This document discusses exit strategies for startup and growth companies. It defines an exit as the process by which founders, management, and investors find public or corporate buyers for some or all of a company's shares. The most popular exit strategies are mergers, acquisitions, initial public offerings (IPOs), and private placements. While mergers and acquisitions are more common than IPOs, entrepreneurs that insist on an IPO greatly reduce their exit opportunities. The document then provides details on preparing for and comparing IPOs versus mergers and acquisitions. It also discusses strategic factors to consider for exiting and remaining independent, as well as requirements for going public such as financial controls, qualified boards and management.
Analysis on the Performance of Technology Companies with Z-score ModeljournalBEEI
Local technology sector plays a significant role in information and communication technology (ICT) based innovations and applications which enhance organizational performance as well as national economic growth and labor productivity. In this paper, financial performance of the listed Malaysia companies in technology sector is analyzed and evaluated. Altman’s Z-score model is proposed due to its robustness in determining companies’ financial distress level using five financial ratios as variables. The computed Z-score values classify the financial status of the companies into distress, grey and safe zones. This study investigates the financial data of 23 listed technology-based companies in the Main Market of Bursa Malaysia over the period of 2013 to 2017. The findings reveal that the percentage of safe zone companies increase throughout the five years whereas distress zone companies decline. It is concluded that financial ratio for market value of equity to total liabilities is the dominant factor that directly influences the level of financial distress among these technology-based companies in Malaysia. These research outcomes provide an insight to investors or policy makers to develop future planning in order to avoid financial failure in local
technology sector.
Why Own Safeguard?
- Full Value Yet to be Realized
- Ownership Stakes in Exciting Partner Companies
- Top Performance of Proven Team
- Financial Strength, Flexibility and Liquidity
- Strong Alignment of Interests
Forward-Looking Statements
Statements contained in this presentation that are not historical facts are forward looking statements which involve certain risks and uncertainties including, but not limited to, risks associated with the uncertainty of managing rapidly changing technologies, limited access to capital, competition, the ability to attract and retain qualified employees, our ability to execute our strategy, the uncertainty of the future performance of our partner companies, acquisitions and dispositions of additional partner companies, the inability to manage growth, government regulation and legal liabilities and the effect of economic conditions in the business sectors in which our partner companies operate, negative media coverage and other uncertainties as described in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K.
Safeguard does not assume any obligation to update any forward looking statements or other information contained in this presentation.
This document describes the XT99 Edge Diversified Managed Futures Program. It highlights the program's exceptional long-term performance of +21.01% annualized return rate, its systematic and automated trading approach, and its ability to provide uncorrelated returns. The program trades a diversified portfolio across global macro markets using a proprietary algorithm. It has demonstrated strong crisis alpha by outperforming market indexes during periods of economic and political turmoil.
This document discusses measuring the financial health of Lotte India Corporation Ltd using the Z-score and Springate models. It provides details on the Z-score model developed by Altman, including the formulas and guidelines for interpretation. Financial ratios used in the Z-score and Springate models are explained. The document also includes information on the confectionery industry and company profile. Objectives, methodology, findings and conclusions of analyzing Lotte's financial health over 5 years are presented.
Assignment on Security Analysis & Portfolio ManagementAmit Kumar
This document discusses factors that affect stock market movements in India and challenges in managing client portfolios. For stock market movements, it identifies price rigging, regulatory actions by SEBI, RBI monetary policy, market sentiments, company announcements, global incidents, weather, and natural disasters as key factors. For managing client portfolios, it outlines challenges such as internal politics and culture, appropriate sponsorship, project management maturity, management commitment, adopting a common approach, prioritizing projects, pace of adoption, financial investment, human nature, and avoiding a "Big Brother" syndrome.
Why Own Safeguard?
- Full Value Yet to be Realized
- Ownership Stakes in Exciting Partner Companies
- Top Performance of Proven Team
- Financial Strength, Flexibility and Liquidity
- Strong Alignment of Interests
Forward-Looking Statements
Statements contained in this presentation that are not historical facts are forward looking statements which involve certain risks and uncertainties including, but not limited to, risks associated with the uncertainty of managing rapidly changing technologies, limited access to capital, competition, the ability to attract and retain qualified employees, our ability to execute our strategy, the uncertainty of the future performance of our partner companies, acquisitions and dispositions of additional partner companies, the inability to manage growth, government regulation and legal liabilities and the effect of economic conditions in the business sectors in which our partner companies operate, negative media coverage and other uncertainties as described in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K.
Safeguard does not assume any obligation to update any forward looking statements or other information contained in this presentation.
This document summarizes a study examining the efficacy of Altman's Z-score model for predicting bankruptcy among specialty retail firms. The authors apply Altman's Z-score to 17 pairs of retail firms from 2007-2008, with one firm in each pair declaring bankruptcy. They find the model accurately predicted bankruptcy for all but two firms, demonstrating 94% accuracy. The document provides background on Altman's Z-score model and discusses literature questioning its predictive power in more modern contexts.
This document analyzes the financial efficiency of Walmart using the Du Pont formula. It summarizes Walmart's financial ratios over a 5-year period, including net profit margin, asset turnover, financial leverage, return on equity, capital ratio, dividend payout ratio, and return on assets. These metrics have remained fairly consistent, indicating Walmart's sustainable growth. The Du Pont formula breakdown shows Walmart's strong profitability is driven by high asset turnover, though financial leverage is on the higher side. Overall, the analysis finds Walmart to be efficiently managed with room to further improve growth by lowering the dividend payout ratio.
Analysis on the Performance of Technology Companies with Z-score ModeljournalBEEI
Local technology sector plays a significant role in information and communication technology (ICT) based innovations and applications which enhance organizational performance as well as national economic growth and labor productivity. In this paper, financial performance of the listed Malaysia companies in technology sector is analyzed and evaluated. Altman’s Z-score model is proposed due to its robustness in determining companies’ financial distress level using five financial ratios as variables. The computed Z-score values classify the financial status of the companies into distress, grey and safe zones. This study investigates the financial data of 23 listed technology-based companies in the Main Market of Bursa Malaysia over the period of 2013 to 2017. The findings reveal that the percentage of safe zone companies increase throughout the five years whereas distress zone companies decline. It is concluded that financial ratio for market value of equity to total liabilities is the dominant factor that directly influences the level of financial distress among these technology-based companies in Malaysia. These research outcomes provide an insight to investors or policy makers to develop future planning in order to avoid financial failure in local
technology sector.
Why Own Safeguard?
- Full Value Yet to be Realized
- Ownership Stakes in Exciting Partner Companies
- Top Performance of Proven Team
- Financial Strength, Flexibility and Liquidity
- Strong Alignment of Interests
Forward-Looking Statements
Statements contained in this presentation that are not historical facts are forward looking statements which involve certain risks and uncertainties including, but not limited to, risks associated with the uncertainty of managing rapidly changing technologies, limited access to capital, competition, the ability to attract and retain qualified employees, our ability to execute our strategy, the uncertainty of the future performance of our partner companies, acquisitions and dispositions of additional partner companies, the inability to manage growth, government regulation and legal liabilities and the effect of economic conditions in the business sectors in which our partner companies operate, negative media coverage and other uncertainties as described in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K.
Safeguard does not assume any obligation to update any forward looking statements or other information contained in this presentation.
This document describes the XT99 Edge Diversified Managed Futures Program. It highlights the program's exceptional long-term performance of +21.01% annualized return rate, its systematic and automated trading approach, and its ability to provide uncorrelated returns. The program trades a diversified portfolio across global macro markets using a proprietary algorithm. It has demonstrated strong crisis alpha by outperforming market indexes during periods of economic and political turmoil.
This document discusses measuring the financial health of Lotte India Corporation Ltd using the Z-score and Springate models. It provides details on the Z-score model developed by Altman, including the formulas and guidelines for interpretation. Financial ratios used in the Z-score and Springate models are explained. The document also includes information on the confectionery industry and company profile. Objectives, methodology, findings and conclusions of analyzing Lotte's financial health over 5 years are presented.
Assignment on Security Analysis & Portfolio ManagementAmit Kumar
This document discusses factors that affect stock market movements in India and challenges in managing client portfolios. For stock market movements, it identifies price rigging, regulatory actions by SEBI, RBI monetary policy, market sentiments, company announcements, global incidents, weather, and natural disasters as key factors. For managing client portfolios, it outlines challenges such as internal politics and culture, appropriate sponsorship, project management maturity, management commitment, adopting a common approach, prioritizing projects, pace of adoption, financial investment, human nature, and avoiding a "Big Brother" syndrome.
