Considerations for a US IPO listing

Considerations for a
US IPO listing
6 March 2014

Considerations for a US IPO listing
Disclaimer
► This material has been prepared for general informational
purposes only and is not intended to be relied upon as
accounting, tax, or other professional advice. Please
refer to your advisors for specific advice.
► The views expressed by the presenters are not necessarily
those of EY.
► This presentation is © 2014 EYGM Limited. All Rights Reserved.
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Today’s moderator
Jackie Kelley
Partner, Ernst & Young LLP
EY Americas IPO leader
#EYIPOJoin today’s Twitter discussion:

Today’s panel
Howard Morgan
First Round Capital
Partner
Todd Sloan
Tremor Video
CFO
Mary Klein
Ernst & Young LLP
Partner, In bound IPO FAAS Leader
Richard Rosenstein
SFX Entertainment, Inc.
CFO
The information contained herein is a summary in nature. Viewers should consult their own professional
advisors to address their individual circumstances and concerns.

Today’s agenda
► IPO Strategy and communication
► Establishing public company governance
► Core areas of focus for a successful IPO
#EYIPOJoin today’s Twitter discussion:

Polling question
For those of you planning an IPO, what is your timeline?
A. Planning an IPO in 2014
B. Planning an IPO in 2015
C. Thinking further out
D. Not sure but interested in learning more about the process
E. Does not apply (EY, faculty, other)

The US IPO market was the most active
since 2004
Source: Dealogic, Thomson Financial, EY research
$50 $38 $44 $50 $27 $27 $43 $40 $47 $62
238
208 204
214
34
65
162
124
133
226
0
10
20
30
40
50
60
70
0
50
100
150
200
250
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Proceeds(US$b)
NumberofIPOs
Proceeds (US$b) Number of IPOs
The US IPO market was supported by better economy, bullish
equity market, low volatility and strong PE/VC backed exits

Setting the capital raising strategy
Key considerations in going public
► How strong is my growth/equity story?
► Do we need capital to grow?
► Do investors want liquidity?
► Is my business predictable?
► Are IPO deal valuations strong?
► Is my business sufficiently mature?

IPO
Destination
Availability of
analyst expertise
Investor base
and attention
Valuation level of
comparable companies
Trend: listings
of comparable companies
Peer
companies
Language and culture
Prestige and critical mass
of the marketplace
Brand recognition
potential
Participation
in indices
Scope of capital
market regulations
Strategic fit:
• Consumers
• Growth markets
Speed of approval process
Liquidity on the
stock exchange
Total flotation
and ongoing
post-IPO costs
Initial and ongoing
stock exchange requirements
Legal and market risks
Currency:
• M&A target market
• Financing growth
America
Asia
Pacific
Home
market
EMEA
IPO on the international stage
Why, where and when to go public?

Polling question
When listing on the US exchanges, what are the most
important criteria for selection? (select all that apply)
A. Competitors are listed on the exchange
B. Better valuation
C. Ongoing stock exchange requirements
D. Interested in learning more about the different options

Benefits of listing in the US
► Brand recognition
► Diversity of companies
► Liquidity
► Cross-border listing opportunities
► High-tech trading platforms

Setting the IPO agenda
Communicating with key stakeholders
Who owns the IPO strategy?
Who are the key internal/external stakeholders?
Who is driving the communications?
Executive
leadership
Customers Vendors
Employees
Key
stakeholders
Regulators
Investors Analysts Creditors

IPO critical success factors
CEOs/CFOs of those outperforming companies noted critical success factors:
► IPO is a transformational process and not just a financing event
► Systematic implementation of new programs, policies and systems common to public companies
prior to the IPO
► Implementation of pre-IPO improvement initiatives at least one to two years prior to the IPO
► Ensuring competitive advantage as measured by both financial and non-financial metrics
EY’s Measures that Matter study was a survey of more than 100 companies and
400 institutional investors
Study shows that only a small percentage of IPOs go on to outperform
the market in the first three years following the offering.
Lessons learned
Results

