Capital raising forum_-_achieving_a_successful_ipo

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  • 1. Capital Raising ForumAchieving a Successful IPO – the success factors and on-going requirementsMay 2011 Audit | Tax | Advisory
  • 2. Crowe Clark Whitehill 2Contents • Introduction • The IPO Process – An overview • Illustrative timetable • What are investors looking for? • How to become investor ready? • How will investors value your business? • Valuation methodologies • The role of the reporting accountant • Corporate Governance issues • On-going accounting requirements – market comparisons • Key factors of post IPO success • Case studies • Conclusions • Crowe Horwath International • Our capital markets track record • Principal contacts
  • 3. Crowe Clark Whitehill 3Introduction • Moving a privately owned company to a public market will take time, detailed planning is required • Accounting compliance requirements are not onerous on admission and continuing obligations are reasonable • In accounting terms the key elements for success are: • sound and effective financial controls • timely and accurate management reporting • an experienced CFO • IFRS, US or suitable national GAAP compliant audited financial statements • realistic and supportable financial projections • Taxation planning will be required at an early stage for the company and shareholders
  • 4. Crowe Clark Whitehill 4The IPO Process – An overview The AIM IPO process can be broken down into the following phases: Phase 1 Phase 2 Phase 3 Phase 4 Due Broker’s Planning Diligence Research Drafting Phase 5 Phase 6 Phase 7 Placing & Marketing Impact & Placing Admission Agreement
  • 5. Crowe Clark Whitehill 5 Note: The pre-IPO period can take 12 – 24 months Illustrative timetable Indicative IPO Timetable Intensive work Preparation / follow-up work Month 1 Month 2 Month 3 Month 4 Phase Week 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Phase 1 : Planning Decision to proceed - Sponsor / financial advisor appointed - Broker appointed Phase 2 : Due diligence Financial - Long form report - Short form report - Working capital review Legal Phase 3 : Research - Prepare flotation research Phase 4 : Drafting - Prospectus - Presentation - Verification Phase 5 : Marketing - Broker pre marketing - Pathfinder published / Road show commences Phase 6 : Placing and Placing agreement Phase 7 : Admission - Pricing / Dealings commence
  • 6. Crowe Clark Whitehill 6What are investors looking for? • A growing business operating in an expanding markets • International exposure or potential to expand overseas • Sustainable competitive position • Visibility of earnings • Quality of earnings • A committed and experienced management team • A commitment to strong corporate governance procedures • Sector approach based on macroeconomic factors
  • 7. Crowe Clark Whitehill 7How to become investor ready ? Improve the “quality” of your profits by: • A strong and complete management team with clear succession planning • A scalable business model, growing organically or by acquisition • A move to higher value and higher margin products • Build barriers to entry based on technical excellence, market knowledge or scale • Robust and reliable accounting and management information system • Enhance corporate governance and appoint non-executive directors • Capital restructuring or reorganisation, consider share incentives, regulatory approvals • Defendable rights over intellectual property
  • 8. Crowe Clark Whitehill 8 How to become investor ready?(cont’d) • Dispose of non-core activities and assets • Identify strategic acquisitions and mergers • Adopt International Financial Reporting Standards or local equivalent • International Audit Standards Compliance • Tax review of compliance and planning issues, national and international • Reduce dependence on particular customers, products or staff • Review terms of trade and strengthen credit management • Appoint experienced advisers
  • 9. Crowe Clark Whitehill 9How will investors value your business? Estimated valuation Market and customer Projected revenue Market and customer growth potential growth growth potential 市场和客户的潜在发展 Revenue visibility Exploitation of proven business model Corporate governance Scalability and Competitive landscape margin potential Management Acquisition/development New markets and Strategy & use of proceeds channels Business Financial Market Fundamentals Outlook conditions Company
  • 10. Crowe Clark Whitehill 10Valuation methodologies Method Comment  Investor familiarity, particularly in small/mid cap Forward P/E markets  Includes all charges against profits  Not distorted by differences in capital structure and Forward EV/EBITDA tax  Facilitates international comparison Multiples  Often applied where lack of profits Forward EV/Sales  Used to review valuation levels across the cycle  Significant sensitivity to a number of assumptions Discounted  Overly dependent on terminal value cash flow DCF analysis  Often used as a “sanity check”
  • 11. Crowe Clark Whitehill 11The Role of the reporting accountant • Pre IPO planning • Long Form Accountants’ Report • Short Form Accountants’ Report • Working Capital Review • Financial Reporting Board Memorandum • Pro-forma Financial Information • Other Financial Information, Consent and Comfort Letters • Taxation Advice
  • 12. Crowe Clark Whitehill 12 Corporate governance issues • The key relationship: Governance = confidence = quality = investor interest = liquidity = Value • The Quoted Company Alliance (UK) Guidelines: • Schedule of matters reserved for the board • Timely provision of information to the board • Annual review of all material internal controls and risk management systems • Separate independent Chairman and CEO • 2 independent non-executive directors • Independent audit, remuneration and nomination committees • Annual published corporate governance statement • UK Listing Rules – The Model Code • Comply or explain any non-compliance and provide a statement of differences