Why Own Safeguard?
- Full Value Yet to be Realized
- Ownership Stakes in Exciting Partner Companies
- Top Performance of Proven Team
- Financial Strength, Flexibility and Liquidity
- Strong Alignment of Interests
Forward-Looking Statements
Statements contained in this presentation that are not historical facts are forward looking statements which involve certain risks and uncertainties including, but not limited to, risks associated with the uncertainty of managing rapidly changing technologies, limited access to capital, competition, the ability to attract and retain qualified employees, our ability to execute our strategy, the uncertainty of the future performance of our partner companies, acquisitions and dispositions of additional partner companies, the inability to manage growth, government regulation and legal liabilities and the effect of economic conditions in the business sectors in which our partner companies operate, negative media coverage and other uncertainties as described in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K.
Safeguard does not assume any obligation to update any forward looking statements or other information contained in this presentation.
This document summarizes a study examining the efficacy of Altman's Z-score model for predicting bankruptcy among specialty retail firms. The authors apply Altman's Z-score to 17 pairs of retail firms from 2007-2008, with one firm in each pair declaring bankruptcy. They find the model accurately predicted bankruptcy for all but two firms, demonstrating 94% accuracy. The document provides background on Altman's Z-score model and discusses literature questioning its predictive power in more modern contexts.
This document analyzes the financial efficiency of Walmart using the Du Pont formula. It summarizes Walmart's financial ratios over a 5-year period, including net profit margin, asset turnover, financial leverage, return on equity, capital ratio, dividend payout ratio, and return on assets. These metrics have remained fairly consistent, indicating Walmart's sustainable growth. The Du Pont formula breakdown shows Walmart's strong profitability is driven by high asset turnover, though financial leverage is on the higher side. Overall, the analysis finds Walmart to be efficiently managed with room to further improve growth by lowering the dividend payout ratio.
This document discusses preparing for an initial public offering (IPO). It emphasizes that careful planning and preparation are critical for a successful IPO. Companies should establish two parallel work streams - "Going Public" to execute the IPO process, and "Being Public" to transform the company for operating as a public firm. Key steps include performing an IPO readiness assessment, appointing a dedicated IPO leader, using project management, building the right finance team, and taking a multidisciplinary approach. Proper preparation can help ensure the IPO process runs smoothly and the company is ready for life as a public company.
Linking Strategic Planning with Operational Planning, Thomson ReutersInnovation Enterprise
Thomson Reuters is proposing changes to better link strategic planning with operational planning by aligning operating segments with market segments. This would allow market growth projections to be used as a leading indicator for business growth. It would also provide a more robust analysis by tying market share and revenue to business forecasts. The goal is to execute strategic planning by informing large investments, acquisitions, and capital expenditures based on consistent targets across market and operating segments. This approach provides increased visibility but reduces flexibility around targets.
This white paper focuses on four key areas for cleantech companies to succeed: the impact of global government policies, global opportunities for operations and funding, managing talent and corporate structure, and the need to stay focused. It provides perspectives from Grant Thornton specialists around the world on these topics. While governments express commitment to supporting cleantech, the gap between policies and practical applications is vast with many unknowns. Ultimately, cleantech company leaders must develop solutions with an awareness of policies but not an undue reliance on government support or funding to achieve success in this dynamic global industry.
Mergers and acquisitions (M&As) allow companies to gain competitive advantages such as economies of scale, increased market share, and access to new customers and technologies. The document discusses the objectives and strategies of M&As, including international trends in M&A activity over the last century. There have been five major waves of M&A activity driven by factors like industry consolidation, globalization, and economic conditions. Currently, healthy corporate balance sheets, low interest rates, and growing M&A activity in emerging markets are fueling a new wave of cross-border M&As.
The fund invests in IPO securities listed in Greater China, Singapore, or the US that derive revenue from Greater China or Singapore. Over the past 2 years, the fund achieved a return of 138.39%, outperforming its benchmark by 42.07%. The manager uses quantitative and qualitative criteria to determine investments with a focus on IPOs that offer growth potential.
The document provides an overview of Dynamic Materials Corporation (DMC) and includes cautionary statements about forward-looking projections. It discusses DMC's three business segments, financial highlights, global operations, and competing cladding technologies. DMC is a leading provider of explosion-welded metal plates and has operations in explosive metalworking, oilfield products, and welding. The document reviews DMC's markets, growth strategy, and historical financial and operational performance.
This document summarizes a presentation on public venture capital investment. It discusses how venture capital can help overcome financing frictions for startups but that returns have been disappointing. There is evidence that VC backing creates value for companies but the market has struggled since the dot-com bubble. The presentation argues for indirect government interventions like subsidies to encourage early-stage private investment and for direct government VC funds if they focus investment and maintain discipline without expecting market returns, as the goal is to promote startup activity, not make a profit.
This document provides an overview and cautionary statements for DMC's presentation at an industrial conference. It summarizes DMC's business segments, global presence, and financial highlights. The document also cautions readers that DMC's forward-looking statements are based on management's current assessments and involve risks and uncertainties that could cause actual results to differ materially.
Measuring Exits in Indian Impact InvestmentsShaun Robinson
This report analyzes 64 exits from impact investments in India over the past decade to understand performance and trends. Key findings include:
- Exits have been most common in southern India, dominated by the microfinance and financial services sectors.
- After 2010, over 9 exits occur annually on average. Median IRR is 27% and exit multiple is 2.25x across all exits.
- Microfinance has the highest median exit multiple at 3.55x and IRR at 39%. Financial services realized 7.50x and 27% respectively.
- The success of exits like SKS IPO in 2010 and diversification after the 2011 microfinance crisis helped drive growth in the impact investing space in India.
1. Political, market, and investor horizons remain out of sync as debt crisis tackling will be long and volatility continues.
2. Clients will take both cautious and opportunistic approaches to risk, blending flight and fight strategies.
3. Asset managers must develop capabilities to benefit clients from volatility through dynamic strategies, manager selection, and communication.
Applying IT to Sweeten Divestitures: The Seller PerspectiveCognizant
A lion’s share of companies plan to divest in the next two years, according to industry gurus, but a significant number of divestment projects are delayed or deferred due to misalignment of the business strategy and the IT strategy. Here’s how sellers can leverage IT as an enabler to achieve the business objectives that drive the divestiture agenda.
This investor presentation discusses DMC's financial highlights and global business operations. It provides cautionary statements about forward-looking projections and explains how non-GAAP financial measures are used. DMC has three business segments and a diversified customer base. It is the dominant provider of explosion-welded clad metal plates and has a global network of production and sales facilities.
There is a steady stream of businesses preparing their initial public offerings as the financial markets continue to change. Investors and financial professionals are very interested in these upcoming IPO 2023.
Private equity involves investing in companies that are not publicly traded, with the goal of improving financial performance and selling at a profit. There are various private equity strategies based on a company's stage of development, including venture capital for early stage companies, growth capital for fast-growing firms, buyouts of mature companies, and distressed debt investments in struggling firms. While high risk, private equity aims to generate above-average returns. Most exits are trade sales to other companies in the same industry, rather than initial public offerings. Private equity requires active involvement to create value through specialization, flexibility, and strong performance incentives.
Venture capital refers to equity investments made to launch or expand a business, while private equity provides capital to enterprises not publicly traded. Companies often need external financing like venture capital during periods of growth when cash flow is negative. The venture capital investment process is highly selective, with only about 3-4% of funding requests ultimately receiving investment after progressing through initial screening, meetings, and thorough due diligence evaluations.
ITT Corporation held an earnings call on February 29, 2012 to discuss Q4 2011 earnings and provide 2012 guidance. Key highlights from 2011 included 9% organic revenue growth, 13% organic order growth, record backlog, and a 23% increase in adjusted pro forma EPS. The company completed its transformation to a diversified global industrial company and is positioned for long-term growth with a strong balance sheet and $690 million in cash. Significant strategic progress was made in 2011 through focused emerging market expansion, aftermarket capture, new product technology investments, and operational excellence.
This document discusses accelerating product venture development in India. It outlines the need to shift focus from services to innovative products that can generate more foreign exchange. An open ecosystem is proposed, with technologists, investors, incubators and a supportive supply chain and tax system. Key elements include identifying promising ventures, providing resources and funding, establishing performance metrics, and influencing industry and tax policies to promote globally competitive product startups in India. This could transform small ventures into large profitable companies and boost the economy.
