The IPO Process

Why Do Companies Go Public?

Fund Growth Plans
Currency for M&A
Recap (retire debt)
Liquidity
Employee compensation
Enhanced Image
Landlords
Creditors/Suppliers
Recruiting/Retention
 Underwriters Criteria
Company Characteristics
Growth Prospects
Predictability of Results
Management Team
Historical Track Record Size;Profitability
First Mover Advantage
Sponsorship
 Underwriters Criteria
Sector/Market Characteristics
Overall Size
Growth Rate
Competitive Dynamics
Comparable Companies Performance
Institutional Appetite
 Underwriters Criteria
IPO 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Withdrawn vs. Completed Offerings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
 Underwriters Criteria
Firm Focus
Research Expertise
Distribution Capabilities
Corporate Finance Focus
Chemistry
Geography (retail offices)
 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
 Lead Manager
Orchestrates Drafting, Due Diligence,
Syndicate, Sales, After Market
Negotiates Fee Split
Allocates Shares
Leads Pricing Call
15% Over Allotment Option
 Fee Structure
Gross Spread - 7%
Management Fee
Underwriting Fee
Selling Consession
Jump Ball
Fixed Fee
 Pitch Book
Executive Summary
Capital Markets Update
Company Positioning
Valuation
Structure and Timing of IPO Process
Track Record of Investment Bank
Team MembersCommitment
References
 Organizational Meeting
Participants
Company
Company Counsel
Underwriters (two or more)
Underwriters Counsel
Companys Accountants
 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
 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
Reservation of Stock Symbol
Authorized Shares
S-8 for the Employees Option Plan
Directed Stock
 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
 Prospectus
Cover
Summary
The Compnay
Risk Factors
Use of Proceeds
Dividend Policy
Capitalization
Dilution
Selected Financial Data
MD&A
The Business
Management and Security Holders
Description of Securities
 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
 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
 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
 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
 Going Effective
Acceleration Request
Pricing the Offering
Final Prospectus Printed
 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
 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