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The role of advisers in an IPO

The role of advisers in an IPO. AFG. April 2010. M&A, Privatizations. Advisers of choice to corporates individuals & governments, often on a repeat basis. Applying knowledge & insight to M&A and strategic advice. 2009, 2008 & 2007 Mid-market Adviser

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The role of advisers in an IPO

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  1. The role of advisers in an IPO AFG April 2010

  2. M&A, Privatizations Advisers of choice to corporates individuals & governments, often on a repeat basis. Applying knowledge & insight to M&A and strategic advice 2009, 2008 & 2007 Mid-market Adviser 2009 Balkans Financial Adviser2008 & 2007 UK Financial Adviser 2008 Italy Financial Adviser 2008 Visegrad Financial Adviser 2009 Best LBO Advisory Bank of the Year 2009 Restructuring House of the Year Euromoney Awards for Excellence2009 Best Global Sovereign Advisory Equity Debt Europe’s leading practice, advising on objectives, strategy, providers, products & terms Experienced teams close to the markets, advising on valuation, tactics, execution, implementation Restructuring Restructuring Adviser of the year German M&A Adviser of the YearDomestic M&A Deal of the Year- Volkswagen/Porsche Market leading adviser to all Participants in restructuring situations, drawing on M&A and Debt Advisory expertise The Rothschild Group Integrated corporate finance advice across: 001 – Announced deals by number (1 Jan to 31 Dec 2009) Source Thomson Reuters 4 Jan 2010 Most Innovative in Corporate Restructuring

  3. Introduction to Rothschild Market leader in equity advisory • Advised on 65 transactions since the start of 2009 • Raising €78 billion • Fully in the flow of live deals and investor feedback • We are global • 37 full-time Equity Advisory professionals in 7 different locations: • Recent and current deal experience on a global basis • Hands-on experience of some of the world’s largest IPOs • Active in IPO markets: • Rusal (Russia) • CFAO (France) • Amadeus (Spain) • 23 IPOs currently being worked on 1 2 3

  4. Romania Poland Lithuania 2006: € 3.75bn acquisition of 62% stake in Banca Comerciala Romana 2005: US$47.3m disposal of 78.5% of stake in Romportmet 2005: €430m merger with HVB Bank Romania 2008: Advisory on disposal of Romanian second largest insurer 2007: Acquisition of a 93.32% stake in Kandia-Excelent 2008: Acquisition of DISA from Procuritas Capital Investors 2008: acquisition of 75% stake in CTL Logistics S.A. 2004: Acquisition of Nord / LB insurance operations 2007: €64m disposal of 60% stake in Agros Nova 2006: €52m disposal of Skarbiec assetmgmtholding 2007: $5.4 bn combination with Gedeon Richter 2007: Sale of 60% of Expander by GE Money to Innova Capital Croatia 2007: €122m disposal of PTE Skarbiec Emerytura to Aegon Albania Belarus 2006: €123m offer for Broker Fm 2007: Acquisition of Funni Corporation, the 4th largest Ukrainian dairy company 2009: fairness opinion on Sberbank’s US$281m offer for a 93.27% stake in BPS Bank 2006: US$40.8m disposal of a 80% stake in Banca Italo Albanese 2007: Disposal of Dominet Bank by Cacek Family andMerrill Lynch 2007: Acquisition of 91% of Dukat (EV of €345m) 2006: US$44.6m opinion on disposal of asset mgmt operations 2009: combining Telenor’s and Altimo’s holdings in OJSC VimpelCom and Kyivstar 2005: Acquisition of Ukrainian P&C insurer Skide West 2006: US$1.2bn acquisition of a majority stake in Ukrsotsbank 2006: €82.6m fairness opinion on public tender offer for 13.01% of Netia Slovenia Bulgaria 2005:€172m merger with Provimi Polska Government of Slovenia 2002: €435m privatisation of 34% in Nova Banka to KBC 2006: €157.7m acquisition of a 74.3% stake in DZI Bank 2004: Acquisition of Queens Juices Czech Republic 2006: €120m disposal of a 50% stake in Modra Pyramida Stavebni Sporitelna 2009: €2.3bn recommended cash offer for Zentiva NV by Sanofi-Aventis S.A. Serbia Government of Serbia 2003: Advisory on the restructuring of NIS - oil company 2005: Advisory to Banca Intesa on Delta Banka acquisition Government of Serbia 2006: €1.51bn disposal of Mobi 63 2004: Acquisition of food brands Sunar, Sunarek & Sunarka from Heinz 2006: Acquisition of Transcentrum Bus s.r.o. 2008: US$750m disposal of Pravex Bank to Intesa Sanpaolo SpA Hungary 2004: Acquisition of juice producer Olympus Top 2006: £1.3bn acquisition of a 75% stake in Budapest Airport Rothschild’s CEE expertise Rothschild’s activity in CEE region Russia Estonia Latvia Lithuania Belarus Poland Ukraine Czech Republic Slovakia Moldova Hungary Slovenia Romania Croatia Serbia Bosnia and Herzegovina Bulgaria Macedonia Albania Ukraine 2009: Restructuring of Nadra bank debt with Export Credit Agencies 2010: Restructuring of Kreditprombank debt

  5. Is an IPO right for you, right now? Most significant corporate event in a company’s. Clear objectives of the IPO should be determined upfront Benchmark of value? Increased profile and global awareness of the company? Monetisation for current shareholders at IPO, liquidity thereafter? Increased attention from lenders and institutions - access to growth capital? Creates currency (stock) to pursue further acquisitions? Platform for employee incentivisation?