This document discusses various modes of entering international business, including exporting, licensing, franchising, mergers and acquisitions, foreign direct investment, joint ventures, and contract manufacturing. It provides details on each mode, such as definitions, advantages, and disadvantages. Major issues in going global are also outlined, including target product/market, goals of target markets, mode of entry, time of entry, and marketing mix plan. Political and regulatory issues that could impact business are also addressed.
This ppt will be helpful for BBA AND MBA students for their exam and interviews. Also helpful for those who are teaching this international business for MBA students . This is explaining the meaning and scope of international business and approaches to international business in the current period . This is also explaining the performance of Global business and controlling of international business . Different forms of international business and performance evaluation system
Global business
This document discusses various modes of entering international business, including exporting, licensing, franchising, mergers and acquisitions, foreign direct investment, joint ventures, and contract manufacturing. It provides details on each mode, such as definitions, advantages, and disadvantages. Major issues in going global are also outlined, including target product/market, goals, entry mode, timing, and marketing plans. Political issues that could impact business environments are also addressed.
How to Identify the Best Crypto to Buy Now in 2024.pdfKezex (KZX)
To identify the best crypto to buy in 2024, analyze market trends, assess the project's fundamentals, review the development team and community, monitor adoption rates, and evaluate risk tolerance. Stay updated with news, regulatory changes, and expert opinions to make informed decisions.
This document discusses preparing for an initial public offering (IPO). It emphasizes that careful planning and preparation are critical for a successful IPO. Companies should establish two parallel work streams - "Going Public" to execute the IPO process, and "Being Public" to transform the company for operating as a public firm. Key steps include performing an IPO readiness assessment, appointing a dedicated IPO leader, using project management, building the right finance team, and taking a multidisciplinary approach. Proper preparation can help ensure the IPO process runs smoothly and the company is ready for life as a public company.
Linking Strategic Planning with Operational Planning, Thomson ReutersInnovation Enterprise
Thomson Reuters is proposing changes to better link strategic planning with operational planning by aligning operating segments with market segments. This would allow market growth projections to be used as a leading indicator for business growth. It would also provide a more robust analysis by tying market share and revenue to business forecasts. The goal is to execute strategic planning by informing large investments, acquisitions, and capital expenditures based on consistent targets across market and operating segments. This approach provides increased visibility but reduces flexibility around targets.
This white paper focuses on four key areas for cleantech companies to succeed: the impact of global government policies, global opportunities for operations and funding, managing talent and corporate structure, and the need to stay focused. It provides perspectives from Grant Thornton specialists around the world on these topics. While governments express commitment to supporting cleantech, the gap between policies and practical applications is vast with many unknowns. Ultimately, cleantech company leaders must develop solutions with an awareness of policies but not an undue reliance on government support or funding to achieve success in this dynamic global industry.
Mergers and acquisitions (M&As) allow companies to gain competitive advantages such as economies of scale, increased market share, and access to new customers and technologies. The document discusses the objectives and strategies of M&As, including international trends in M&A activity over the last century. There have been five major waves of M&A activity driven by factors like industry consolidation, globalization, and economic conditions. Currently, healthy corporate balance sheets, low interest rates, and growing M&A activity in emerging markets are fueling a new wave of cross-border M&As.
The fund invests in IPO securities listed in Greater China, Singapore, or the US that derive revenue from Greater China or Singapore. Over the past 2 years, the fund achieved a return of 138.39%, outperforming its benchmark by 42.07%. The manager uses quantitative and qualitative criteria to determine investments with a focus on IPOs that offer growth potential.
The document provides an overview of Dynamic Materials Corporation (DMC) and includes cautionary statements about forward-looking projections. It discusses DMC's three business segments, financial highlights, global operations, and competing cladding technologies. DMC is a leading provider of explosion-welded metal plates and has operations in explosive metalworking, oilfield products, and welding. The document reviews DMC's markets, growth strategy, and historical financial and operational performance.
This document summarizes a presentation on public venture capital investment. It discusses how venture capital can help overcome financing frictions for startups but that returns have been disappointing. There is evidence that VC backing creates value for companies but the market has struggled since the dot-com bubble. The presentation argues for indirect government interventions like subsidies to encourage early-stage private investment and for direct government VC funds if they focus investment and maintain discipline without expecting market returns, as the goal is to promote startup activity, not make a profit.
This document provides an overview and cautionary statements for DMC's presentation at an industrial conference. It summarizes DMC's business segments, global presence, and financial highlights. The document also cautions readers that DMC's forward-looking statements are based on management's current assessments and involve risks and uncertainties that could cause actual results to differ materially.
Measuring Exits in Indian Impact InvestmentsShaun Robinson
This report analyzes 64 exits from impact investments in India over the past decade to understand performance and trends. Key findings include:
- Exits have been most common in southern India, dominated by the microfinance and financial services sectors.
- After 2010, over 9 exits occur annually on average. Median IRR is 27% and exit multiple is 2.25x across all exits.
- Microfinance has the highest median exit multiple at 3.55x and IRR at 39%. Financial services realized 7.50x and 27% respectively.
- The success of exits like SKS IPO in 2010 and diversification after the 2011 microfinance crisis helped drive growth in the impact investing space in India.
1. Political, market, and investor horizons remain out of sync as debt crisis tackling will be long and volatility continues.
2. Clients will take both cautious and opportunistic approaches to risk, blending flight and fight strategies.
3. Asset managers must develop capabilities to benefit clients from volatility through dynamic strategies, manager selection, and communication.
Applying IT to Sweeten Divestitures: The Seller PerspectiveCognizant
A lion’s share of companies plan to divest in the next two years, according to industry gurus, but a significant number of divestment projects are delayed or deferred due to misalignment of the business strategy and the IT strategy. Here’s how sellers can leverage IT as an enabler to achieve the business objectives that drive the divestiture agenda.
This investor presentation discusses DMC's financial highlights and global business operations. It provides cautionary statements about forward-looking projections and explains how non-GAAP financial measures are used. DMC has three business segments and a diversified customer base. It is the dominant provider of explosion-welded clad metal plates and has a global network of production and sales facilities.
There is a steady stream of businesses preparing their initial public offerings as the financial markets continue to change. Investors and financial professionals are very interested in these upcoming IPO 2023.
Private equity involves investing in companies that are not publicly traded, with the goal of improving financial performance and selling at a profit. There are various private equity strategies based on a company's stage of development, including venture capital for early stage companies, growth capital for fast-growing firms, buyouts of mature companies, and distressed debt investments in struggling firms. While high risk, private equity aims to generate above-average returns. Most exits are trade sales to other companies in the same industry, rather than initial public offerings. Private equity requires active involvement to create value through specialization, flexibility, and strong performance incentives.
Venture capital refers to equity investments made to launch or expand a business, while private equity provides capital to enterprises not publicly traded. Companies often need external financing like venture capital during periods of growth when cash flow is negative. The venture capital investment process is highly selective, with only about 3-4% of funding requests ultimately receiving investment after progressing through initial screening, meetings, and thorough due diligence evaluations.
ITT Corporation held an earnings call on February 29, 2012 to discuss Q4 2011 earnings and provide 2012 guidance. Key highlights from 2011 included 9% organic revenue growth, 13% organic order growth, record backlog, and a 23% increase in adjusted pro forma EPS. The company completed its transformation to a diversified global industrial company and is positioned for long-term growth with a strong balance sheet and $690 million in cash. Significant strategic progress was made in 2011 through focused emerging market expansion, aftermarket capture, new product technology investments, and operational excellence.
This document discusses accelerating product venture development in India. It outlines the need to shift focus from services to innovative products that can generate more foreign exchange. An open ecosystem is proposed, with technologists, investors, incubators and a supportive supply chain and tax system. Key elements include identifying promising ventures, providing resources and funding, establishing performance metrics, and influencing industry and tax policies to promote globally competitive product startups in India. This could transform small ventures into large profitable companies and boost the economy.
This document discusses various modes of entering international business, including exporting, licensing, franchising, mergers and acquisitions, foreign direct investment, joint ventures, and contract manufacturing. It provides details on each mode, such as definitions, advantages, and disadvantages. Major issues in going global are also outlined, including target product/market, goals of target markets, mode of entry, time of entry, and marketing mix plan. Political and regulatory issues that could impact business are also addressed.
