Corpfin Report

7/21/2019 Corpfin Report

http://slidepdf.com/reader/full/corpfin-report-56db90804fba8 1/15

ARELLANO UNIVERSITY SCHOOL OF LAW

Written Report on

QUESTIONS AND ANSWERSON

INITIAL PUBLIC OFFERING (IPO)

In Prti! F"!#!!$ent o% t&e Re'"ire$ent in

CORPORATE FINANCE(Wene* + ,-./ 0 1-./ + Roo$ 2/3)

Submitted to:

ATTY4 5ARY 6UDE V4 CANTORIAS

Submitted by:

A7rin8 ConF"tino8 Pi

Q"into8 Vini!!Re*e8 H9e!

Ro!e8 Rone*S!7o8 5r* Antonnete

Vi8 5: ;er<in

Apri! 2/3=



34 W&t i t&e pri$r* p"rpoe o% IPO>

The primary purpose of IPO is to increase capital in a cost-eectiveway because it allows business expansion without increasing borrowings ordraining the companys cash reserves! IPO also improves the companys

pro"ts and increase the potential for mergers or ac#uisitions!

24 W&o i pri$ri!* reponi?!e %or $n7in7 t&e IPO pro:e n<&t ot&er ro!e oe it "$e>

The lead investment ban$ is the one primarily responsible formanaging the IPO process and for coordinating the companys otheradvisers! %epending on the terms of its engagement& it may also assume theroles of 'nderwriter& (inancial )dviser& Stabili*ing manager& and +esearchanalyst!

.4 Ho< !on7 oe t&e IPO pro:e t@e>

It is extremely important that the companys management understandfrom early stage how time consuming and overwhelming the IPO process canbe! ) timetable should be agreed at the outset and deadlines for particulartas$s should be set! ,elow is a timeline for an initial public oering IPO. of securities of a non-emerging growth company!/

) )uditors0 0ompany00 0ompany counsel

(1P (ree writing prospectusSS Selling stoc$holdersS0 Selling stoc$holders counsel'1 'nderwriter'0 'nderwriters counsel

DATES EVENTS+WOR;TO BE CO5PLETED

PARTIESRESPONSIBLE

PreFi!in7 Perio(:o$$en:e oon t&e "ner<riter re e!e:te ?* t&e

:o$pn*)

Preliminary organi*ational meeting 1or$ing2roup

/ Timeline and Responsibility Chart: Initial Public Offerings (Non- Emerging ro!th Companies"

http:##u$"practicalla!"com#%-&'-')*+

http://uk.practicallaw.com/9-380-8542




Wee@ 3 2 Select co-managers 00& '0

0ommence due diligence managementpresentations and legal& "nancial&business and accounting due diligence

review

0& 00& '1&'0

0ommence preparation of initial draftof Form S-1 registration statement

0& 00& '1&'0

0ommence preparation of necessary"nancial statements

0& )

Select "nancial printer 0

Select registrar and transfer agent 0

Select securities exchange and reserveor determine availability of. tradingsymbol

0& 00

%etermine desirability of pre-"lingconferences with S30& bluesky authorities orFINRA if necessary.

)& 0& 00& '0

Submit letter to S30 re#uesting pre-"ling conference if necessary.

)& 0& 00

%raft Directors and Ocers

Questionnaires

0& 00

%raft selling stoc$holder4s Power of )ttorney including 5uestionnaire. and0ustody )greement

S0& 00

%raft Powers of )ttorney for registrationstatement and amendments thereto& if needed

0& 00

Select ban$note company to print stoc$certi"cates& advise ban$note companyof schedule and arrange for printing of stoc$ certi"cates

0

0ommence negotiations with lendersconcerning necessary consents andrevisions of covenants that wouldrestrict oering or use of proceeds

0& 00

















Wee@ . 0ontinue due diligence 00& '0

0ontinue drafting registrationstatement

0& 00& '1&'0

6old meetings to review registrationstatement 0& 00& '1&'0

0ommence drafting underwritingagreement

'0

%iscuss comfort letter content andprocedures

'0& '1& )

Send %irectors and O7cers5uestionnaires to o7cers& directors and/89 stoc$holders

0& 00

ail letter to stoc$holders relating toparticipation in secondary oeringincluding Power of )ttorney&5uestionnaire and 0ustody )greement.

0& 00& S0

0ommence preparation of securitiesexchange listing application

0& 00

+eview and approve proofs of stoc$certi"cates

0

0irculate drafts of "nancial statements )

%etermine representative to act ascustodian for selling stoc$holders attime of oering

0& SS& S0

Wee@ Send draft registration statement andunderwriting agreement to printer

00

6old meetings to review registrationstatement

0& 00& '1&'0

(inali*e due diligence 00& '0

0ontinue drafting underwritingagreement

'0& 00

Obtain completed 5uestionnaires andPowers of )ttorney from o7cers anddirectors and /89 stoc$holders and

0& 00





provide copies to underwriters

Wee@ = 6old meetings to review and "nali*eregistration statement

0& 00& '1&'0

0irculate proofs of registrationstatement including draft "nancialstatements. and underwritingagreement to board of directors

0& 00

)ssemble exhibits to registrationstatement

0& 00

%etermine which exhibits& if any&re#uire con"dential treatment

0& 00

0irculate draft comfort letter )

(inali*e "nancial statements 0& )

(inali*e underwriting agreement '0& 00

Prepare Form -A for registrationunder theSecurities !"c#ange Act of 1$%&& as amended 3xchange )ct.

00

Send draft of registration statement tosecurities exchange on which thecompany wishes to list stoc$ for

con"dential review of eligibilityre#uired if listing intention language isto be included in the preliminaryprospectus.

