stockholders of companies that are subject to all of the NYSE rules regarding corporate governance.

Subsequent to consummation of the Business Combination, we may be required to subsequently take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our share price, which could cause you to lose some or all of your investment.

We cannot assure you that the due diligence conducted in relation to DMS has identified all material issues or risks associated with DMS, its business or the industry in which it competes. As a result of these factors, we may incur additional costs and expenses and we may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses. Even if our due diligence has identified certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. If any of these risks materialize, this could have a material adverse effect on our financial condition and results of operations and could contribute to negative market perceptions about our securities or New DMS. Accordingly, any shareholders of Leo who choose to remain New DMS stockholders following the Business Combination could suffer a reduction in the value of their shares and warrants. Such shareholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the registration statement or proxy statement/prospectus relating to the Business Combination contained an actionable material misstatement or material omission.

 

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Our ability to successfully effect the Business Combination and to be successful thereafter will be dependent upon the efforts of key personnel of New DMS, some of whom may be from Leo, DMS and some of whom may join New DMS following the Business Combination. The loss of key personnel or the hiring of ineffective personnel after the Business Combination could negatively impact the operations and profitability of New DMS.

Our ability to successfully effect the Business Combination and be successful thereafter will be dependent upon the efforts of our key personnel. Although some of Leo’s key personnel may remain with the target business in senior management or advisory positions following our business combination, we expect DMS’s current management to remain in place. We cannot assure you that we will be successful in integrating and retaining such key personnel, or in identifying and recruiting additional key individuals we determine may be necessary following the Business Combination.

The unaudited pro forma financial information included elsewhere in this proxy statement/prospectus may not be indicative of what New DMS’s actual financial position or results of operations would have been.

The unaudited pro forma financial information in this proxy statement/prospectus is presented for illustrative purposes only and has been prepared based on a number of assumptions including, but not limited to, DMS being considered the accounting acquiror in the Business Combination, the debt obligations and the cash and cash equivalents of DMS at the Closing and the number of Class A ordinary shares that are redeemed in connection with the Business Combination. Accordingly, such pro forma financial information may not be indicative of our future operating or financial performance and our actual financial condition and results of operations may vary materially from our pro forma results of operations and balance sheet contained elsewhere in this proxy statement/prospectus, including as a result of such assumptions not being accurate. Additionally, the final acquisition accounting adjustments could differ materially from the unaudited pro forma adjustments presented in this proxy statement/prospectus. Any increase or decrease in the fair value of the assets acquired and liabilities assumed, as compared to the information shown herein, could also change the portion of the purchase consideration allocable to goodwill and could impact the operating results of New DMS following the Business Combination due to differences in the allocation of the purchase consideration, depreciation and amortization related to some of these assets and liabilities. The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies or cost savings that may be associated with the Business Combination. See “Unaudited Pro Forma Condensed Combined Financial Information.”

The ability of our public shareholders to exercise redemption rights with respect to a large number of our public shares may not allow us to complete the most desirable business combination or optimize the capital structure of New DMS.

At the time of entering into the Business Combination Agreement, we did not know how many shareholders may exercise their redemption rights, and therefore, we needed to structure the transaction based on our expectations as to the number of shares that will be submitted for redemption. The Business Combination Agreement provides that the parties’ obligations to consummate the Business Combination is conditioned on, among other things, (1) the approval of the BCA Proposal, the Domestication Proposal, the Security Issuance Proposal and certain of the Organizational Documents Proposals being obtained; (2) all required waiting periods or approvals under the HSR Act and all applicable antitrust laws shall have expired, been received or terminated; (3) the consummation of the Domestication immediately prior to the Closing; (4) the consummation of the PIPE Investment immediately prior to the Closing; (5) 1,500,000 Class B ordinary shares and 2,000,000 private placement warrants of Leo shall have been surrendered and forfeited by Sponsor and the Leo independent directors, as applicable, in accordance with the Surrender Agreement; (6) the absence of a Material Adverse Effect (as defined in the Business Combination Agreement); (7) the net tangible assets of New DMS (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) being at least $5,000,001; (8) cash proceeds from the trust account established for the purpose of holding the net proceeds of Leo’s initial public