This ppt will be helpful for BBA AND MBA students for their exam and interviews. Also helpful for those who are teaching this international business for MBA students . This is explaining the meaning and scope of international business and approaches to international business in the current period . This is also explaining the performance of Global business and controlling of international business . Different forms of international business and performance evaluation system
Global business
This document discusses various modes of entering international business, including exporting, licensing, franchising, mergers and acquisitions, foreign direct investment, joint ventures, and contract manufacturing. It provides details on each mode, such as definitions, advantages, and disadvantages. Major issues in going global are also outlined, including target product/market, goals, entry mode, timing, and marketing plans. Political issues that could impact business environments are also addressed.
How to Identify the Best Crypto to Buy Now in 2024.pdfKezex (KZX)
To identify the best crypto to buy in 2024, analyze market trends, assess the project's fundamentals, review the development team and community, monitor adoption rates, and evaluate risk tolerance. Stay updated with news, regulatory changes, and expert opinions to make informed decisions.
Madhya Pradesh, the "Heart of India," boasts a rich tapestry of culture and heritage, from ancient dynasties to modern developments. Explore its land records, historical landmarks, and vibrant traditions. From agricultural expanses to urban growth, Madhya Pradesh offers a unique blend of the ancient and modern.
Dr. Alyce Su Cover Story - China's Investment Leadermsthrill
In World Expo 2010 Shanghai – the most visited Expo in the World History
https://www.britannica.com/event/Expo-Shanghai-2010
China’s official organizer of the Expo, CCPIT (China Council for the Promotion of International Trade https://en.ccpit.org/) has chosen Dr. Alyce Su as the Cover Person with Cover Story, in the Expo’s official magazine distributed throughout the Expo, showcasing China’s New Generation of Leaders to the World.
Discover the Future of Dogecoin with Our Comprehensive Guidance36 Crypto
Learn in-depth about Dogecoin's trajectory and stay informed with 36crypto's essential and up-to-date information about the crypto space.
Our presentation delves into Dogecoin's potential future, exploring whether it's destined to skyrocket to the moon or face a downward spiral. In addition, it highlights invaluable insights. Don't miss out on this opportunity to enhance your crypto understanding!
https://36crypto.com/the-future-of-dogecoin-how-high-can-this-cryptocurrency-reach/
Explore the world of investments with an in-depth comparison of the stock market and real estate. Understand their fundamentals, risks, returns, and diversification strategies to make informed financial decisions that align with your goals.
An accounting information system (AIS) refers to tools and systems designed for the collection and display of accounting information so accountants and executives can make informed decisions.
What Lessons Can New Investors Learn from Newman Leech’s Success?Newman Leech
Newman Leech's success in the real estate industry is based on key lessons and principles, offering practical advice for new investors and serving as a blueprint for building a successful career.
University of North Carolina at Charlotte degree offer diploma Transcripttscdzuip
办理美国UNCC毕业证书制作北卡大学夏洛特分校假文凭定制Q微168899991做UNCC留信网教留服认证海牙认证改UNCC成绩单GPA做UNCC假学位证假文凭高仿毕业证GRE代考如何申请北卡罗莱纳大学夏洛特分校University of North Carolina at Charlotte degree offer diploma Transcript
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
2. Note on Exits Case # 5-0022
2002.1 Furthermore, many companies that did conduct IPOs during the bubble did
not achieve success – almost 70% of companies that went public between 1997 and
2000 could not maintain a market capitalization above $200 million.2
More recently, statistics and market conditions indicate potential for a greater
number and value of exits. Specifically within the private equity industry, given the
increase in number of companies wanting to exit and the rising number of
disenchanted limited partners wanting to see returns on their investments, there is
PY
an increased sense of urgency for portfolio companies to seek exits.
The exit market is beginning to show signs of life as 2003 annualized (Q3) activity
in IPOs and M&A transactions well exceeds 2002 levels. See Table 1 below:
O
Table 1 – Equity Underwritings and M&A Activity in Select Years
Equity
Peak Years
1993 1999
C Recession Periods
1991 2002 2003
Annualized
2003 v 2002
% change
Underwritings
Technology 228 531 55 60 176 193%
T
Health Care 146 69 133 68 140 106%
Consumer 138 65 76 23 40 74%
Total 512 665 264 151 356 136%
O
M&A
Technology 75 684 42 218 312 43%
Health Care 77 239 49 135 136 1%
Consumer 45 65 27 35 64 83%
N
Total 197 988 118 388 512 32%
Source: SDC /Thomson Financial and America’s Growth Capital, “Emerging Growth Capital Markets Update,
Third Quarter 2003”
O
D
1
SDC/Thomson Financial and America’s Growth Capital, “Emerging Growth Capital Markets
Update, Third Quarter 2003”
2
Liang, Jim and Florence, Tony, Private Equity Exit Alternatives, Morgan Stanley, November 2003
Center for Private Equity and Entrepreneurship 2
3. Note on Exits Case # 5-0022
Early Exit Thinking and Strategic Considerations
As part of the Center’s study of exit strategies, we interviewed approximately 25
general partners with venture and buyout firms, entrepreneurs, investment bankers,
lawyers, and accountants. A recurring theme among nearly all of the GPs was that
they only invest in a portfolio company if they have a clear sense at the beginning
of what the exit will be. Several GPs indicated that they need to see at least three
clear buyers at the outset to believe that an M&A exit approach is viable. It is
PY
important early on to explore the type of buyers that would be interested in the
business. If a GP believes that an IPO is the exit vehicle of choice, he needs to
evaluate the likelihood (early on) of the company being able to survive as a
standalone entity.
When deciding whether to exit or remain independent, a company’s management
O
and board of directors should consider several strategic factors3:
• How does an exit strategy fit with the company’s original business plan
C
objectives? A company’s ability to stand as an individual entity should not
be compromised by its pursuit of an exit.
• Is the company approaching an exit in a position of strength or one of
weakness? Has the marketplace dictated the need for a significantly larger
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scale that can be gained through an IPO or M&A or has the market
deteriorated such that being acquired is a means of survival?
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• What are the financial motives behind the pursuit of an exit strategy? A
successful exit strategy balances the need for additional growth capital with
the need to provide returns on capital to early investors who, after several
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years, often seek liquidity.
• What is the risk/reward trade-off of conducting an exit strategy vs.
remaining a stand-alone entity? It is important to examine the pros and
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cons of exiting. Does the potential for expansion and access to additional
capital outweigh potential dilution of ownership and the loss of job security?
• Is the company able to manage itself throughout the process? Execution of
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an exit strategy involves a significant amount of time and money, especially
the IPO process. Does the company have sufficient funds to complete an
exit strategy? Do the management team and board of directors have the
ability and qualifications to lead the company through this process?
3
Liang, Jim and Florence, Tony, Private Equity Exit Alternatives, Morgan Stanley, November 2003
Center for Private Equity and Entrepreneurship 3
4. Note on Exits Case # 5-0022
• What is the state of public markets? Public markets are volatile, and a
successful exit strategy largely depends on market timing. Many IPOs have
been pulled at the last minute at a high cost due to unfavorable market
conditions.
• What is the state of the company’s systems and controls? Before conducting
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an exit strategy, a company will be subjected to a stringent due diligence
process to ensure that all of the proper systems and controls are in place. Is
the company ready for the intense scrutiny of its management and
operations that accompanies the exit process?
• What decision is in the best interest of shareholders? Evaluate the timing of
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the exit – would it benefit shareholders to continue to strengthen the
company as a standalone entity and fetch a higher valuation at a later time,
or is now the optimal time to exit?
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In addition to these strategic considerations, general partners that we interviewed
also noted the following factors that impact their investment decisions and
eventually the success of their exit strategies:
•
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Does the business solve a particular problem, and if so, is there a large
market demanding that the problem be solved?
• How accessible is the target market?
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• What kind of capital do you have/need to open access to these markets?
• What is the company’s track record in meeting or achieving goals and
performance measures?
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Comparing IPOs and M&A
The following table details the pros and cons of conducting an IPO:
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[see next page]
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Center for Private Equity and Entrepreneurship 4
5. Note on Exits Case # 5-0022
Table 2 – Pros and Cons of an IPO
Pros of Conducting an IPO Cons of Conducting and IPO
Opportunity for Growth: An IPO Significant Time and Money:
exposes a company to a significant Preparation of documents, the due
number of investors, giving it access to adiligence process, and lengthy meetings
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larger pool of capital to use for growth take up a significant amount of
purposes. management’s time. Furthermore,
lawyers, accountants, underwriters and
other counsel charge high fees to assist
with the IPO process.
