A List of Companies Going Out of Business - PowerPoint by fvf19035


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									                   Going Public vs Staying Private
Oleksandra Dubovyk                 Mark Jarvis
Associate Director, IPO Services   Partner - Inbound IPO's

+380 44 499 2009                   +44 20 7951 4690
Oleksandra.Dubovyk@ua.ey.com       MJarvis@uk.ey.com
Today’s Market

►   Its tough out there…
    ►    A move to quality exists – if you have the right story you can IPO
►   Emerging Markets are in favour
    ►    Q1 2008 2/3rds of all IPO’s (excluding Visa) were from Emerging
         Market companies
►   PE is still very much around but more selective
►   Private Placements are popular as a first round pre IPO
    fund raising tool
►   Debt is short
►   But the best companies are still pursuing IPOs

Page 2    23 September 2010        Presentation title
Should you?

►   Should you remain Private or go Public?
    ►    Trend for small- and medium-sized companies to use the capital
         markets to develop their business.
    ►    M&A deals, bond issues, buyouts, sales to strategic investors and
         private placements become increasingly demanded by
    ►    Surging growth of Pre-IPO and direct investment funds is another
         indication of market growth
         ►   A first step could be a Private Stock Offering?
         ►   Maybe a sale to a PE fund?
         ►   Or are you ready for an IPO?
    ►    We will cover this in the next 20 minutes
    ►    But remember not everyone who is big is Public….

Page 3    23 September 2010           Presentation title
Combined Top 20 NPC & Public listed companies

                                             Mkt Cap / Est Mkt
      Company                                                  Listed
                                             Val Dec 2005 ($m)
  1   Saudi Aramco                                 781,000         NPC
  2   ExxonMobil Corporation                       439,536         listed
  3   Petróleos Mexicanos (Pemex)                  415,000         NPC
  4   Petróleos de Venezuela SA                    388,000         NPC
  5   Kuwait Petroleum Corporation                 378,000         NPC
  6   General Electric Company                     363,051         listed
  7   Microsoft Corporation                        290,392         listed
  8   Gazprom OAO                                  261,459         listed
  9   Citigroup Inc                                259,835         listed
 10   PetroChina Company Limited                   236,457         listed
 11   Bank of America Corporation                  235,986         listed
 12   Petroliam Nasional Berhad (Petronas)         232,000         NPC
 13   Royal Dutch Shell plc                        230,262         listed
 14   BP plc                                       224,478         listed
 15   Sonatrach                                    224,000         NPC
 16   National Iranian Oil Company                 220,000         NPC
 17   HSBC Holdings plc                            204,403         listed
 18   The Procter Gamble Company                   202,388         listed
 19   Toyota Motor Corporation                     196,171         listed
 20   Wal-Mart Stores, Inc                         191,729         listed   NPC = Not Publicly Traded
Source FT

Page 4       23 September 2010                Presentation title
The right reason to go Public?

►    Is this the right message?
     ►     Private Stock Offerings
           ►     The best way to raise money (capital) is issuing stock in your private
                 company - in most cases only issue 15 to 45% of your company
                 ……….. so you retain the majority of the shares and the control of
                 your company. This can be done easily if you have the KNOWLEDGE.
                 The best two things about stock offerings are NO LOAN PAYMENTS
                 and NO RISK of your personal assets, such as your home, car etc. By
                 selling and issuing stock in your corporation, it can be almost like
                 having a license to print money.
Source: Florida based company’s website

Page 5        23 September 2010           Presentation title

►    Values - Private vs. Public Company
     ►     Changing a private company into a public company can result in a
           substantial increase in the value to shareholders.
           ►       Interestingly most private companies are liquidated rather than sold, because a
                   buyer cannot be found.
           ►       Statistics show that sellers of private companies, fortunate enough to find a
                   buyer, receive an average of 4 to 6 times their net earnings. Rarely is the seller
                   cashed out.
     ►     By comparison, public companies sell at an average of 25-30 times their
           net earnings. The reason being that, unlike a private company purchase
           ►       investors have no management responsibilities
           ►       they can purchase a very small portion of the company
           ►       their investment is liquid, and
           ►       there are millions of investors.
Source: FSMCG

Page 6          23 September 2010              Presentation title

Page 7   23 September 2010     Presentation title
Is Private Equity a solution?

►   Is private equity ownership that much less onerous than being
    publicly traded?
►   For managers, the advantages of going private are no longer as clear
    as they once were.
    ►    Critics of Sarbanes-Oxley claim that CEOs can't wait to escape the law
    ►    But many private companies are actually complying with top level
         corporate governance in case they eventually go public again
►   The differences between private and public company CEOs have
    although by no means disappeared.
    ►    Privately held firms can hold on to the best parts of the Corporate
         Governance Codes while avoiding much of the paperwork and expense.
    ►    While private, they can also avoid disclosing executive pay information.

Page 8    23 September 2010          Presentation title
Maybe a Private Placement?

► Issuer largely determines conditions of the placement by itself
         ►     list of the investors, share price and number of the shares
►   Quick method for the capital raising
►   Puts a marker down for the future value of the company at IPO time
►   Relatively lowcost

►   Restricted access to the financial resources
►   Lack of market visibility / PR for the company
►   Business cultures of the original shareholders and the investors may be
►   Investors may wish to participate in the day-to-day management of the

Page 9       23 September 2010             Presentation title
Let’s go Public - its decision time

►   The decision for a private business owner to take a company public is never
       ►   The financial costs are not only considerable but ongoing.
       ►   Financial projections, previously developed with an acceptable degree
           of accuracy, must be checked, double-checked and disseminated
           through the proper channels or the analyst community will deal a swift
►   Despite these costs, growing businesses have a large appetite for capital and
    for many of these companies the benefits of a liquid, publicly traded security
    far outweigh the costs.
►   Many owners are encouraged to consider public issuance by investment
    bankers because IPOs are one of their more lucrative products. In most
    cases, the bankers are correct and justified in their advice.