 

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offering and certain of the proceeds from its concurrent private placement of warrants, together with the proceeds from the PIPE Investment, net of any amounts paid to Leo shareholders that exercise their redemption rights in connection with the Business Combination, equaling no less than $200,000,000 at the Closing; and (9) the shares of New DMS Class A Common Stock to be issued in connection with the Business Combination Agreement will have been approved for listing on the NYSE. Therefore, unless these conditions are waived by the applicable parties to the Business Combination Agreement, the Business Combination Agreement could terminate and the proposed business combination may not be consummated.

Sponsor, as well as our directors, executive officers, advisors and their affiliates may elect to purchase shares from public shareholders prior to the consummation of the Business Combination, which may influence the vote on the Business Combination and reduce the public “float” of our Class A ordinary shares.

At any time at or prior to the Business Combination, during a period when they are not then aware of any material nonpublic information regarding us or our securities, our Class B Shareholders, DMS and/or their directors, officers, advisors or respective affiliates may purchase public shares from institutional and other investors who vote, or indicate an intention to vote, against any of the Condition Precedent Proposals, or execute agreements to purchase such shares from such investors in the future, or they may enter into transactions with such investors and others to provide them with incentives to acquire public shares or vote their public shares in favor of the Condition Precedent Proposals. Such a purchase may include a contractual acknowledgement that such shareholder, although still the record or beneficial holder of our shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our Class B Shareholders, DMS and/or their directors, officers, advisors or respective affiliates purchase shares in privately negotiated transactions from public shareholders who have already elected to exercise their redemption rights, such selling shareholder would be required to revoke their prior elections to redeem their shares. The purpose of such share purchases and other transactions would be to increase the likelihood of satisfaction of the requirements that that (1) holders of a majority of the ordinary shares, represented in person or by proxy and entitled to vote at the extraordinary general meeting, vote in favor of the BCA Proposal, the Security Issuance Proposal, the Incentive Award Plan Proposal, Seller Nominee Appointment Proposal and the Adjournment Proposal, (2) holders of at least two-thirds of the ordinary shares, represented in person or by proxy and entitled to vote at the extraordinary general meeting, vote in favor of the Domestication Proposal and the Organizational Documents Proposals, (3) otherwise limit the number of public shares electing to redeem and (4) New DMS’s net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) being at least $5,000,001.

Entering into any such arrangements may have a depressive effect on the ordinary shares. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares at a price lower than market and may therefore be more likely to sell the shares he or she owns, either at or prior to the Business Combination.

If such transactions are effected, the consequence could be to cause the Business Combination to be consummated in circumstances where such consummation could not otherwise occur. Purchases of shares by the persons described above would allow them to exert more influence over the approval of the proposals to be presented at the extraordinary general meeting and would likely increase the chances that such proposals would be approved.

In addition, if such purchases are made, the public “float” of our public shares and the number of beneficial holders of our securities may be reduced, possibly making it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.

 

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We are not registering the shares of New DMS Class A Common Stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time, and such registration may not be in place when an investor desires to exercise warrants, thus precluding such investor from being able to exercise its warrants and causing such warrants to expire worthless.