Increased Visibility: Due to the Increased Scrutiny: When a company
increased media and analyst coverage of goes public, it must file numerous
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public companies, an IPO results in documents with the SEC and disclose
increased visibility for both the company information on its management and
itself and startups in general. C board of directors. With this increased
visibility comes intense scrutiny of
financial information and management
behavior.
Profitability: If an IPO is successful in Ongoing Disclosure: Public companies
the long-run, founders and early are required to disclose all events
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investors can generate even greater material to their business through press
returns. releases and 8K filings with the SEC.
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Annual reports, 10K’s, 10Q’s, and other
financial documents must also be
prepared and/or filed for public access.
Opportunity for Liquidity: An IPO Control Reduced: Founders and/or early
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creates an active market where investors investors lose exclusive control of the
can liquidate their shares for cash company after conducting an IPO.
(following certain regulations). While Shareholder approval is required for
early investors are usually subject to a certain activities such as issuing new
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lock-up period, they can often make a stock, M&A activity, or instituting an
significant profit. employee stock purchase plan.
Attract Solid Personnel: IPO’s offer the Reliance on Market Conditions: Market
ability to entice quality personnel with conditions have a significant impact on
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various stock incentive plans. the success or failure of an IPO.
Center for Private Equity and Entrepreneurship 5
6. Note on Exits Case # 5-0022
The following table details the pros and cons of conducting a merger or acquisition:
Table 3 – Pros and Cons of an M&A Decision
Pros of M&A Cons of M&A
Accessibility: A merger or acquisition Loss of Control: Getting acquired or
usually gives the target company access merging with another company often
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to additional resources that it did not results in a loss of control. In a merger,
have as a standalone entity, thus giving the combined company might blend
it more opportunity for growth. For management teams together or dismiss
example, the acquiring/merging current management, depending on the
company might have more access to terms of the deal.
capital, larger distribution channels, or a
wider customer base.
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Liquidity: If a company is acquired or Closures or Job Losses: After a merger
merges with another company, initial or acquisition, the surviving entity
investors can usually liquidate their
C attempts to achieve synergies resulting
investment in a quick and timely fashion from the combination. These synergies
as compared to an IPO (but may fetch a are often attained by cutting back or
lower valuation.) downsizing in areas now deemed to be
unnecessary, duplicated, or extravagant,
which often results in facility closures
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and job losses.
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The IPO Process
An Initial Public Offering (“IPO”) occurs when a private company offers its shares
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to the general public after registering its issue with the Securities and Exchange
Commission (“SEC”). The main purpose of an IPO is to raise additional capital
from outside investors to fund the growth of the company. The offer and sale of
securities are governed by the Securities Acts of 1933 and 1934 and enforced by the
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SEC on a federal level. On a state level, Blue Sky laws govern the IPO process.
The purpose of these laws is to ensure adequate disclosure to investors and to
prevent fraud. Under the Securities Act of 1933, companies intending to conduct an
IPO must file a detailed registration statement with the SEC which includes in depth
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financial, management, and operational information.
Center for Private Equity and Entrepreneurship 6
7. Note on Exits Case # 5-0022
Preparation for an IPO
There are a number of requirements a company must fulfill as well as steps it can
take to better position itself for a potential IPO. Depending on the exchange where
the securities will trade, the company will have to meet a minimum market
valuation. The ability to raise a sufficient amount of capital in its offering and the
achievement of a minimum growth rate are also keys to a successful IPO. 4
The cost of taking a company public has increased substantially, largely as a result
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of the Sarbanes Oxley Act of 2002. Therefore, M&A has become the more popular
exit strategy in recent years. However, if an IPO is conducted, popular opinion is
that the minimum size for a company to go public has risen from $20-$30 M to
$75-$100 M.
If a company is to conduct an IPO as its exit strategy, it needs to begin operating
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like a public company well beforehand. Some GPs note that it should be fully
functional as a public company at least 2 quarters before the IPO. Even in an M&A
deal, an acquirer will not want a company with sloppy controls, inaccurate financial
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statements, or other questionable practices. It is important to introduce accounting,
financial, and legal internal controls early on in the lifecycle to create the perception
that the company is ready for public scrutiny. Some actions a company can take
prior to conducting an IPO include 1) cleaning up its financial records and ensuring
they are free of material misstatements; 2) creating an investor relations department
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to prepare to deal with investors and analysts; and 3) establishing controls to ensure
the timely and accurate preparation of the upcoming disclosures required of a public
company.
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A sound and qualified board of directors is also a necessity in completing a
successful IPO, and its selection should be made well before the IPO process
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begins. Depending on the exchange, a public company must adhere to strict
corporate governance standards. There are mandatory rules as to the number of
directors that must be independent, and this requirement can prove difficult for
many companies. Venture capitalists who serve on the boards of their portfolio
companies will often be forced to resign as they do not meet the current
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independence standards. Furthermore, Sarbanes-Oxley has created even more rules
for public companies, making it expensive and difficult to find qualified directors.
For example, under this new act, five of a company’s directors must be financially
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literate and at least two must have had a CPA license at one point.5 These
additional rules and standards emphasize the need for companies with prospects of
4
Gabor Garai and Susan Pravda, How to Take Your Company Public the Right Way at the Right
Time, Epstein Becker & Green RC, May 1996
5
American Institute of Certified Public Accountants (AICPA) Website
Center for Private Equity and Entrepreneurship 7
8. Note on Exits Case # 5-0022
going public to find qualified board members early on, as it can be difficult to fulfill
these requirements at the last minute.
Finally, many general partners have also noted that it is sometimes necessary to
replace the management team of a portfolio company before it exits. Actually, it is
common to replace management throughout the life of the business. In the venture
capital sector, general partners may replace the entire management team two or
three times as the business enters different phases. Different skill sets and teams are
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often needed to manage an early stage company versus a rapidly growing operation
versus a public company. It is important to anticipate when these management
changes are necessary rather than waiting until it is too late and a crisis develops.
Although buyouts are almost certain to make some personnel changes, these will
likely be confined to a handful of key people.
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More on Sarbanes-Oxley
Sarbanes-Oxley has introduced meaningful costs to public companies, taking the
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form of internal compliance measures, external audits, and consulting expenses.
The managing director of one accounting firm indicated that internal compliance
costs are the largest costs related to being a public company, but also the hardest to
quantify, and attributes them directly to Sarbanes-Oxley legislation.
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The cost of the legislation is meaningful and often means that a company might
conduct a trade sale in today’s environment (versus an IPO pre Sarbanes Oxley). At
a recent Tuck conference, one VC claimed that compliance costs shaved 4-5
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cents/share from portfolio companies. A buyout firm viewed the costs for
compliance to be on the order of $1-2MM a year in ongoing efforts, depending on
the size of the company, and noted that the cost of D&O insurance has also risen
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dramatically.
The average shift in the minimum effective size for companies to go
public is at least largely attributable to increased regulatory costs. Furthermore,
since acquirers who are SEC registrants need to swiftly integrate acquisitions into
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their control systems, even portfolio companies exiting via trade sale will have to
undertake compliance activities. The result is that VCs cannot avoid SO expenses
by shunning the IPO route to liquidity.
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Center for Private Equity and Entrepreneurship 8
9. Note on Exits Case # 5-0022
Selection of an Underwriter
One of the first steps in conducting an IPO is the selection of an underwriting firm.
An underwriting firm assists throughout the whole IPO process, from the
preparation of the registration statement to setting a price for the company’s
securities. With its access to capital markets, the underwriting firm helps distribute
the company’s shares to institutional and retail clients. Where a private equity firm
is involved, the general partners and Finance Committee often select the
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underwriter, as many firms try to limit the involvement of the management team in
the whole process. Both the IPO and M&A processes can be very distracting to
management and take up too much of their time if they are too involved. When
evaluating an underwriter, it is important to consider the size and types of IPOs the
firm has handled in the past as well as its client base. During our interviews with
private equity firms, general partners noted that pricing, sell-side coverage, and
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company positioning are important factors to consider when choosing an
investment bank. Other key questions include:
•
•
issuance?
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Is the underwriting firm too large or too small to handle the size of the
Does the underwriting firm have experience in the relevant industry sector?
• Does the underwriter have a wide client base and the ability to distribute
shares to a range of institutional and individual customers?