Page 10   23 September 2010         Presentation title
So you have decided…

You have decided to raise money as a Ukrainian company
► Possibly by PE
► Possibly by Private Placement prior to IPO
► Or you are the market leader and you are going to go direct to IPO

► What           do you need to do?

Page 11   23 September 2010    Presentation title
The Ukrainian market

Page 12   23 September 2010   Presentation title
IPO’s performed
          Number of Ukrainian                                Stock exchanges,
           companies IPO'd                                 selected by Ukrainian
              2005-2008                                      companies - 2007
 7                                                             Warsaw,                            14.29%
 6                               7                             14.29%

 5                                                                                                         LSE,
 4         3

 3                                      2
 2                   1
          2005    2006          2007   2008                        LSE AIM,
                                                                         Source: companies data, Ernst&Young estimates

Page 13     23 September 2010                 Presentation title
Private Placements

           Private Placements by Ukrainian companies
                             - 2007
            Retail and        TMT 5%                                         Financial
            Consumer                                                       Services 20%
          Products 15%

                                                                              Products 10%

      Real Estate 30%
                                       Pharmaceuticals                          Natural
                                            5%                               Resources 15%

                                                         Source: companies data, Ernst&Young estimates

Page 14   23 September 2010       Presentation title
  Adding Value to Your Company

Page 15   23 September 2010   Presentation title
Adding Value Process

                                MAXIMISING value
  Diagnostics            Corp.
                                   Finance   Controls   Tax/Legal     IT

 Situation “as is”                  Changes needed                                   What does the Investor need?

                      ►    Group structure                                   ►   Full understanding about company’s
                      ►    Historical financial information                      activities, its financial state and it’s
                                                                                 market position
                      ►    Forecasted financial information
                      ►    Planning and budgeting                            ►   Assurance in the future of the
                                                                                 company, predictability
                      ►    Tax/Legal
                                                                             ►   Understanding all of the current and
                      ►    Financial reporting processes and
                                                                                 potential risks, connected with the work
                                                                                 of the company
                      ►    Corporate governance
                                                                             ►   Understanding of the value base to
                      ►    Risk management
                                                                                 determine what amount he is ready to
                      ►    It & information security                             pay for a company or a part of the

Page 16     23 September 2010                           Presentation title
Changes Needed To Maximize Your
Company’s Value

                                            & values
                                        Corporate strategy
                                          and operating

                                     Business unit strategy and

                                 Policies, process and procedures

                         Enabling infrastructure (IT, human resources, etc.)

Page 17   23 September 2010                  Presentation title
     Is Your Company Ready?

Page 18   23 September 2010   Presentation title
Public vs. Private Equity

►   Many corporate executives view private equity as
    expensive relative to public equity.
►   But stock markets occasionally become "closed" and
    public equity can involve significant information costs.
    ►     Private equity partially overcomes these costs by relying on the
          oversight of well-informed and highly motivated owners.
    ►     Moreover, research suggests that the best private equity firms
          consistently add value.

Page 19    23 September 2010       Presentation title
Why would you go Public?

► Demonstrate your market leading position
► Achieve enhanced market capitalisation = owners become richer
► Access to a wide and varied network of financial resources = more
   efficient funding
► Achieving a high level of corporate governance = a better run
► Increased market image = enhanced company valuations

► Loss of control
► Extra corporate costs

Page 20   23 September 2010   Presentation title
Is your company ready for a Public Listing?

                                                                                  Management and corporate
                 Size                           Corporate structure                     governance
• There is no right size for listing on   • Clear and transparent shareholder    • A strong management team with a
  AIM, but UK companies are usually         and corporate structures with          proven track record and listing
  in a start-up phase and foreign           straightforward business models        experience is preferable. Many
  companies are usually of high             are more attractive to investors       listing companies will recruit new
  growth potential. A profitable                                                   independent non-executive
  trading record is not a requirement                                              directors
  for listing

                                                                                   Accounts and information
              Growth                              Use of proceeds                         systems
• Actual or potential high growth is      • The amount of the offering and the   • The reporting requirements for
  the main attraction for investors in      use to which the proceeds are put      listed companies are demanding
  AIM companies                             will be evaluated by investors.        and will require good accounting
                                            Forecasts and plans will be            and information systems
                                            required as part of the listing

Page 21      23 September 2010                      Presentation title
Critical success factors for the IPO


• Company-wide support for process
• Adequate resources from the Company available to run the process
• Fully resourced programme management in place
• Nominated decision maker with authority to commit Company
• Communications between all parties
• Realistic initial view on status of preparation to inform planning process
• Experts / advisors with relevant experience
• Adequate advisor resource committed
• Compelling investment case to market
  • management/ strategy / financial performance

Page 22   23 September 2010          Presentation title
To summarise

►   IPO if:
          ►     You are the market leader
          ►     You are ready for a whole new way to run your business
          ►     You are committed to the process
►   There are other steps if you are not ready
          ►     PE investors may help you grow your business
          ►     A Private Placement is less demanding

► But     the jewel in the corporate crown is a
    listing on a Global Exchange

Page 23       23 September 2010      Presentation title
Thank you

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