We are not registering the shares of New DMS Class A Common Stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time. However, under the terms of the warrant agreement, we have agreed, as soon as practicable, but in no event later than 15 business days after the closing of our initial business combination, to use our best efforts to file a registration statement under the Securities Act covering the issuance of such shares and maintain a current prospectus relating to the shares of New DMS Class A Common Stock issuable upon exercise of the warrants, until the expiration of the warrants in accordance with the provisions of the warrant agreement. We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in the registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current, complete or correct or the SEC issues a stop order. If the shares issuable upon exercise of the warrants are not registered under the Securities Act, we will be required to permit holders to exercise their warrants on a cashless basis. However, no warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder or an exemption from registration is available. Notwithstanding the above, if the New DMS Class A Common Stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, but we will use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In no event will we be required to net cash settle any warrant, or issue securities or other compensation in exchange for the warrants in the event that we are unable to register or qualify the shares underlying the warrants under applicable state securities laws. If the issuance of the shares upon exercise of the warrants is not so registered or qualified or exempt from registration or qualification, the holder of such warrant shall not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In such event, holders who acquired their warrants as part of a purchase of units will have paid the full unit purchase price solely for the shares of New DMS Class A Common Stock. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying shares of New DMS Class A Common Stock for sale under all applicable state securities laws.

If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per share redemption amount received by shareholders may be less than $10.00 per share (which was the offering price in our initial public offering).

Our placing of funds in the trust account may not protect those funds from third-party claims against us. Although we will seek to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the trust account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative.

 

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Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason. Upon redemption of our public shares, if we are unable to complete our business combination within the prescribed time frame, or upon the exercise of a redemption right in connection with our business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the ten years following redemption. Accordingly, the per share redemption amount received by public shareholders could be less than the $10.00 per share initially held in the trust account, due to claims of such creditors. In order to protect the amounts held in the trust account, Sponsor has agreed to be liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduces the amount of funds in the trust account. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the trust account or to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act. Moreover, even in the event that an executed waiver is deemed to be unenforceable against a third party, Sponsor will not be responsible to the extent of any liability for such third party claims. We have not independently verified whether Sponsor has sufficient funds to satisfy its indemnity obligations and we have not asked Sponsor to reserve for such indemnification obligations. Therefore, we cannot assure you that Sponsor would be able to satisfy those obligations. None of our officers will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

Additionally, if we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, or if we otherwise enter compulsory or court supervised liquidation, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our shareholders. To the extent any bankruptcy claims deplete the trust account, we may not be able to return to our public shareholders $10.00 per share (which was the offering price in our initial public offering).

If, after we distribute the proceeds in the trust account to our public shareholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and we and our board of directors may be exposed to claims of punitive damages.

If, after we distribute the proceeds in the trust account to our public shareholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by shareholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our shareholders. In addition, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing it and us to claims of punitive damages, by paying public shareholders from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.

If, before distributing the proceeds in the trust account to our public shareholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our shareholders and the per share amount that would otherwise be received by our shareholders in connection with our liquidation may be reduced.

If, before distributing the proceeds in the trust account to our public shareholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the

 

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trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our shareholders. To the extent any bankruptcy claims deplete the trust account, the per share amount that would otherwise be received by our shareholders in connection with our liquidation may be reduced.

Our shareholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their shares.

If we are forced to enter into an insolvent liquidation, any distributions received by shareholders could be viewed as an unlawful payment if it was proved that immediately following the date on which the distribution was made, we were unable to pay our debts as they fall due in the ordinary course of business. As a result, a liquidator could seek to recover all amounts received by our shareholders. Furthermore, our directors may be viewed as having breached their fiduciary duties to us or our creditors and/or may have acted in bad faith, and thereby exposing themselves and our company to claims, by paying public shareholders from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.

We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to “emerging growth companies” or “smaller reporting companies,” this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.

We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As a result, our shareholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our Class A ordinary shares held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other

 

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things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our ordinary shares held by non-affiliates exceeds $250 million as of the prior June 30, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the prior June 30. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.

Compliance obligations under the Sarbanes-Oxley Act may make it more difficult for us to effectuate the Business Combination, require substantial financial and management resources and increase the time and costs of completing a business combination.

The fact that we are a blank check company makes compliance with the requirements of the Sarbanes-Oxley Act particularly burdensome on us as compared to other public companies. DMS is not a publicly reporting company required to comply with Section 404 of the Sarbanes-Oxley Act and New DMS management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that will be applicable to New DMS after the Business Combination. If we are not able to implement the requirements of Section 404, including any additional requirements once we are no longer an emerging growth company, in a timely manner or with adequate compliance, we may not be able to assess whether its internal control over financial reporting are effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of New DMS Class A Common Stock. Additionally, once we are no longer an emerging growth company, we will be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting.

The price of New DMS Class A Common Stock and New DMS’s warrants may be volatile.

Upon consummation of the Business Combination, the price of New DMS Class A Common Stock and New DMS’s warrants may fluctuate due to a variety of factors, including:

 

   

changes in the industries in which New DMS and its customers operate;

 

   

variations in its operating performance and the performance of its competitors in general;

 

   

material and adverse impact of the COVID-19 pandemic on the markets and the broader global economy;

 

   

actual or anticipated fluctuations in New DMS’s quarterly or annual operating results;

 

   

publication of research reports by securities analysts about New DMS or its competitors or its industry;

 

   

the public’s reaction to New DMS’s press releases, its other public announcements and its filings with the SEC;

 

   

New DMS’s failure or the failure of its competitors to meet analysts’ projections or guidance that New DMS’s or its competitors may give to the market;

 

   

additions and departures of key personnel;

 

   

changes in laws and regulations affecting its business;

 

   

commencement of, or involvement in, litigation involving New DMS;

 

   

changes in New DMS’s capital structure, such as future issuances of securities or the incurrence of additional debt;

 

   

the volume of shares of New DMS Class A Common Stock available for public sale; and

 

   

general economic and political conditions such as recessions, interest rates, fuel prices, foreign currency fluctuations, international tariffs, social, political and economic risks and acts of war or terrorism.

 

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These market and industry factors may materially reduce the market price of New DMS Class A Common Stock and New DMS’s warrants regardless of the operating performance of New DMS.

A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of New DMS Class A Common Stock to drop significantly, even if New DMS’s business is doing well.

Sales of a substantial number of shares of New DMS Class A Common Stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of New DMS Class A Common Stock. Upon completion of the Business Combination, the Sellers and the Class B Shareholders and Sponsor PIPE Entity, collectively, will own approximately 43.9% and 18.3%, respectively, of the outstanding shares of New DMS Class A Common Stock on an as-converted and as-redeemed basis (representing approximately 67.4% and 10.6%, respectively, of the total outstanding voting interests in New DMS capital stock) assuming that none of Leo’s outstanding Class A ordinary shares are redeemed in connection with the Business Combination, or approximately 60.7% and 18.2%, respectively, of the outstanding New DMS Class A Common Stock on an as-converted and as-redeemed basis (representing approximately 67.4% and 15.1%, respectively, of the total outstanding voting interests in New DMS capital stock) assuming that 9,656,404 of Leo’s outstanding Class A ordinary shares are redeemed in connection with the Business Combination. While the Sellers will agree, and Sponsor will continue to be subject, to certain restrictions regarding the transfer of New DMS Class A Common Stock, these shares may be sold after the expiration of the respective applicable lock-up. Sponsor PIPE Entity will not be subject to any such restrictions. In addition, after the Business Combination, the PIPE Investors (other than Sponsor PIPE Entity) will hold approximately 4.8% of the outstanding shares of New DMS Class A Common Stock on an as-converted and as-redeemed basis (representing approximately 2.8% of the total outstanding voting interests in New DMS capital stock), assuming that none of Leo’s outstanding Class A ordinary shares are redeemed in connection with the Business Combination, and will not be subject to any contractual restrictions or resale. We intend to file one or more registration statements prior to or shortly after the closing of the Business Combination to provide for the resale of such shares from time to time. As restrictions on resale end and the registration statements are available for use, the market price of New DMS Class A Common Stock could decline if the holders of currently restricted shares sell them or are perceived by the market as intending to sell them.

The public stockholders will experience immediate dilution as a consequence of the issuance of New DMS Common Stock as consideration in the Business Combination and in the PIPE Investment.