Top IPO readiness considerations
► Preparing for the journey
► Keeping your options open
► Timing the market
► Building the right management and advisory teams
► Building your business and financial processes and
infrastructure
► Establishing corporate structure and governance
► Managing investor relations and communications
► Delivering an effective road show
► Attracting the right investors and analysts
► Delivering in your promises

Polling question
What is the status of your board? (select all that apply)
A. Ready to be public
B. Need to establish structure
C. Need to find new members
D. Not sure, need to learn more about what the board should
be comprised of

Since the financial crisis of 2007–2008, US exchanges
have been the preferred market for cross-border IPOs
Number of IPOs Capital raised (US$b)
* Foreign listings is where the domicile of the primary exchange (or the secondary exchange for dual listings) differs from the listed company domicile. For dual listings,
all funds are allocated to the primary/foreign stock exchange.
Source: Dealogic, EY research
2009–2013 top stock exchanges for cross-border listings*
143
88
30 30
0
50
100
150
200
NYSE and
Nasdaq
London
(Mainboard and
AIM)
Hong Kong
(HKEx)
Singapore (SGX)
$37
$25
$18
$8
$0
$10
$20
$30
$40
NYSE and
Nasdaq
London
(Mainboard and
AIM)
Hong Kong
(HKEx)
Singapore (SGX)
China,
55%
Israel, 6%
UK, 5%
Greece,
3%
Canada,
3%
25 other
countries,
28%

Board governance for IPO-bound companies
IPO companies have an opportunity to enhance board governance in four
key areas:
► Independent board leadership
► Director elections
► Board composition
► Ownership structure
EY will be releasing a study on Board governance of recent IPO companies
Study shows that IPO companies have less mature board
governance practices
Findings
Results

Polling question
Have you assessed your company’s IPO readiness? (select
all that apply)
A. Yes
B. No, we have not but are planning to do so
C. Not yet, still in the process of learning if an IPO is
the right strategy
D. Does not apply (EY, faculty, other)

Preparing for an IPO
Act like a public company before the IPO
Business case for
investment
Develop a compelling investment story, sound business, predictable
growth trajectory and clear use of IPO proceeds for growth
Financial results Demonstrate strong operating performance, balance sheet and positive
cash flow over several quarters, and several years of strong, steady growth
momentum and rising profits
Accounts and information
systems
Establish timely and reliable financial information, appropriate IT systems
and a robust financial planning and analysis, enabling availability of
concise management information
Internal controls and
reporting
Establish a robust internal control structure and financial reporting
processes
Management
and external advisory
team
Put a team in place with a proven track record and the experience to
undertake the IPO event and operate a public company
Corporate governance Establish a strong governance structure, including independent board and
clear, transparent shareholder/corporate structure
Investor relations Place an expert to drive an effective communications strategy, manage the
public spotlight and send effective messages to investors and analysts

One-minute recap

Resources
►EY’s guide to going public
►Make sure you have your
SOX house in order
►Right team, right story, right price
► Connect with us:
►ey.com/ipocenter
►EY_Growth

tsloan@tremorvideo.com
+ 1 212 773 1803
mary.klein@ey.com
+ 1 212 201 0311
howard@firstround.com
+ 1 646 561 6378
rich@sfxii.com
+ 1 949 437 0237
jacqueline.kelley@ey.com
@jackiekelleyEY
Contact us
Todd Sloan
Tremor Video
Mary Klein
Ernst & Young LLP
Howard Morgan
First Round Capital
Richard Rosenstein
SFX Entertainment, Inc.
Jackie Kelley
Ernst & Young LLP

Looking for even more information on taking
your company public?
EY IPO and Strategic Transactions Conference: guide
to going public in today's marketplace
Geared toward CEOs and CFOs of pre-IPO companies
May 28, 2014
11:30 a.m. – 5:00 p.m.
Metropolitan Pavilion
New York City
For more information, contact kelly.mcauley@ey.com

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Considerations for a US IPO listing

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