london stock exchange ipo forum - meetupfiles.meetup.com/2243521/lse ipo forum slides 17-09-13 part...

September 2013 Strictly private and confidential

London Stock Exchange IPO Forum

September 2013

1

Contents

> Introduction to Panmure Gordon

> Role on IPO

> Key considerations on IPO

> Key considerations after IPO

> Summary

Dominic Morley

Managing Director

Investment Banking

Tel: +44 (0)20 7886 2954

[email protected]

September 2013

2

An Introduction to Panmure Gordon

Leading corporate stockbroker

� Founded in 1876

� Coverage from FTSE 100 to AIM stocks

� Highly ranked in 2013 Extel Survey

Highly regarded, comprehensive research coverage

� Sector specialist teams covering 12 sectors, producing

respected analysis on over 276 stocks

� Multi- media approach (sector notes, flash notes, daily emails)

Powerful international distribution

� One of the largest UK small and mid-cap sales desks (12

salesmen)

� Over 400 institutional clients globally

� Raised over £2bn since the start of 2010

Leading corporate advisory and broking expertise

� Corporate department serving 122 corporate clients

Overview

26

3424

18

116

£0-20m

£20-50m

£50-100m

£100-200m

£200-750m

£750m+

122 Corporate Clients

Recent Transactions

Introduction

February 2013

Financial Adviser and Broker

Recommended Offer by Emulex Corporation

£80.5 million

Endace Limited

July 2013

Nominated Adviser and Broker

Initial Public Offering

£43.5 million

Globalworth Real Estates Investment Limited

£485.0 million


Co-Lead Manager

June 2013

February 2013


Secondary Offering

£40.0 million

e-Therapeutics plc

December 2012



£64.5 million

Fusionex International plc

October 2012

Joint Financial Adviser and Broker


£37.0 million

WANdisco plc

January 2013

Joint Financial Adviser and Broker

Placing to fund Acquisition

£58.3 million

Dignity plc

May 2013


Secondary Offering

£50.0 million

Vertu Motors plcPartnership Assurance Group

September 2013

3


> Role on IPO



> Summary

September 2013

4

Sponsor / Nominated Adviser

� Formal endorsement of the company’s suitability for listing

� Financial adviser

– gain in-depth understanding of the client and its sector

– objective advice to maximise shareholders' interests

– advice on

– deal and corporate structuring

– regulatory issues

– review due diligence

– take lead in preparation of offering documentation

� Project management

– assist with the selection of other professional advisers

– manage other advisers’ work

– design timetable and monitor progress

� Role often / usually combined with…

The role

Role on IPO

Analysis of key issues and advice

Combining NOMAD/Sponsor and Broker

Management of the flotation process

September 2013

5

Broker

� Advise on valuation, marketing and timetable

� Position the investment opportunity

– detailed understanding of the business

– develop key selling messages

– address potential investor concerns

– advise on the marketing materials

� Production of paving research

– provides an in-depth analysis of the business

– widely distributed amongst the client base

– stimulates interest

– generates feedback

� Design and arrange institutional marketing programme

– arrange institutional presentations and follow-up meetings

– gather and interpret feedback

– advise on pricing and placing list

The role

Role on IPO

Lead on valuation and marketing

Generate demand and pricing

competition

Formulate and present the investment

opportunity

September 2013

6


> Role on IPO



> Summary

September 2013

7

Regulatory Frameworks

� Minimum 25% shares in public hands

� 3 year trading record

� Prior shareholder approval required for substantial acquisitions

and disposals

� Pre-vetting of prospectus by UK Listing Authority and

requirement for a further prospectus for certain issues

� Sponsor needed for certain transactions / matters

Official List

� No minimum shares to be in public hands (but need liquidity)

� No trading record requirements (shareholder lock-ins required

in some circumstances)

� No prior shareholder approval for transactions (unless reverse

takeover)

� Admission document not pre-vetted

� Nominated Adviser required at all times

AIM

Key considerations on IPO

September 2013

8

� Other offer structures possible but care needed if intention is to avoid a prospectus requirement

� Jurisdictional issues

– UK, Europe, US, others

� How much can be raised?