It is anticipated that, upon completion of the Business Combination, (1) Leo’s public shareholders are expected to own approximately 33.0% of the outstanding New DMS Class A Common Stock on an as-converted and as-redeemed basis, representing approximately 19.2 % of the total outstanding voting interests in New DMS capital stock, (2) Prism and Clairvest Direct Seller (without taking into account any public shares held by such DMS equityholders prior to the consummation of the Business Combination), are expected to collectively own all of the outstanding New DMS Class B Common Stock, representing approximately 25.9% of the outstanding New DMS Class A Common Stock on an as-converted and as-redeemed basis and approximately 39.8% of the total outstanding voting interests of the New DMS capital stock, (3) Blocker Sellers (without taking into account any public shares held by Blocker Sellers prior to the consummation of the Business Combination), are expected to collectively own all of the New DMS Class C Common Stock, representing approximately 18% of the outstanding New DMS Class A Common Stock on an as-converted and as-redeemed basis and approximately 27.6% of the total outstanding voting interests of the New DMS capital stock, (4) the Class B Shareholders are expected to own approximately 6% of the outstanding New DMS Class A Common Stock on an as-converted and as-redeemed basis, representing approximately 3.5% of the total outstanding voting interests in New DMS capital stock and (5) the PIPE Investors (including Sponsor PIPE Entity) are expected to own approximately 17.1% of the outstanding New DMS Class A Common Stock on an as-converted and as-redeemed basis, representing approximately 9.9% of the total outstanding voting interests in New DMS capital stock. These percentages (i) assume that none of Leo’s outstanding Class A ordinary shares are redeemed in connection with

 

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the Business Combination, (ii) reflect the surrender and forfeiture by Sponsor and the Leo independent directors of 1,500,000 Class B ordinary shares of Leo pursuant to the Surrender Agreement, (iii) assume 10,000,000 shares of New DMS Class A Common Stock are issued to the PIPE Investors upon the consummation of the PIPE Investment, (iv) do not take into account public warrants or private placement warrants to purchase New DMS Class A Common Stock that will be outstanding immediately following the completion of the Business Combination and (v) do not assume the issuance of any shares upon completion of the Business Combination under the Incentive Plan. If the actual facts are different than these assumptions, the percentage ownership retained by the Company’s existing stockholders in New DMS will be different.

The issuance of additional common stock will significantly dilute the equity interests of existing holders of Leo securities; and may adversely affect prevailing market prices for the New DMS Class A Common Stock and/or the New DMS warrants.

Warrants will become exercisable for New DMS Class A Common Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

If the Business Combination is completed, outstanding warrants to purchase an aggregate of 14,000,000 shares of New DMS Class A Common Stock will become exercisable in accordance with the terms of the warrant agreement governing those securities. These warrants will become exercisable 30 days after the completion of the Business Combination. The exercise price of these warrants will be $11.50 per share. To the extent such warrants are exercised, additional shares of New DMS Class A Common Stock will be issued, which will result in dilution to the holders of New DMS Class A Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such warrants may be exercised could adversely affect the market price of New DMS Class A Common Stock. However, there is no guarantee that the public warrants will ever be in the money prior to their expiration, and as such, the warrants may expire worthless. See “ —Even if the Business Combination is consummated, the public warrants may never be in the money, and they may expire worthless and the terms of the warrants may be amended in a manner adverse to a holder if holders of at least 50% of the then outstanding public warrants approve of such amendment.”

Even if the Business Combination is consummated, the public warrants may never be in the money, and they may expire worthless and the terms of the warrants may be amended in a manner adverse to a holder if holders of at least 50% of the then outstanding public warrants approve of such amendment.

The warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and Leo. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants. Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 50% of the then outstanding public warrants approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of at least 50% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, shorten the exercise period or decrease the number of shares of New DMS Class A Common Stock purchasable upon exercise of a warrant.

We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.

We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of the New DMS Class A Common Stock equals or exceeds $18.00 per share (as adjusted for share splits, share dividends, rights

 

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