Picking Bankers. February 10, Bob Day Corporate. Mike Nordtvedt Corporate

Transcription

1 Picking Bankers February 10, 2017 Bob Day Corporate Mike Nordtvedt Corporate The materials in this presentation, and the opinions expressed in this webinar, are those of the authors and speakers, respectively, and do not necessarily reflect the opinions of the companies or institutions with which such authors or speakers are affiliated. In addition, neither these materials nor the views expressed in this webinar are intended to constitute legal advice as to any particular situation. 1

2 Why is this topic important? After management, the bankers will have biggest impact on success of an IPO Banks and bankers can provide value beyond underwriting an IPO Research analysts can assist with investor understanding of business You will be spending A LOT of time with your bankers 2

3 Underwriting Syndicate Lead Bookrunner(s) Overall responsibility for transaction execution and success Crafts and disseminates marketing themes Coordinates and executes marketing plan / logistics Takes institutional orders and maintains order book Makes final pricing and allocation recommendations Manages aftermarket stabilization (if necessary) Joint Bookrunners Non-bookrunning partner with the bookrunner Crafts and disseminates marketing themes Provides research support during transaction and afterward Provides incremental retail distribution and targeted marketing effort Co-Managers Provides research support during transaction and afterward Provides incremental retail distribution and targeted marketing effort Allows company to reward important relationships 3

4 The Players Inside Banks Investment Banking Department (IBD) Company / industry expertise Responsible for client relationship, disclosure, pre-roadshow deal management Equity Capital Markets (ECM) Market expert Responsible for building book, intra-syndicate relationships, some lock-up issues Research Analyst Assists with valuation determination Responsible for publishing research reports post-ipo Legal Department The Back Office 4

5 What to underwriters actually do? Craft cogent, compelling narrative for investors Prospectus Test-the-waters presentation Roadshow presentation Recommend initial valuation range Educate and motivate salesforce Target investors and assess demand Advise regarding post-ipo key metrics Provide research analysis (subject to internal wall ) 5

6 Bookbuilding and Allocation Bookbuilding Mechanics During the marketing period, lead banker and the co-managers solicit orders, including: Identity Number of shares Price sensitivity Lead banker collects all orders and generates a complete picture of total demand Credibility of Order Allocation Size of order relative to normal position size and size of assets under management Previous experience of investments in comparable companies Timing of order Overall knowledge of company Goals The main objectives of the bookbuilding process are: Determine the highest market-clearing price consistent aftermarket expectations Adjust pricing and allocation decisions to target desired investors The final recommendations on investor category sizes will be based on lead banker assessment of the quantity, quality, and price sensitivity of demand from each category Real Level of Interest Likely Aftermarket Behavior Estimated real demand Ultimate destination of shares (which specific funds?) Attendance at a roadshow meeting Participation in a call with research analyst Level and type of price sensitivity Presumed holding period Behavior in previous IPOs 6

7 Role of the Research Analyst During the Offering Participate in developing marketing story/materials and identifying key investors and potential investor concerns Develop internal earnings model and independent viewpoint on valuation Educate sales force Act as ongoing resource for buy-side and as a conduit for feedback to management team After the Offering Publish comprehensive research report distributed to institutional and high net worth clients Regularly publish comments and notes quarterly or after important company developments; highlight company in applicable industry reports "First alert" for issues to be brought to management's attention; assist in crafting response 7

8 Key criteria Experience Judgment, relationships, sponsorship and credibility Company / industry knowledge Positioning and strategic advice IPO track record Institutional support Strong equity distribution Quality placement and after market support Strong team / bench Consistent, well-informed judgment, coordination and cooperation Well-regarded research analysts Help position and throw weight to internal/external sales effort; after market support Relationships with other parts of the investment banks 8

9 Thank you! Bob Day Wilson Sonsini Goodrich & Rosati 650 Page Mill Road Palo Alto, CA Office: (650) Mike Nordtvedt Wilson Sonsini Goodrich & Rosati 701 Fifth Avenue, Suite 5100 Seattle, WA Office: (206)