Taking your company public Some experiences 09-05-20141

Taking your company public

Some experiences

09-05-2014 1www.Ricardo-Zettl.com

Disclaimer

• This is not a workshop – Can't tell you in 10 minutes what others study for years in a university

• Just personal examples – Needs and reasons why to do it, success and failure

• None about Google or Facebook and company– Don´t believe in the big stories, yours will be different

• Not a strategy handbook – I´m an accountant, the navigator, not the enlightened

09-05-2014 www.Ricardo-Zettl.com 2

What is going public?

• Collecting money in huge dimensions – Especially for very big projects – Nowadays also smaller ones (new market, new economy)

• Collecting equity not loans – A shareholder has no right – to get his money back – or to get a certain interest

• There is a market for loans, too – But loans are only for the rich


Why to go public???

• Please refer to http://www.investopedia.com/ask/answers/04/061704.asp for further information put “going public” in Google– “Advantages

• Strengthens capital base [dramatically!!!]• makes acquisitions easier • diversifies ownership • and increases prestige.”

– “Disadvantages • Puts pressure on short-term growth • increases costs • imposes more restrictions on management and on trading • forces disclosure to the public • and makes former business owners lose control of decision making.”


http://www.investopedia.com/ask/answers/04/061704.asp

What do you need?• Change your legal form

– Ltd.s or LLPs don´t serve for a stock exchange – Need a corporation, whatever it means

• different in every State of the US • internationally it is called a SA

• An army of layers – Need of handling this change – You will find yourself instantaneously in dire straits – Means more layers – Only the name of the corporation already is a legal defiance

• An army of accountants – In-house accounting – According US-Gaap for public corporations or according IFRS – Appropriate software: NAVISION, SAP, ORACLE, HYPERION etc.– Public auditor: the “Big Four” – Prompt public reporting every 3 month


What do you need?• A consortium of banks

– That are willing to take your shares to a stock exchange – You can´t do it neither by your own

nor with just one bank (they represent the investors)

• Approbation of a stock exchange for IPO – You have to present personally your project (prospectus)

• Marketing – A “sexy story” – Investor relations – Road shows – Publicity – The share itself becomes a product to sell


Now the examples


The hero

• KNURR, The hero of the entrepreneurs club • Avant-guardist 30 years ago • Sold his family enterprise on the stock exchange • Collected a lot of money to make his company grow • Got more money than needed • Came in troubled waters because he paid dividends

from funds, not from earnings • Now it´s owned by a bigger group (acquisition)• It´s not listed anymore • http://www.technical-furniture.com/index.php/en/


Apprenticeship 1

• COSIMA, now CONTI-group – internship http://www.conti-online.de/unternehmen/geschichte/

• Not listed, but collecting huge amounts of equity • Learned:

– Road shows – Investor relations – Shareholders´ general meetings – Public accounting

• Not always funny, but over all a success story


Apprenticeship 2

• OSRAM - financial controller of international subsidiaries http://en.wikipedia.org/wiki/Osram

• Subsidiary of a listed corporation (Siemens)• Now is listed itself • Learned:

– Reporting for public corporations – Controlling of international subsidiaries – Audits, acquisitions, due diligence, consolidation, presentation to the

share holders – And so on


Apprenticeship 3• CFO of GLUCK, a subsidiary of

C.H.A. Chemie Holding, now InnoTec TSS • GLUCK was recently acquired by CHA • As subsidiary of a listed corporation GLUCK had to meet

– accounting standards of a public corporation – and public audits

• GLUCK itself was a group with nearly 20 subsidiaries • Some of these recently acquired and needed to be integrated • Conclusion:

– Grew to fast – Not every acquisition was lucrative – Some had to be shot down after taking over – Burning a lot of shareholders money – CHA came in troubled water and had to be completely reconstructed – CHA is not listed any more

• http://www.innotectss.de/unternehmen/kennzahlen.html09-05-2014 www.Ricardo-Zettl.com 11

Now we go public

• Finally I was a recognized expert in financial administration of a public listed international corporation with subsidiaries

• In the late 1990ies there was a boom of IPOs • Especially with click companies (new economy)• They needed urgently experts in financial

administration

• Here I am! 09-05-2014 www.Ricardo-Zettl.com 12

Example 1 • easypay – CFO • Electronic cash with bank cards in the point of sale

– Need financing the devices where you put the card in – Every new customer you have to buy a new device – Means: Fast growth needs a lot of money – If you don´t grow fast, competition will do– Brick company

• Project: platform for internet payment with international dimensions – Development of software – Development of new contracts – Much more hardware in the datacenter – Development of a new sales organization – Click company


Example 1

• Conclusion: Going public to collect the money needed

• What do you need? See above … • I started to work the list

– Auditors – Consortium of banks – Accounting– Change of legal form – And so on

• As shareholders became concern of what it means to go public some of them stopped the project.


Example 1

• End of the story:

• I lost my job • easypay could not grow enough • Stayed alive for a while but • The competition made the race: PayPal • easypay doesn't exist any more


Example 2

• Webmiles – interim consultant for IPO

• Going public was still booming, especially for click companies

• I went out of the easypay office an the same day into the Webmiles office

• We had to hurry because there was already the tell of a bubble in the new market.


Example 2

• Webmiles idea: Every time you buy something in Internet you get “miles” like the airlines already did for flights

• There was competition, but not much – Who will do the race? – Just one who does it internationally – For that it´s called Internet – And customers are already internationally

• A very “sexy story” for going public and • A pure click company,

the favorites of the new market 09-05-2014 www.Ricardo-Zettl.com 17

Example 2• What do you need? See above … • I started to work the list:

– The entire list, see details there

• We were very close to the IPO – Audits for all subsidiaries passed – approbation by the Frankfurt stock exchange received – Consortium of banks ready – Prospectus ready

• Than the bubble burst – stock prices went down to nearly zero

• IPO was canceled and Webmiles was sold to a customer – Webmiles still exists https://www.webmiles.de/


Going down

• I lost my job

• All my life I have prepared for taking companies public

• Now I was one of the bad guys how burned the money of the poor share holders

• From than on I worked in different acquisitions of international companies


Example of going down• Tiscaly – CFO of the German subsidiary

telecommunication • International trend:

privatize former state owned service companies – Energy supply – Telecommunications – Railways – Airports and so on

• Grow fast! – To reach the critical mass for being profitable – Buy every thing you can get – And that internationally


Example of going down• Tiscaly did

– Collected money at the stock exchange – Made a lot of acquisitions when ever possible – Bought licenses for billions of Euros (UMTS and others)

• But did not win the race – There was not enough money to run the business – UMTS was a flop – Acquisitions were bad handled (to fast)

and without functioning accounting – Share price went down to nearly zero

• How to exit from the disaster? – Sell the business


Example of going down• What do you need? (to sell the business) See above …

• I started to work the list: (as far as possible) – Reconstruction of the accounting– Clear tax accounts and intercompany accounts – Clear provider and customer relations – Forming subsidiaries to transfer the business some one wants to buy – Pass through audits – Take the new companies, not public, to the buyer

• Great part of the business was sold, the rest liquidated.

• Rest of Tiscali now belongs to Telefonica, it is not listed any more.


Conclusions• Don´t be afraid of going public, but do it right

(see What do you need?)

• First of all you have to know and manage your business well

• A well managed business is the best guaranty for a successful IPO

• Going public or being acquired are nearly the same (see What do you need?)


Thank you for your attention

Ricardo A.M. Zettl www.Ricardo-Zettl.com

Documents

Taking your company public Some experiences 09-05-20141