� New funding for business vs. exit for existing investors

– Working capital statement

– Company requirements come first – growth capital

– Importance of liquidity

– Maturity of business

– Lock-ins


The most common/ straightforward structure is an institutional placing

Offering Structures – On IPO

September 2013

9


There are three main types of offering structures post IPO

Offering Structures – Post IPON

on

pre

-em

pti

ve

Placing

� Most straightforward means of raising equity

� Lower costs involved than with pre-emptive offers

� No prospectus required if less than 10% of issued share capital (Main Market) or if on AIM

� IPC protections usually built into AGM authorities

� Typically tighter discount than with pre-emptive offers

� Dilutive to non-participating shareholders (related to discount achieved) but quasi pre-emptive to institutions

Pre

-em

pti

ve

Placing and Open Offer

� Structure generally used for larger equity issues by Main Market listed companies

� Shares placed with institutions and existing shareholders have the opportunity to “claw back” their pro-rata

share entitlement

� Often made in conjunction with an element “firm placed” to attract new investors

� Existing shareholders must either take part in the issue or be diluted – normally no ability to sell unwanted

entitlements in the market (unlike in a rights issue (see below))

� Historically lower discounts than for rights issues

� UKLA approved prospectus required as an “offer to the public” is being made (3 – 4 week process)

Rights Issue

� All shareholders receive a tradeable right to take up their pro-rata entitlement at the offer price

� Theoretical discount – market price adjusts to ex-rights price (the blended price)

� Compensation for non-participating shareholders whose rights can be sold on their behalf

� UKLA approved prospectus required as an offer to the public is being made (3 – 4 week process)

September 2013

10


Some Investors in the UK Market

September 2013

11

� Main Market (Premium Listing)

– FTSE 100

– FTSE 250

– FTSE SmallCap

– FTSE Fledgling

– Ineligible

� AIM

– FTSE AIM 50

– FTSE AIM 100

– FTSE AIM All-Share

Industry Classification Benchmark (ICB)

� Detailed, comprehensive and homogenous international structure for sector classification

� Maintained by FTSE

� Broker view may vary

Key UK Indices

Index and Sector Classification

September 2013

12

Funds raised by sector on AIM

Funds Raised on the London Stock Exchange

Funds raised by sector on the Main Market

Source: London Stock Exchange as at 31 August 2013 Source: London Stock Exchange as at 31 August 2013


£0bn

£1bn

£2bn

£3bn

£4bn

2012 2013 YTD

Financials Oil & Gas Industrials Consumer ServicesTelecommunications Basic Industries Health Care Consumer Goods

£0bn

£2bn

£4bn

£6bn

£8bn

£10bn

£12bn

£14bn

2012 2013 YTD

Financials Oil & Gas Industrials Consumer ServicesTelecommunications Basic Industries Health Care Consumer Goods

September 2013

13


The IPO Process

Valuation

Adviser selectionAdviser selection Pre- marketingPre- marketing RoadshowRoadshow PricingPricingResearch noteResearch note

Initial FeedbackInitial FeedbackBusiness planBusiness plan Due DiligenceDue Diligence Indicative ordersIndicative orders Order bookOrder book

IPO

Pri

cin

gLe

vel o

f info

rma

tion

September 2013

14

� UK sector and stock market comparables

� Price / earning multiples

� Revenue multiples

� Discounted cash flow model (DCF)

� Discount impact of market sentiment, sector and macro /

international events on valuations

Valuation methodologies

Pricing the IPO

Ideal

� 5 – 15% premium in the aftermarket

� Long-term support and adequate liquidity

Too high

� Shares trade at discount

� Difficulty of raising further finance

� Credibility issues

Too low

� Excessive dilution

Post IPO considerations


September 2013

15

� Investors need to understand how existing shareholders will behave in the aftermarket

� Current holders should aim to realise the immediate liquidity needs at IPO and not in the months that follow the commencement of

dealings

� Market practice varies around the length of lock-ins

� When markets are fragile and volumes low, the length of lock-ins needs to increase

� When markets are strong lock-ins can be reduced

� Directors present particular sensitivity

� Major shareholders need to be locked-in but sale into demand will be encouraged where possible


Lock ups are important to ensure the success of the issue and after-market performance

Lock-ups and Managing the Free Float

September 2013

16


> Role on IPO



> Summary

September 2013

17

Research

� There is a post IPO blackout period for research from your house broker – usually 30 days post admission

� Increased coverage can help to introduce new investors and provide a consensus view for investors

� Paid for research is worth considering

News flow

� Media

� RNS

� Trade press

Investor engagement

� Importance of on-going IR programme

� Led by your house broker

Regulatory requirements

� Vary between Main Market and AIM

� On-going dialogue critical

Key considerations after IPO

Investor communication and regulatory requirements

Post IPO

September 2013

18


> Role on IPO



> Summary

September 2013

19

� Choice of advisers is crucial

� Challenge valuation methodology and track records

� Which market is right for you?