  • 13. Crowe Clark Whitehill 13 On-going accounting requirements – market comparisons AIM PLUS ACE 6 months 5 months 6 monthsAnnual results announced within (months) Half yearly Half yearly QuarterlyInterim results frequencyInterim results announced within (months) 3 months 3 months 2 months IFRS/USGAAP UKGAAP/IFRS/ UKGAAP/IFRS/Accounting policies USGAAP USGAAP/AUSGAAP
  • 14. Crowe Clark Whitehill 14 On-going accounting requirements – market comparisons Bursa Malaysia SGX CatalistAnnual results announced within (months) 6 months 60days 60daysInterim results frequency Half yearly Quarterly/Half- Quarterly/Half- yearlya yearlybInterim results announced within (months) 2 months 45days 45 days UKGAAP/IFRS/ Sing FRS/IFRS/ Sing FRS/IFRS/Accounting policies USGAAP/AUSGAAP USGAAP USGAAP a Depending on market capitalisation b Catalist companies are listed based on the Catalist Sponsor‘s assessment that they are suitable. No minimum quantitative entry criteria are set, but Sponsors will use their own deal selection criteria
  • 15. Crowe Clark Whitehill 15Key Issues of post IPO success Realistic valuation Do not over value the value of the business on IPO is less important than the value 12 months later Strategy Admission to market is the start of the process, not the end Communication A continuous process – Invest time and effort in the market and the market will invest in you Expectations Keep the market informed, under-promise and over-achieve if possible Financial Control working capital, maintain and display strong corporate governance Flexibility Consider secondary or two-stage listings e.g.: • Asian Citrus • RC Group • West China Cement
  • 16. Crowe Clark Whitehill 16Case Studies Property development company, operating in Malaysia and Vietnam. April 2007, joined LSE Main Market and raised US$162m at IPO Malaysia-based, provides data centre facilities and services in SE Asia. Joined AIM in March 2010 and raised £28m Provision of healthcare support services. Malaysia HQ and operating in SE Asia. November 2008, Joined AIM and raised £2 million Beijing-based software and content management company. AIM admission in June 2006, 3 further secondary fundraisings Orange plantation and producer in China, joined AIM in July 2005 and raised £12m, raised a further £20m in March 2007. Dual listing on HKSE in November 2009 by introduction, placing of HK$1.55b in November 2010
  • 17. Crowe Clark Whitehill 17 Conclusions • Moving a privately owned company to a public market will take time, detailed planning is required • Increasing the “Quality” of profits will increase the value of your business • Preparing for external investment at an early stage will significantly increase your chance of success – Plan early! • The value of the business on IPO is less important than the value 12 months later, do not over value • Admission to a market is the start of a process, not the end • Liquidity and valuations must be developed - Invest time and effort in the market and the market will invest in you
  • 18. Crowe Clark Whitehill 18Crowe Horwath International• Global professional services alliance with more than 150 independent member firms• Services provided include: audit and assurance, taxation, accountancy, corporate finance, consultancy, financial planning• Our corporate finance services include pre-IPO planning, reporting accountant services, due diligence, M&A , company disposals, raising finance and MBO’s• Based on integrated and high quality service delivery and common core values• 640 offices in over 100 different countries, annual revenues $2.8 billion and approximately 28,000 professional staff• Ranked 5th in Asia Pacific with over 8,500 staff. Strong coverage in Kuala Lumpur, Jakarta and Singapore• 31 offices throughout China including Beijing, Shanghai, Hong Kong, Guangzhou and Shenzhen• In the UK a leading accountancy firm established in 1843, strong international client base
  • 19. Crowe Clark Whitehill 19Asia Pacific Ranking (in m US Dollars) Asia Pacific: top 10 accounting networks Rank Network Revenues Staff ($m) 1 PricewaterhouseCoopers 3,803 39,585 2 Deloitte 3,400 34,154 3 Ernst & Young 3,157 34,222 4 KPMG 3,007 30,932 5 Crowe Horwath 651 8,656 International 6 BDO 448 8,844 AccountancyAsia Survey: 5th in Asia Pacific 7 Grant Thornton 389 5,921 International Relayed in the IAB 8 RSM Asia-Pacific 353 6,423 Leading accounting networks 2009: fee data 9 Nexia International 328 5,034 10 Baker Tilly International 325 6,442
  • 20. Crowe Clark Whitehill 20Our Team Members’ Capital Markets Track Record Includes…
  • 21. Crowe Clark Whitehill 21Our Team Members’ Capital Markets Track Record Includes…
  • 22. Crowe Clark Whitehill 22Principal Contacts – Capital Markets United Kingdom Robin Stevens Direct line: +44 (0) 20 7353 7282 email: Mobile: +44 (0) 7787 112 059 Marty Lau Direct line: +44 (0) 20 7842 7240 email: Mobile: +44 (0) 7899 070 609 Peter Varley Direct line: +44 (0) 20 7842 7353 email: Mobile: +44 (0) 7775 502 776 Stephen Bullock Direct line: +44 (0) 20 7842 7166 email: Mobile: +44 (0) 7714 700 657 Linda Jin Direct line: +44 (0) 20 7842 7208 email: Mobile: +44 (0) 7887 600 766 Paul Blythe Direct line: +44 (0) 20 7842 7231 email: Mobile: +44 (0) 7876 282 728 Chulanga Jayawardana Direct line: +44 (0) 20 7842 7173 email: Mobile: +44 (0) 7880 818 386 Mitesh Timpani Direct line: +44 (0) 20 7842 7305 email: Mobile: +44 (0) 7500 048 069 Kuala Lumpur Kien Hoe Onn email: Jakarta Munir Ali email: Singapore Catherine Cheng email: Beijing Wo Xiao Ning email: Shanghai Xu Li Ying (Amendar) email: Hong Kong Delores Teh email: