The IPO Process

1
The IPO Process
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Why Do Companies Go Public?

• Fund Growth Plans
• Currency for MA
• Recap (retire debt)
• Liquidity
• Employee compensation
• Enhanced Image
• Landlords
• Creditors/Suppliers
• Recruiting/Retention

3
Underwriters CriteriaCompany Characteristics

• Growth Prospects
• Predictability of Results
• Management Team
• Historical Track Record SizeProfitability
• First Mover Advantage
• Sponsorship

4
Underwriters CriteriaSector/Market
Characteristics

• Overall Size
• Growth Rate
• Competitive Dynamics
• Comparable Companies Performance
• Institutional Appetite

5
Underwriters CriteriaIPO Market Conditions

• Backlog
• Cash Inflows to Mutual Funds
• Deals Pricing Below/Within/Above Range
• Withdrawn vs. Completed Offerings
• Market Performance of Recent IPOs
• Stable Economic Climate

6
Underwriters CriteriaFirm Focus

• Research Expertise
• Distribution Capabilities
• Corporate Finance Focus
• Chemistry
• Geography (retail offices)

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Selecting Underwriters

• Types of Investment Banks
• Lead vs. Co-managers
• Distribution Capabilities Institutional,
  Retail, International
• After Market Support
• Research
• Trading
• Ongoing Corporate Finance Support
• Culture of Firm

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Lead Manager

• Orchestrates Drafting, Due Diligence, Syndicate,
  Sales, After Market
• Negotiates Fee Split
• Allocates Shares
• Leads Pricing Call
• 15 Over Allotment Option

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Fee Structure

• Gross Spread - 7
• Management Fee
• Underwriting Fee
• Selling Consession
• Jump Ball
• Fixed Fee

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Pitch Book

• Executive Summary
• Capital Markets Update
• Company Positioning
• Valuation
• Structure and Timing of IPO Process
• Track Record of Investment Bank
• Team MembersCommitment
• References

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Organizational Meeting

• Participants
• Company
• Company Counsel
• Underwriters (two or more)
• Underwriters Counsel
• Companys Accountants

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Organizational Meeting

• Transaction Issues
• Due Diligence Interviews
• Document Request List
• Facility and/or Store Tours
• Initial Drafting
• Outline Story
• Position the Company
• Schedule of Key Dates

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Transactional Issues

• Size of Offering
• Not More Than a Third
• Company vs Secondary Shares
• Over Allotment Option
• Split
• Lock-ups Who and How Long
• Use of Proceeds
• Debt Retirement
• Working Capital
• Growth
• Legal
• Corporate Status
• Quiet Period and Ordinary Course Announcements
• Anti-Takeover Provisions
• Misc
• Comfort Letter
• Selection of Printer
• Transfer Agent
• Bank Note Company

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Prospectus Selling Document

• Five to Eight Drafting Sessions
• File Registration Statement with SEC
• SEC Review (30 days)
• SEC Comments
• File Amendment 1 with SEC
• Print and Distribute Red Herring

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Prospectus

• Cover
• Summary
• The Compnay
• Risk Factors
• Use of Proceeds
• Dividend Policy
• Capitalization
• Dilution
• Selected Financial Data
• MDA
• The Business
• Management and Security Holders
• Description of Securities

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Registration Statement

• Prospectus
• Exhibits
• Underwriting Agreement
• Articles of Incorporation
• Opinion of Company Counsel
• Stock Option Plan(s) 401(k) Plan
• Employment Agreements
• Registration Rights Agreements
• Material Contracts
• Computation of Earnings per Share
• Consents

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Marketing Process

• Marketing Documents
• Prospectus
• Roadshow Presentation
• Insitutional Sales Teach In
• Retail Broker Fact Sheet
• Distribution Strategy
• Mix of Institutional and Retail
• Directed Shares
• Syndicate Structure
• Roadshow
• Share Allocation

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Marketing Strategy

• Institutions with history of buying, holding and
  increasing positions
• Institutions which own comparable companies
• Build momentum before NY and Boston
• Create perception of scarcity

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The Road Show

• Two to Three Weeks
• Organized and paid for by underwriter
• Provides info about the company in one-on-one
  meetings with prospective investors
• Build the book

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Going Effective

• Acceleration Request
• Pricing the Offering
• Final Prospectus Printed

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After Market Support

• Timely, Accurate and Insightful Research
• Coverage begins after a 25 day quiet period
• Follow up Road Shows
• Investor Conferences
• Active Market Making

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Life As a Public Company

• Reporting
• Qs, Ks, Press Releases, Conference Calls, Reg FD,
  Forward-looking Statements,
• Trading Blackouts
• Proxys
• BOD Liability
• Investor Relations
• Secondary Offerings
• Additional Cash
• Enhance the Float
• Orderly Exit for Large Holders