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When a company is planning to conduct an IPO, it will typically hire more than one
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underwriter to gain access to a larger pool of public investors. The group of
underwriters working on the deal is called a syndicate. One firm is usually
designated as the lead underwriter with heightened responsibilities, including
setting the final price for a firm’s securities before the IPO, entering into the
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underwriting agreement, and controlling advertising. In recent years, the formation
of an underwriting syndicate has been common given the large size of many IPOs.
As a syndicate, more than one firm will put up the capital to purchase the securities,
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and the risk of not selling the securities to the public is spread among the
investment banks. Once a company has selected an underwriter or underwriting
syndicate, a non-binding letter of intent is drafted. The letter of intent includes a
description of the security, the tentative number of shares to be issued, a tentative
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price range, underwriters’ compensation, the type of underwriting (firm
commitment or best efforts), and which expenses the company will be responsible
for if the offering doesn’t succeed.6 The agreement does not become final until the
6
Equity Analytics, Ltd. Website, IPO Resource Center
Center for Private Equity and Entrepreneurship 9
10. Note on Exits Case # 5-0022
SEC approves the issue and all parties sign a contract, binding them to the letter of
intent.
The underwriting syndicate is paid out of the spread, the difference between the
price the issuing company receives from the lead underwriter and the offering price
to the public. The spread is expressed as a percentage of the gross proceeds of the
offering and is typically about 7%. The fee paid to the syndicate to compensate
them for their expenses and risk is called the syndicate allowance. The lead
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underwriter also receives a percentage of every security sold, known as the
manager’s fee.
Types of Underwritings
The two main types of underwritings are “firm commitment” and “best efforts.”
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“Firm commitment” underwritings are the most popular in the United States, where
the underwriting firm purchases the new securities from the issuer at a stated price
and assumes the risk of not being able to sell them to the public at a higher price.
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As mentioned above, the formation of a syndicate mitigates the risk of one firm
being left with all the unsold shares. Furthermore, underwriters often wait until the
last minute, hours before the registration statement is declared effective, to price the
shares, limiting the amount of time between their purchase of the shares and the sale
to investors. There are certain situations where an underwriter can get out of his
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“firm commitment” agreement, stated in a “market out” clause of the underwriting
agreement. These situations are usually extreme, as a lenient “market out” clause
would defeat the purpose of a firm commitment underwriting.
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In a “best efforts” underwriting, the issuing company retains the risk of holding any
remaining unsold shares. The underwriter uses its best efforts to sell the shares, but
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the underwriting firm never actually owns the securities, and it only makes a
commission on the shares it sells. Any unsold shares belong to the issuing
company. While best efforts underwritings are less common, they are options for
companies conducting riskier IPOs.
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The Pre-Filing Period
The preparation of the registration statement, usually the Form S-1, begins after the
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letter of intent has been signed. The time period before the filing of the registration
statement is called the pre-filing period. The registration statement serves to fulfill
the requirements of the Securities Act of 1933, providing full disclosure on the
company intending to go public. The registration statement includes the prospectus,
which is given to potential investors, along with additional information on the
company. It provides investors with detailed information on the company, its
Center for Private Equity and Entrepreneurship 10
11. Note on Exits Case # 5-0022
management, its business, and its relevant risk factors to allow investors to make an
informed decision. It also includes the company’s financial statements. The
registration statement is prepared by a group of attorneys, accountants, and
underwriters, in collaboration with the issuer. For a more detailed description of the
items included in the registration statement, see Exhibits 3 and 4. There is
significant legal liability for any material misrepresentations in the document;
therefore a lengthy due diligence investigation of the issuer is conducted. Due-
diligence procedures entail reviews of the company and its management, including,
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but not limited to, visiting facility sites, reviewing significant agreements and
contracts, financial statements, tax returns, board of directors and shareholders'
meeting minutes, and performing various analyses of the company and the industry
in which it operates by the attorneys and underwriters.7
During the pre-filing period, it is imperative that the issuing company makes no
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offers to sell its securities. Formal or veiled attempts at publicizing an offer to sell
securities before the registration statement is filed, also known as “gun-jumping”, is
strictly prohibited as it could generate demand for the issuance with potentially
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misleading information. If the SEC finds a company guilty of inappropriate
disclosure, it can impose fines or postpone the IPO.
The Waiting Period (or Cooling Off Period)
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The waiting period is the time between the filing of the registration statement with
the SEC and its effective date. During this period, oral offers to sell the issuer’s
securities can be made, but no actual sales can take place. There are specific
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regulations as to the type of written material that can be distributed during the
waiting period (no brochures, television advertisements, articles, etc. about the
issuer).
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Company management and underwriters will also visit institutional investors who
have interest in the IPO in a road show. The road show gives an indication of the
demand for the new issue, but any indications of interest are non-binding. A red
herring, or preliminary prospectus, can be given to potential investors. A red
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herring does not include any price-related information on the securities since the
offering price is not set until the effective date, but it does include most of the other
pertinent information that investors would use to make a decision. It must be stated
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in the document that it is not intended to be an offer to buy or sell securities.
A tombstone ad is also permitted during the waiting period to provide limited
information on the IPO (although it is typically published after the effective date of
7
PricewaterhouseCoopers Website, The Going Public Process
Center for Private Equity and Entrepreneurship 11
12. Note on Exits Case # 5-0022
the registration statement). The ad can announce the offering and its dollar amount,
identify certain members of the underwriting syndicate, and note where and from
whom a copy of the company’s prospectus can be obtained.8
After the registration statement is sent to the SEC, there is a review process
whereby the SEC and the company intending to go public exchange edits.
Typically, the SEC takes an average of 30 days to release its initial revisions in a
comment letter. Each comment must be addressed; furthermore, amendments must
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be made to the registration statement for any interim developments between its
filing date and the effective date. The offering is usually priced immediately before
the underwriting agreement is signed and the day before the registration statement
is effective. The underwriter prices the shares, with the approval of company
management, based on the company’s financial performance and growth prospects,
the stock price of other companies in the sector, market conditions, and the amount
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of interest already generated in the issuance from the road show.
The Post-Effective Period C
After the revisions have been made to the registration statement and approved by
both the SEC and the company, the statement becomes effective with the SEC.
During the post-effective period, offers to buy and sell may be made freely.
Investors, management, and insiders owning pre-IPO shares in the issuing company
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are subject to a lock-up period, typically 180 days after the IPO is declared
effective, where they are not allowed to sell their shares. If insiders were allowed to
sell their shares immediately, it could cause a downward spike in the company’s
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stock price, undermining the initial public offering price. Furthermore, pre-IPO
shareholders are often limited in the amount of shares they can sell, as large sales
might convey the perception to investors that early stakeholders lack confidence in
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the company’s future.
After the IPO
After conducting an IPO, a company must abide by a new set of rules set forth by
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the SEC to regulate public companies. These new requirements often entail a
significant amount of extra time and money as compared to the company’s pre-IPO
life. The most time-consuming changes to a newly public company are the
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increased reporting and disclosure requirements. At a minimum, public companies
must file quarterly (10Q’s) and annual (10K’s) earnings reports with the SEC, as
well as annual reports to shareholders and proxy solicitation materials.
Furthermore, public companies have an obligation to report matters through press
8
Ibid.
Center for Private Equity and Entrepreneurship 12
13. Note on Exits Case # 5-0022
releases that could have a material impact on their business, such as earnings
revisions, merger/acquisition activity, or management changes.
Along with the increased disclosure requirements comes increased scrutiny of
company management and directors. Individuals involved with a public company
are prohibited from taking certain actions. For example, insider trading, or trading
securities based on non-public information, is strictly prohibited. Along those lines,
Regulation Fair Disclosure (“Reg FD”) went into effect in October 2000. This rule
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bars companies from practicing “selective disclosure” of pertinent nonpublic
information. It is especially applicable to the disclosure of information to analysts
and institutional investors. If information is disclosed unintentionally, a subsequent
press release must be issued 1) within 24 hours of the disclosure or 2) before the
next market opening, whichever is later. There are also numerous other disclosure
and corporate governance rules depending on the exchange on which the company
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trades.
Mergers and Acquisitions
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The cost of conducting an IPO has significantly risen in recent years due to the
passage of the Sarbanes-Oxley Act and an increase in regulations required by the
SEC and the various exchanges. Combining this cost increase with the need for
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consolidation and improved performance by many companies, M&A is now the
dominant exit strategy. Good companies will exit roughly 80% M&A and 20% IPO
– many other companies will not find an exit.9
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Some experts argue that a company should not exist with the sole intention to
merge or be acquired but should first experience success as a stand-alone entity.