  6. Is an IPO right for you, right now? The devil is in the detail Are prospects for growth sufficiently assured and visible? ? Is a 3 year financial track record available and does it “sell” the business? ? Is the Board settled? Are the CEO and CFO experienced? Independent directors? ? Customer concentration, competition, macro-economic issues? ? Is the business model / strategy suitable for the public markets? Restructuring needed? ? Are financial and legal contracts (IP patents, mining rights,…) in place? ?

  7. Your Equity Story Key part of the IPO planning process • Be sure you understand what is meant by term “equity story” • “Roadshow test” • Simple, easily intelligible story • 25 minutes • Summary in prospectus, analyst and roadshow presentations • Offering shares on the stock market is like any market with buyers and sellers • Consider the “buyer’s” vantage point A clear, well thought-out equity story will substantially increase the likelihood of success

  8. Pre-IPO preparation Key to efficient and rapid progress – there are no short-cuts Pre - IPO preparation IPO preparation / execution Marketing and pricing Due diligence Documentation Restructuring Financial statements Business plan Target valuation Equity story / positioning Appointments Structure and logistics Marketing preparation An adviser will advise on structure and positioning; select, negotiate and manage Bookrunners and other third parties; spot pitfalls and manage the whole process

  9. Typical “post-preparation” timetable Following a period of preparation the execution takes c.5 months Month 1 Month 2 Month 3 Month 4 Month 5 Organisation Appoint legal advisers Appoint Bookrunners Kick off meeting Business plan, valuation, capital structure and corporate governance Business plan Review corporate governance and appoint INEDs Equity story and valuation Due diligence, financials & documentation Carry out legal and financial DD and establish dataroom Prepare audited accounts and accounting reports Draft prospectus Liaise with listing authority Offer structure & marketing Define offer structure Research reports published Analyst presentation Investor education Roadshow and bookbuild Pricing

  10. Valuing companies before an IPO Route to “price discovery” • Closing the valuation gap • Market valuation may differ from management / shareholders’ approach to value • An independent adviser will ensure there is a meeting of minds on value throughout the process The “Valuation Vacuum” risk A period of time, which may be several months, between the pitch and pricing where valuation is not discussed

  11. Choosing your team A financial adviser will guide you in the appointment of all third parties Bookrunners Lawyers Accountants Role • Sell stock broadly • Achieve your target price • Support after market effectively Role • Explain laws, regulations and market practice and ensure compliance • Run legal workstream • Provide formal legal opinions Role • Audit • Transaction services • Financials for prospectus • Financial due diligence reports • Financial controls review / implementation • Working capital report What you are looking for • ECM experience in your: • Sector • Region • Analyst credibility / expertise • Understanding of equity story and valuation • Strength of execution team • Investor relationships • Fees What you are looking for • Strength of Partner and their team • ECM experience in your: • Country • Sector • Ability to solve problems • Fees What you are looking for • Strength of team • Ideally one of Big 4 • Familiarity with Company • Familiarity with country of domicile • Fees Others Financial PR Junior syndicate members Printers

  12. Bookrunners’ have 3 “clients” Company’s and Bookrunner’s objectives are not always aligned Investors / Internal issues Company / Shareholders Bookrunners Bookrunners have other “clients” 1. Company / Shareholders • Pay the IPO commission • Potential for future business (M&A, equity) • League table credit • Credential / publicity 2. Investors • Material recurring commissions for equity sales • IPO pricing conflicts can arise here as the bank “looks after” investors 3. Internal “clients” within every Bookrunner • Commitment committee • Valuation committee • Sustainability committee • Internal legal department • Internal compliance Important to note: Bookrunners’ equity research team have explicitly one client – the buyers

  13. Independent financial adviser Problem resolution is a key role of the independent financial adviser Increase price, upsize or accelerate Sensitivedisclosure Decrease price, downsize or postpone Dual trackor single track Add aGlobal Co-ordinator Need for unbiasedclear advice Delay to allow an infill acquisition Fire a Global Co-ordinator Valuation disagreement Capital commitments/ stabilisation issues Delay to allow private bidder time to prepare Every deal has its own unique problems; unbiased, clear advice will help avoid or solve the difficult issues

  14. Contacts • 23, Avenue de Messine, • 23, Avenue de Messine, • 75008 Paris, France • 75008 Paris, France • Tel: +33 1 40 74 40 74 • Tel: +33 1 40 74 40 74 • Fax:+33 1 40 74 98 02 • Fax:+33 1 40 74 98 02 • Oleksandr Demenchuk • Giovanni Salvetti • Executive • Managing Director • Tel: +33 1 40 74 49 14 • Tel: +33 1 40 74 71 89 • oleksandr.demenchuk@rothschild.com • giovanni.salvetti@rothschild.com

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