IPO Readiness. Sao Paulo, May 5 th 2009

Transcription

1 IPO Readiness Sao Paulo, May 5 th 2009

2 Access to global institutional investor base Domestic market Regional institutional and retail investors Middle East US Asia Eastern Europe Europe UK Global institutional investor base US institutional investors 2

3 London Stock Exchange - key statistics Total companies Domestic: 2,345 International: 618 Market capitalisation Main Market: UK listed: US$1,732bn International listed: US$2,090bn AIM: US$57bn Turnover value (Jan-Dec 2008) Main Market: 4,587bn AIM: US$73bn Source: London Stock Exchange statistics March 2009 Used currency exchange as of 14/04/09: GBP/USD

4 Comparison of international listing locations High profile Rapid timing Simplified disclosure Trading / liquidity London Stock Exchange NYSE / Nasdaq Bovespa?? Optimal Least suitable Strategic financings from global companies will converge on London or New York 4

5 An intelligent approach to regulation Companies Investors Minimise bureaucracy and cost Balance Competing Needs Maximise protection UK Principles based - comply or explain Ranked first in corporate governance standards by GMI, Deminor and Davis Global Advisors US Rules based - prescriptive and expensive Increased cost of compliance and risk premium (Financial Executive & Korn Ferry Surveys) 5

6 Main features Setting the standard for excellence Where ideas take off Highest standards of regulation Investable indices Largest institutional investor base Deepest capital pool Most liquid trading platforms Enhanced profile and status Different entry requirements Flexible regulatory regime Specialist small-cap institutional & retail investor base Bespoke indices 6

7 Preparing for the IPO

8 Pre-IPO preparation Timetable Costs Alternative sources of finance Timing is key Pricing your IPO Following the IPO Choosing your advisers Role of the NOMAD Continuing obligations 8

9 Pre-IPO preparation Start early! - Appoint the right team to manage the process Get your house in order - Develop robust business plan, be clear about your objectives - Review internal controls and financial reporting - Consider ownership and tax issues - Complete any planned strategic initiatives - Adopt best-practice corporate governance standards (eg Combined Code) Talk to your existing advisers - Identify issues early on - Think about advisers you will need to appoint - Understand the IPO process and manage expectations Other considerations - Pre-IPO fundraising? An IPO is not just a transaction, but an opportunity to transform your business 9

10 Timetable Typical time frame to flotation on AIM is 3 to 4 months from the appointment of the advisory team Weeks before Admission weeks - Appoint and instruct advisers - Agree timetable to Admission - Initiate due diligence (Long Form and Working Capital Reports, Legal Due Diligence) 6 8 weeks - Review any problem areas that have arisen - First draft Admission Document - First draft other required documents 2 4 weeks - Drafting meetings - Complete due diligence - PR meetings and marketing roadshow 1 week - All documents completed and approved - Pricing and allocation 10

11 Costs The main cost of an IPO is commission on money raised (typically 4% - 6%) Ongoing costs of listing on AIM (excluding accounting and legal) approx USD150,000 p.a. Small fundraisings and more complex IPOs are proportionally more expensive While listing can be expensive, the benefits to a company, its employees and shareholders should outweigh the costs Fees may form part of the adviser selection process but should not be the dominant consideration simply opting for the lowest fees may compromise the success of the IPO 11

12 Consider all options before going down IPO route An IPO can bring significant benefits to a company - Access to capital at relatively low cost - Opportunity to realise value for shareholders and employees - Enhanced corporate profile But the benefits are not without cost - Ongoing compliance requirements - Dilution of control - Pressure of life in the public eye the market can be unforgiving - Management inflexibility and short-term decision making The attractions of an IPO are not without cost. Management must consider all options to ensure that an IPO is right for the company 12

13 Alternative sources of finance Alternatives depend on stage in the development cycle and company objectives: Private placing Pros - Relatively quick process - Fewer disclosure, due diligence or regulatory requirements - Selective institutional investors or HNWI Private equity or venture capital Pros - Availability of further finance - Provision of management expertise - Likely to support a MBO or MBI Cons - Investor pool may be limited and lower funds raised - Less competitive pricing illiquidity discount - Likely to IPO anyway to provide exit route Cons - Dilution of control - Require exit route (IPO or sale) - Cost target IRR 30% Debt financing Pros - Flexible structures e.g. PIK, mezzanine - Optimise capital structure to enhance ROCE - Less dilution Cons - Increased gearing - risky if interest rates are rising - Restrictive covenants - May be difficult in current market 13