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The need to merge or be acquired should then come when the company is on a fast
track and needs an infusion of capital to grow, access to facilities or distribution
channels, or additional expertise that only another company could provide.
Furthermore, M&A deals often yield the best terms for companies with strong
growth prospects rather than a solid past performance. In other words, terms of a
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combination or acquisition are likely to be much more favorable for companies with
a solid market share and the potential to improve margins.
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9
America’s Growth Capital, “Emerging Growth Capital Markets Update, Third Quarter 2003”
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14. Note on Exits Case # 5-0022
M&A Structures
The following table shows a sample of the most common M&A structures.
Table 4 – Common M&A Mechanisms
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Type of Structure Description
Forward Merger Target merges into acquirer’s company and target
shareholders get acquirer’s stock
Reverse Merger Acquirer merges into target’s company and acquiring
shareholders get target company’s stock (In some cases a
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private company uses a reverse merger with a public one as
a way to go public at a lesser cost and with less stock
dilution than through an IPO.)
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Subsidiary Merger An acquirer incorporates an acquisition subsidiary and
merges it with the target company.
Triangular Merger Target company’s assets are conveyed to the acquirer’s
company in exchange for the acquirer’s stock.
Stock Acquisition The acquirer purchases all or substantially all of the
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common stock of the target company for a specified price.
The buyer replaces the selling stockholders as the owner of
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the target company.
Asset Purchase The buyer buys specific assets and perhaps some liabilities
that are explicitly detailed. The tax and accounting basis of
the assets, including any goodwill being purchased, is the
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purchase price.
Source: Nicholas J Jr Mastracchio and Victoria M Zunitch “Differences Between Mergers and
Acquisitions,” Journal of Accountancy, November 2002
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M&A Preparation
There are a number of issues to take into account when considering merging with
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another company or getting acquired.
• Who is the potential acquirer? A company in the M&A market should take
the time to identify its own strengths and weaknesses and then compare
them to those of the potential combining/acquiring company. It is important
Center for Private Equity and Entrepreneurship 14
15. Note on Exits Case # 5-0022
to understand what the acquirer has to offer, how these attributes would
benefit the target company, and the motive behind the desire to merge or
acquire. Common motives behind the pursuit of a merger or acquisition
include the following:
Strategic: the target company has a technology or service that the
acquirer cannot or will not build or develop on its own.
Defensive: the target company offers too much competition or is
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stealing too much market share from the acquirer.
Financial: the purchasing entity needs the target company to
strengthen its financial statements.
Growth: a financial conglomerate has the capital, a well-developed
distribution network, and certain expertise to further develop an
existing company.
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• What will be the impact on the target company’s business? When
considering M&A activity, it is necessary to assess whether or not the
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combination will enhance the target company’s core competencies. Will the
acquirer provide the target with the best opportunity to expand and gain
additional market share? Are the founders and initial shareholders ready to
relinquish their leadership and control of the company if necessary?
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• What will be the impact on the management and employees? Retention of
key management and personnel can be critical. Furthermore, employees
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often become nervous upon hearing rumors of M&A activity within their
own companies, especially since it can lead to downsizing and layoffs. In
fact, studies found ‘employee problems’ as being responsible for between
one-third to a half of all merger failures.10 If downsizing must occur, it is
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important to conduct it in a sensitive manner as it will affect the morale and
loyalty of existing employees.
• How will a merger/acquisition impact investor returns? M&A activity is
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the exit strategy of choice in today’s economic environment, partially
because it usually allows investors to exit faster than an IPO. However,
competition among acquirers has declined in recent years, allowing buyers
to shop around and negotiate cheaper deals, resulting in lower returns for
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early investors.
10
Jennifer Jin, The Ups and Downsizing of Mergers, Business Weekly, 2002
Center for Private Equity and Entrepreneurship 15
16. Note on Exits Case # 5-0022
Current Trends
Given today’s volatile economy and the difficult IPO market, companies are finding
it necessary to explore their exit options. Some companies elect to employ a “dual
track” strategy whereby one team looks for potential acquirers while the other team
prepares for an IPO. Under this strategy, the company tries to better position itself
to take advantage of either exit vehicle should the opportunity arise.
Despite the weakness in exits over the past few years, there are signs of an up-tick
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in transactions. The following table details the current conditions that indicate a
potential increase in IPO and M&A activity:
Table 5 – Recent IPO and M&A Trends
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IPO M&A
Increase in investor confidence and C Overcrowding in many sectors and
appetite for risk due to recent improved maturing product lines are encouraging
returns in financial markets. consolidation.
Private companies have gone a long Strong stock prices and improved
time without new capital and liquidity. operating performance have made both
buyers and sellers more enthusiastic
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about M&A.
Private companies have had 3 years to Companies are poised to acquire after
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mature and grow stronger. Companies focusing on structure and cost
that have emerged from the downturn at containment, but active buyers are more
or near profitability are very strong IPO sensitive to value, accretion, and
candidates. potential shareholder reaction.
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Emerging growth businesses are much Targets now have real traction and
healthier today and showing some revenue growth.
growth with the economy.
Hedge funds have hundreds of billions Large buyers have taken advantage of
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of dollars to invest and are leading the lower asset values.
way. They have also encouraged major
investors to act more aggressively in this
environment.
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Wall Street is ready to get back to Going private transactions are beginning
business. to gain momentum.
Source: America’s Growth Capital, “Emerging Growth Capital Markets Update, Third Quarter
2003”
Center for Private Equity and Entrepreneurship 16
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Dutch Auctions
Dutch auctions have recently been brought to the forefront given the highly
publicized Google IPO. W.R. Hambrecht introduced the OpenIPO, a Dutch
auction, in 1999. Since then a handful of companies have used the process to go
public including Peets Coffee & Tea and Overstock.com.
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In a Dutch auction, a company reveals the maximum amount of shares being sold
and sometimes a potential price for those shares. Investors then state the number of
shares they want and at what price. Once a minimum clearing price is determined,
investors who bid at least that price are awarded shares. If there are more bids than
shares available, allotment is on a pro-rata basis--awarding a percent of actual
shares available based on the percent bid for--or a maximum basis, which fills the
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maximum amount of smaller bids by setting an allocation for the largest bids.11
It remains to be determined whether the Dutch auction method will become a
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popular alternative to the traditional IPO.
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N
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11
IPO Dutch Auctions vs. Traditional Allocation, Ari Weinberg, Forbes.com
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18. Note on Exits Case # 5-0022
Exhibit 1 - Total Value in Millions of Dollars
Transaction Values Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03
Technology
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M&A Transactions $8693 $11,914 $9150 $8538 $6920 $13,458 $15,109
IPOs (a) $125 $324 $0 $0 $0 $187 $1016
Health Care
M&A Transactions (b) $4,218 $11,028 $4,860 $7,463 $6,710 $9,210 $15,650
IPOs $2,522 $1,126 $30 $522 $0 $0 $238
Consumer
M&A Transactions $3,507 $2,765 $1,500 $2,381 $1,088 $1,515 $2,011
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IPOs $691 $413 $155 $146 $0 $0 $0
Note: Includes US Transaction valued at or above $20 million.
(a) Excludes $870M IPO for Seagate Technology, Q4 02
(b) Excludes Pfizer Inc acquiring Pharmacia Corp on 7/15/02 for $59.5 B.
C
Source: America’s Growth Capital, Emerging Growth Capital Markets Update, “Third Quarter
2003”
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Exhibit 2 - Total M&A and IPO Volume
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Transactions Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03
Technology
M&A Transactions 69 57 41 51 37 51 78
N
IPOs (a) 2 6 0 0 0 2 6
Health Care
M&A Transactions (b) 42 38 20 35 26 24 34
IPOs 3 9 1 3 0 0 3
Consumer
M&A Transactions 13 7 9 6 12 13 16
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IPOs 2 3 2 2 0 0 0
Note: Includes US Transaction valued at or above $20 million.
(a) Excludes $870M IPO for Seagate Technology, Q4 02
(b) Excludes Pfizer Inc acquiring Pharmacia Corp on 7/15/02 for $59.5 B.
D
Source: America’s Growth Capital, “Emerging Growth Capital Markets Update, Third Quarter
2003”
Center for Private Equity and Entrepreneurship 18
19. Note on Exits Case # 5-0022
Exhibit 3 - Items Included in the Prospectus (Part I)
• A summary of the information presented in the prospectus.
• A discussion of risk factors
• A description of the company, including what business it is in, its corporate name and
operating history.
• Information regarding management.
• Information regarding any promoters.