– AIM vs. Main Market

� Which type of investor will your business attract?

� Corporate governance very important on any market

� Flexibility on key marketing points and themes

� Correct pricing is critically important for long-term support

Summary

Key points

Summary

September 2013

20September 2013

Selected Capital Markets Transactions

Appendix

September 2013

21

Capital Markets Transactions

£40.0 million

Secondary Offering


February 2013

E-Therapeutics Plc

September 2013

22

Capital Markets Transactions (cont’d)

Capital Markets Track Record

September 2013

23

Capital Markets Transactions (cont’d)

Capital Markets Track Record

£21.0 million

Placing and Secondary Offering


February 2011

E-Therapeutics plc

£89.0 million

Rights Issue

Joint Bookrunner, Underwriterand Broker

December 2010

RPC Group plc

£62.2 million

Secondary Offering


November 2010

Faroe Petroleum plc

£2.5 million

Secondary Offering


November 2010

Electric Word plc

£23.5 million

Secondary Offering

Global Co0ordinator

June 2010

Goldenport Holdings inc

September 2013

24

Important Notice

For the use of the recipient only. Not to be copied or distributed

to any other person. This presentation has been prepared from

publicly available information, internally developed data and

other sources believed to be reliable. No representation, warranty

or undertaking (express or implied) is given and no responsibility

is accepted by Panmure Gordon, or by any of its officers,

employees or agents for the completeness or accuracy of any

information contained in, or of any omissions from, this

presentation or any supplementary information made available to

any interested party or its advisers, and any liability in respect of

such information or omissions is hereby expressly disclaimed.

This presentation does not constitute an offer, invitation or

recommendation to buy, sell, subscribe for or issue any securities

or a solicitation of any such offer or invitation and shall not form

the basis of any contract with Panmure Gordon. Opinions

expressed herein are subject to change without notice. In

providing this presentation, Panmure Gordon undertakes no

obligation to provide the recipient with access to any further

information or to correct any inaccuracies or omissions which may

become apparent. Panmure Gordon, its associated companies, its

connected companies, and its and their officers, employees and

agents may own or have positions in securities of companies or

issuers mentioned therein and may also seek to provide financial

advisory, banking and other services for any such companies or

issuers.

September 2013 Strictly private and confidential

London Liverpool Leeds Switzerland Singapore

Panmure Gordon & Co

One New Change

London EC4M 9AF

Panmure Gordon & Co

20 Chapel Street

Liverpool L3 9AG

Panmure Gordon & Co

1 City Square

Leeds LS1 2ES

Quaker Securities

Place Bel-Air 8

1260 Nyon

Panmure Gordon & Co

136A Telok Ayer Street

Singapore 068601

+44 (0)20 7886 2500 +44 (0)151 243 0960 +44 (0)113 366 3181 +41 (223) 658 111 +65 (682) 48 204

London Stock Exchange IPO ForumPreparing for an IPO: legal aspects

17 September 2013

IPO considerations

Key preliminary questions:

• What is the process and timetable?

• Which market is most appropriate?

• Does the group need to be restructured?

• What due diligence will be undertaken?

• Does the company have the right board and corporate governance structures in place?

• What is my liability/responsibility?

www.blplaw.com Page 27 © Berwin Leighton Paisner

Timetable and process

• Advisory

• appoint advisers and hold kick-off meeting

• determine listing venue

• structure paper (listing group and share capital)

• Pre-marketing (pilot fishing)

• Due diligence, documentation and structuring

• Investor education

• intention to float

• connected analysts’ research

• black-out period

• Marketing• price range/pathfinder

• investor presentation

• Pricing, allocation and Admission


Which market?


Eligibility criteria Main market premium listing (equity shares)

Main market standard listing (equity shares)

Main market High Growth Segment (equity shares)

AIM

Incorporation Anywhere EEA State Anywhere

Minimum free float 25% 25% 10% and a value of £30m

NOMAD assessment of suitability

Minimum market capitalisation

£700,000 N/A but see above NOMAD assessment of suitability

Audited historical financial information

Three years (with exceptions)

Three years or such shorter period

Revenue earning 75% of business supported by revenue earning record for three year historic period

N/A Growth of at least 20% on a CAGR basis for three year historic period

N/A but see lock-ins

Controls majority of its assets/business

For the three year historic period

N/A From admission N/A

Transferability of shares Freely transferable

Working capital statement

Clean 12 month statement

Clean/qualified 12 month statement Clean 12 month statement

Adviser required Sponsor N/A Key adviser NOMAD

Settlement Eligible for electronic settlement

Lock-ins “No requirement but market practice” If the applicant has not been independent and revenue earning for at least two years, lock ins for one year from admission

Pre-IPO restructuring

Which entity will be the listing vehicle?

• Need to re-register as a plc?

• New holding company

• Tax considerations - UK or offshore?

• Shareholder protections - pre-emption rights; takeover protections

• Constitutional documents - suitable for listed company?

• Transfer in/out of assets

• Formalise arrangements with third parties


Pre-IPO restructuring (cont’d)

Capital structure

• One class of shares

• Unwind special rights

• Third party consents/shareholder approvals

• Shareholder authorities for offer shares

• Major shareholders/concert parties

• Relationship agreement

• UK City Code disclosure (if relevant)


Due diligence process

• Scope:

• financial, legal and commercial/technical

• Purpose:

• identify any issues or risks which may impact on IPO

• identify any matters which require disclosure

• assist with verification process

• Process:

• DD questionnaire

• data room

• management Q&A sessions

• directors’ questionnaireswww.blplaw.com Page 32 © Berwin Leighton Paisner

Board composition and corporate governance


Liability and responsibility


Responsible

Party

Prospectus/ admission document

and related presentation

Underwriting/placing/introduction

agreement

Stock exchange confirmations

Relationship agreement with key

shareholder

Company Director Selling shareholder

Liable for the contents at law jointly and severally with the Company

Liable for the contents at law jointly and severally with the

directors

Warranties in favour of the Bank limited in time and amount; NED’s give ‘offer

related’ warranties only

Yes N/A N/A

No

Warranties and indemnities in favour of the Bank

Limited warranties (as to title and capacity) in favour of the Bank; warranties will be uncapped

Yes N/A Yes (30% +)

Golden rules for a successful IPO

• Appoint the right management team and board

• Allocate responsibilities and workstreams

• Prepare early

• Adopt processes and systems appropriate for a listed company

• Don’t talk about the IPO in advance and be careful what you say

• Remain flexible on sell-down strategy

• Appoint the right advisers for IPO and beyond



Julian Stanier - PartnerT: +44 (0)20 3400 3046E: [email protected]

• Julian is a corporate finance lawyer specialising in equity capital markets work, both UK and international.

• He has advised a wide variety of international and UK issuers and investment banks on IPOs and secondary offerings in London (on the Main Market and AIM) and internationally.

• He regularly advises listed companies and banks/brokers on the Listing Rules, the AIM Rules, the City Code on Takeovers and Mergers, the DTRs, the Prospectus Rules and English company law.

Business. Empowered.

CONFIDENTIAL

The Company Secretarial Aspects of Life as a Listed Company

40


41

There are two key themes to the Company Secretary’s role…

Roles and Responsibilities

Good Procedures

What you do internally and when…

Listing Principle 2

A listed company must take reasonable steps to establish

and maintain adequate procedures, systems and controls

to enable it to comply with its obligations.

Communication

What you say externally and when…

Listing Principle 4

A listed company must communicate information to

holders … of its shares in such a way as to avoid the

creation …or a false market in such shares.


42


Interims AGMPrelimsYear-end

Interim Report Annual Report and AGM NoticeIMS IMS

Board

Audit

Remuneration

Nominations

Insider Information, Share Dealing and Announcements

The Board Calendar underpins the compliance timetable…


43


Interims AGMPrelimsYear-end

Interim Report Annual Report and AGM NoticeIMS IMS

Board

Audit

Remuneration

Nominations

Insider Information, Share Dealing and Announcements

The Board Process

The Reporting Process

Information Processes

The Company Secretary is therefore involved in three processes…


44

Stock Exchange Rules

• Listing Rules

• Disclosure &

Transparency Rules

• Prospectus Rules

• UK Corporate

Governance Code

Financial Rules

IFRS Accounting �

Turnbull Guidance �

Going Concern �

Risks & Uncertainties �

Legislation: Companies Act 2006; FSMA; Executive Remuneration Report

Regulations; etc

The Board Process

Market Expectations: Analysts expectations; best practice reporting

expectations; Corporate governance expectations


45

The Reporting Process

AGM Notice

& Circular

Prelims

Roadshow

Presentation

A Busy Few Weeks…

Financial

Statements

Compliance

ReportsBusiness

Review

The Annual Report

Website

Updates

Preliminary

Announcement

Annual General

Meeting

Post-Results

Roadshow

Publication of

Annual Report


46

Information Processes

Share Dealing CodeDealing in Company Shares

Disclosure PolicyDealing with Company Information


47

• London-based company secretarial and

corporate governance practice

• Specialist in London Stock Exchange

Main Market and AIM

• Emerging market emphasis, particularly

in resources sectors

About Prism Cosec

Some of our IPO Clients

A-Z Electronic Materials - Luxembourg

Bank of Georgia - Georgia

Ferrexpo plc - Ukraine

Fresnillo plc - Mexico

Glencore International plc - Global

Hochschild Mining plc - Peru

Kazakhmys PLC - Kazakhstan

Ophir Energy plc – Tanzania/ Africa

Vedanta Resources plc - India

Companies that we have helped to

establish board, governance and reporting

processes immediately after IPO


48

Chris Stamp

Director

Email: [email protected]

Website: www.prismcosec.com

Cell: +44 (0) 7785 265 335

Tel: +44 (0) 203 008 6446

Prism Cosec

10 Margaret Street

London

United Kingdom

W1W 8RL

Contact details

Dedicated

Relationship

Manager and

Team

Get to know

you and your

Company

Think about

Shareholder

and Employee

ownership

strategies

Make sure you

are IPO ready

Why we are an

essential part

of the launch

What our role

involves:

• Corporate Advice

� Preparation & Planning

• Relationship Manager

� Supporting your

Company Secretary

• Register set up

� Mechanics are in place

• Liaison with advisers on

timetable/documentation

� Successful implementation

• Receiving Agent

� Providing banking facilities

� Keep you updated on offer

It’s all about keeping your

shareholders (and employees)

engaged and happy!

Day to day

communication

with

shareholders

Managing

corporate

calendar

activities

(AGM,

Dividends,

Employee

Schemes)

Investor

Analytics – who

really owns

your Company

Shareholder

strategies

Delivering

corporate tasks

(Rights issues,

Mergers &

Acquisitions)

• Contact Centre

� First port of call

• Written correspondence

� Paper and email

• Self-service

� Shareview website

� Selector portal

� ESP Portal

• Dedicated Relationship

Manager and Team

� Knowledgebase

• Analyse and track shareholders from listing date

(long/short investors, Hedge Funds)

• Identify your top institutional investors & beneficial owners

• Geographic make up of the shareholders/type of funds

• Who is buying and selling?

• Who holds the voting rights?

E-Plus:

• Understanding your register and your individual

requirements and goals

• Understanding your shareholder/employee

strategy and developing action plans

• Developing your communications with your

shareholders and employees

� Corporate Governance

� Cost reduction

� Online promotion

� Re-engagement

� Shareholder choice

� Peer group network

• Rights Issues

� Lloyds Banking Group

� Barclays

� First Group

� Thomas Cook

• Mergers and Acquisitions

� International Power (Scheme of Arrangement)

� LSE (Acquisition of LCH Clearnet)

� Britvic and AG Barr (aborted merger)

Market leader

with 50+ years

experience

UK’s Number 1

Share Registrar

2013*

Shares Award

2012 Winner

21 years average

contract tenure

1 in 3 people in

the UK use our

services

Global

capabilities

Competitive

and transparent

pricing

6 IPOs won

so far this year

*Capital Analytics Survey

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