14 Timing is key State of the market - Beyond the control of the company - Success at IPO is highly dependent on investor sentiment - Windows of opportunity brief in volatile markets - Be ready! Performance of the business - Largely under the control of the company - Track record of earnings pointing to a growth trend, opportunities, execution? - Visibility of future earnings? Company strategy - Investors are looking for a clear strategy and medium term growth prospects - Can the company deliver? IPO s are time consuming and distracting so ensure business is not damaged by the process Better to be ready early be prepared for the window of opportunity 14

15 Pricing your IPO A Technical Starting Point Initial valuation based on the following: Peer group analysis Precedent transactions (IPO & M&A) Discounted cashflow Sum of the parts Not a simple process: What is the peer group? Direct comparables are rare Which ratios? Which industry? Blended multiples? Environment tax, structures Subjective and objective measures The bookbuilding process Initial Valuation Range Optional Pre-Marketing Three phased marketing and price discovery approach Phase I Educate potential investors Orders & Bookbuild Phase II Target and contact interested investors Phase III Company management roadshow PRICE 15

16 Pricing your IPO Supply and Demand Pricing driven by far more than simply a desktop valuation Pricing ultimately driven by supply of and demand for available shares - Supply Funding needs of the company Selling shareholders Demand Oversubscribed issue Better price although an uplift in pricing best achieved if issue marketed with a range rather than fixed price Undersubscribed offer A cut in the price often required to meet minimum increase fundraise requirement Strike a balance to ensure fair pricing 16

17 Pricing your IPO Factors Affecting Price Macro factors Market conditions Economic sentiment Company factors Credibility of story / management Track record Management remuneration arrangements Risk Fund Factors Availability of funds (redemptions / need to sell) The psychology of the fund manager is key. Ultimately he / she will invariably seek the lowest entry price Balance of sector / country / exchange risk Technical Factors Perceived after-market liquidity price of pre-ipo rounds which market? Need to understand various factors affecting your ultimate valuation 17

18 Following the IPO An IPO is a beginning not a end A strongly rising share price post-ipo offers opportunities A declining share price restricts and frustrates Role of the equity research analyst key In UK, an IPO is accompanied by pre IPO research Use the research as a medium to sell your story Resist the urge to overstate projected financial performance Profits warnings early in a company s public life can be disastrous Under-promise and over-perform Unless you are selling shares in an IPO, the downside from over-pricing an issue will vastly outweigh the damage caused by under-pricing it 18

19 Choosing your advisers Your advisers play a central role in your company s IPO - and beyond Key advisers: - NOMAD/Sponsor and Broker - Lawyers - Reporting Accountants Key questions to bear in mind when appointing your advisers: - Do they understand my business? - Do they have experience with companies in the same sector? - Do they share my vision for the company and understand where I want to take it? - Do they have a proven track record of getting the deal done? 19

20 Role of the Nominated Adviser (NOMAD) AIM is an exchange regulated market - The NOMAD plays a crucial role in upholding regulatory requirements - AIM has rules for Companies as well as for NOMADS NOMAD s role is to advise company s board regarding their responsibilities/obligations to their shareholders, investors and London Stock Exchange - Assess a company s suitability and appropriateness for admission to AIM - Perform due diligence on company and its management - Project-manage IPO - Assist a company to meet its continuing obligations once admitted Choose a NOMAD with relevant transaction and sector experience NOMAD may also act as broker to an company on AIM All companies listed on AIM must retain a NOMAD at all times 20

21 Indicative Timetable Month 1 Month 2 Month 3 Month 4 GENERAL Agree shareholder objectives Agree Agree capital capital and and group group structure structure requirements requirements and and board board structure structure considered considered including including non-executive non-executive search search Discussions with existing shareholders Dealings commence ACCOUNTANTS Tax planning commences Analysis Analysis of of share share option option Schemes Schemes and and remuneration remuneration packages packages Submission of tax clearance Preparation Long Form and Working Capital Financial Reports due diligence, long form and short form reports Working Working capital capital report report Final -Long form report -Short form report -Working capital report LEGAL Appoint Legal Adviser Draft Memorandum and Articles of of Association Legal Due Diligence including competent person s report if applicable Undertake verification exercise Drafting /Placing Agreement, Board Minutes and other legal documents Final verification notes issued Final version of legal reports DOCUMENTATION Resolve any preliminary Regulatory issues Drafting of Prospectus Prospectus cover and other design Pathfinder issued Prospectus issued MARKETING Appoint PR consultants Preparation of institutional presentation Brokers research issued Institutional meetings arranged Analysts visit company Roadshow and one to one presentations Impact Day DISTRIBUTION Prepare pricing model Preliminar y pricing Pricing Shares placed 21

22 Contact Graham Dallas Head of business development Americas +44 (0) Anne Moulier Business Development Manager Americas +44 (0) Website: 22