•
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Summary information on corporate earnings.
• A description of the company’s capital structure.
• A description of the stock being registered and other securities being registered.
• The plan of distribution.
• An explanation of how the proceeds are to be used.
• A list of sales being made for other than cash.
• A list of the principal holders of securities along with the number of shares owned by each
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principal holder.
• Disclosures of any interests management has in certain transactions.
• A statement setting for the compensation of officers and directors.
• Disclosure of any options to purchase securities, including the number of options
•
•
•
Any legal opinions of counsel.
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outstanding and their exercise price.
Disclosure of any pending legal proceedings.
Management’s discussion and analysis of the company’s financial condition and results of
operations.
• Financial Statements
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Source: Heim, Robert G, Going Public in Good Times and Bad, 2002
O
N
O
D
Center for Private Equity and Entrepreneurship 19
20. Note on Exits Case # 5-0022
Exhibit 4 - Items Included in Part II of the Registration Statement
• A list of expenses associated with the issuance and distribution of the securities.
• Disclosure of any relationship with experts named in the registration statement.
• Listing of sales to special parties.
• Disclosures of any recent sales of unregistered securities.
• Information about the registrant’s subsidiaries.
• A discussion of the effect of any charter provision or bylaw under which an officer or
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director is indemnified against liability which he may incur in his capacity as such.
• Any exhibits, including any material contract not made in the ordinary course of business.
• Disclosures of certain undertakings that the issuer must perform after the conclusion of the
offering.
• Signatures of the company’s officers and directors to confirm that they have read and
approved the registration statement.
• Consent of the certified public accountant to the use of its auditing reports in the
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registration statement.
Source: Heim, Robert G, Going Public in Good Times and Bad, 2002
C
T
O
N
O
D
Center for Private Equity and Entrepreneurship 20
21. Note on Exits Case # 5-0022
Exhibit 5 - Estimated Cost of Going Public (NASDAQ Exchange)
Offering Value $25 million $50 million
Total shares outstanding 5,880,000 shares 5,880,000 shares
Item Estimated Fee Estimated Fee
SEC Fees 9,914 (2) 19,828 (2)
NASD Fees 3,375 (3) 6,250 (3)
Printing and Engraving 100,000 (1) 100,000 (1)
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Accounting Fees & Expenses 160,000 (1) 160,000 (1)
Legal Fees & Expenses 200,000 (1) 200,000 (1)
Blue-Sky Fees (6) 25,000 (1) 25,000 (1)
Miscellaneous 34,200 (1) 34,200 (1)
Nasdaq Entry Fees 63,725 (4) 63,725 (4)
Nasdaq Annual Fees 11,960 (5) 11,960 (5)
Transfer Agent and Registrar 5,000 (1) 5,000 (1)
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Fees
Total $2,363,174 $4,125,963
(1) Mean value; issuers should be aware that all aspects of the relationship, including underwriting, can be negotiated.
(2) 1/29 of 1 percent of the offering value, inclusive of over-allotment shares.
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(3) $500 + .01 percent of the offering value, inclusive of over-allotment shares, not to exceed $30,500.
(4) Includes a $5,000 one-time company initial fee and a fee based on 5,880,000 total shares outstanding.
(5) Fee shown is a full year’s fee. On Nasdaq, first year of annual fee will be prorated based on month listed.
Source: NASDAQ Website, Going Public Manual
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O
N
O
D
Center for Private Equity and Entrepreneurship 21
22. Note on Exits Case # 5-0022
Exhibit 6 - Initial Public Offering Schedule
This schedule applies to a fully syndicated, fixed price offering for both U.S. and non-U.S.
companies. The time frames are merely illustrative.
1-2 years before 1-6 months before 1-3 months 1-4 weeks
before before
Company Act like a public Select the team; Select printer & Executives
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company execute letter of transfer agent present the road
intent show
Company Law Perform Prepare & file Clear SEC
Firm housekeeping of preliminary comments
company records; registration
Draft S-1; file with statement
the SEC; file
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Nasdaq listing
application.
Company Clean up and restate Prepare draft Prepare updated
Accounting balance sheet;
C comfort letter financial
Firm prepare and review statements, if
audited financial necessary.
statements
Investment Assess market; Continue due Orchestrate road
Banker(s) make presentation to diligence. show; solicit
board. expressions of
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interest
Investment Begin due diligence Prepare NASDR Clear NASDR
Banker’s filing; undertake comments.
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Counsel blue-sky filings
Financial Print preliminary Produce SEC &
Printer registration NASDR filing
statement/prospectus packages.
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SEC Confer regarding Review
problems, if preliminary
necessary registration
statement; issue
comfort letter
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NASDR Request pre-filing Review Resolve
advice, if necessary preliminary comments.
registration
statement; issue
comment letter
D
Center for Private Equity and Entrepreneurship 22
23. Note on Exits Case # 5-0022
1-10 days 1 day before Day of IPO 3 days after 0-30 days
before after
Company Issue press Price the Trading of Provide Provide
release. offering; company’s certificates; additional
execute securities collect certificates;
underwriting begins. proceeds collect
agreement. additional
proceeds.
Company Request Deliver Update
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Law Firm acceleration; documents/ closing
file final opinions documents.
registration
statement.
Company Deliver draft Deliver final Deliver bring- Second bring-
Accounting comfort letters comfort letter down comfort down comfort
Firm letter letter
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Investment Form Execute Provide net Exercise
Banker(s) syndicate; underwriting proceeds over-
place agreement allotment
tombstone ad. option; make
C determination
about issuing
research
report.
Investment Continue due Assist in Assist in
Banker’s diligence closing second
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Counsel closing
Financial Print final
Printer registration
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statement/
Prospectus
SEC Declare
offering
N
effective
NASDR Declare no
objections.
Source: NASDAQ Website, Going Public Manual
O
D
Center for Private Equity and Entrepreneurship 23
24. Note on Exits Case # 5-0022
Sources
America’s Growth Capital, Emerging Growth Capital Markets Update – Third
Quarter 2003 “Revival of the IPO”
Bierce & Kenerson, P.C. Website, Angel Investors and Venture Capital Investing:
Financial Investor’s Rights in a Startup Venture
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Fellers, Charles, Making an Exit: VCs Examine their Options, Venture Capital
Journal, May 2001
Garai, Gabor and Pravda, Susan, How to Take Your Company Public the Right Way
at the Right Time, May 1996
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Heim, Robert G, Going Public in Good Times and Bad, 2002
Kerig, Bill, The Initial Public Offering, The Successful Exit, December 2002
C
Lajoux, Alexandra and Elson, Charles, The Art of M&A Due Diligence, 2000
Levin, Jack, Structuring Venture Capital, Private Equity, and Entrepreneurial
Transactions, March 2001
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Liang, Jim and Florence, Tony, Private Equity Exit Alternatives, Morgan Stanley,
November 2003
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Machiz, Robert, M&A Viewpoint, Pricing Acquisitions, Moneysoft Website
N
Mastracchio, Nicholas and Zunitch, Victoria, Differences Between Mergers and
Acquisitions, Journal of Accountancy, November 2002
NASDAQ Website, Going Public Manual
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Nasr, Heidi, IPO Candidates Opting Out for Merger, The Daily Deal, April 2001
Neal, John and Pinson, Linda, Developing an Exit Strategy, Start the Race with the
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Finish Line in Sight, Anatomy of a Business Plan, 1999 & 2002
Newbold, Gail, Getting Acquired, The Successful Exit, December 2002
Orol, Ron, The New Costs of Going Public, The Daily Deal, 2003
Center for Private Equity and Entrepreneurship 24
25. Note on Exits Case # 5-0022
PricewaterhouseCoopers Website, The Going Public Process
Primack, Dan, IPOs: An Exit Strategy of the Past for VCs, Private Equity Week,
September 2002
Rind, Kenneth and Mushkin, Martin, “Exiting” by Disposition – Negotiating an
Acquisition, October 1996
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Snow, David, Private Equity Exit Alternatives, Private Equity Central, May 2003
Sormani, Angela, Exits: The IPO Alternative, European Venture Capital Journal,
November 2002
Stein, Tom and Debellis, Matthew, VC-Backed Companies: Desperately Seeking
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Partners, Private Equity Week, August 2002
Volpe, Lou, On Their Own, The Daily Deal, May 2003
C
Weinberg, Ari, IPO Dutch Auctions vs. Traditional Allocation, Forbes.com
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O
N
O
D
Center for Private Equity and Entrepreneurship 25