0& 00

%eliver list of states in which shares areto be oered

'1& '0

0ommence preparation of preliminary blue sky sur'ey

'0

%iscuss road s#o( presentation '1& 0

%raft invitation letter to potentialsyndicate members

'1

Wee@ , 6old board of directors meetings toapprove IPO& registration statement&form underwriting agreement& listing of

0& 00













stoc$& appointment of transfer agentand registrar& approve all necessarycorporate clean-up matters& form of stoc$ certi"cate& set up pricingcommittee

6old stoc$holders4 meeting to approveall corporate clean-up matters if necessary.

0& 00

(ile registration statement with S30including exhibits. by 3%2)+

00

Submit con"dential treatment re#ueststo S30

00

(ile registration statement and related

materials with (I;+)

'0

(ile securities exchange application 0& 00

Prepare application for )*SI+number for stoc$

0& 00

,egin selecting syndicate < send outinvitation letters

'1

Witin7 Perio(:o$$en:e oon re7itrtion tte$ent i #!e <it& t&eSEC)

Wee@ 3/ 0ontact De,ository rust )om,any %T0. to discuss oering

0& 00

Proceed with blue s$y #uali"cations& asdesignated by underwriters

'0& '1

)pply for 0'SIP number= send copy of registration statement to 0'SIP Service,ureau

0& 00

0ommence preparation of any (1P 0& 00& '1&'0

0ommence preparation of road showmaterials

0& 00& '1&'0











0ommence drafting legal opinions 00& '0

0o-managers due diligence '1

0ommence obtaining loc$-up

agreements

0& 00& '0

Wee@ 33 (inali*e arrangements with transferagent

0& 00

+eceive S30 comment letter anddistribute to wor$ing group

0& 00

)pprove "nal proof of stoc$ certi"catesand order su7cient #uantities fromban$note company to be available atclosing

0

Supply transfer agent and registrar withall re#uired documents

00

eeting of all parties to discuss S30comments if necessary. and begindrafting response letter

1or$ing2roup

0orrespond with securities exchange 0& 00

Wee@ 32 (ile )mendment ;o! / and response toS30 comments with S30 and send

courtesy copies to S30 examiners viaovernight courier

00

(ile )mendment ;o!/ with (I;+) andrespond to (I;+) comments& if any

'0& '1

(ile )mendment ;o! / with securitiesexchange

00

(ile (orm >-) with S30 and withsecurities exchange on which listing issought

00

Wee@ 3. (inali*e (1P 0& 00& '1&'0

(inali*e road show materials 0& 00& '1&'0

+eceive S30 comments on )mendment 0& 00



;o! / and distribute to wor$ing group

Obtain 0'SIP number 0& 00

Wee@ 3 (inali*e valuation& determine price

range

0& '1

(ile )mendment ;o! ? including anyun"led exhibits. and response to S30comments with S30 and send courtesycopies to S30 examiners via overnightcourier

00

(ile )mendment ;o! ? with (I;+) '0& '1

(ile )mendment ;o! ? with securitiesexchange

00

(inali*e comfort letter '0& )& '1

Print preliminary prospectus 1or$ing2roup

Wee@ 3= 0ommence road show 0& 00& '1&'0

Sales force meetings '1

Send (1P to accounts electronically

with lin$ to Section /8a. prospectus.

'1

(ile (1P with S30 00

+eceive S30 comments on )mendment;o! ?

1or$ing2roup

0lear all outstanding comments withS30

1or$ing2roup

%raft closing agenda and distribute towor$ing group

'0

%eadline for receipt of acceptance of invitation to @oin syndicate

'1

Wee@ 3 Obtain (I;+) clearance of underwritingarrangements and deliver noti"cationto the S30

'0& '1



Obtain approval of listing fromsecurities exchange

0& 00

0ontinue road show 0& '1

(ile )mendment ;o! A and response toS30 comments with S30 and sendcourtesy copies to S30 examiners viaovernight courier

00

(ile )mendment ;o! A with (I;+) '0& '1

(ile )mendment ;o! A with securitiesexchange

00

%etermine printing #uantities of "nalprospectuses and label and mailing

instructions

'1

Wee@ 3, (ile acceleration re#uest for registrationstatement and (orm >-) with S30

0& 00

Obtain letter from securities exchange @oining in the company4s re#uest foracceleration of eectiveness of (orm >-)

00

6old "nal underwriters4 due diligencemeeting& if necessary& withrepresentatives of the underwritinggroup

1or$ing2roup

0ommence preparation of legalopinions& certi"cates& %T0 letter of representations and other closingdocuments= order good standingcerti"cates

'0& 00

6ave S30 declare registrationstatement and (orm >-) BeectiveB

usually occurs two business days afteracceleration re#uest "led.

00

(ile (orm A for each director and o7cerof the company on the day the (orm >-) is declared eective

0& 00

PotEe:tie Perio



(:o$$en:e "pon t&e SEC e:!rin7 t&e re7itrtion tte$ent to?e ee:tie)

Wee@ 3,(:ontin"e)

;otify securities exchange and leadunderwriters. of eectiveness of

registration statement and (orm >-)

0O& '1

%etermine "nal oering price of stoc$and underwriting discounts

0& '1

6old pricing committee meeting toapprove pricing& "nal prospectus and"nal underwriting agreement

0& 00

Sign underwriting agreement 0& '1

%eliver comfort letter )

0omplete "nal blue s$y survey '0

Send "nal changes to prospectus andunderwriting agreement to printer

1or$ing2roup

2ive printer labels and mailinginstructions for "nal prospectus

'1

)dvise blue s$y commissions of "nalterms of oering where re#uired anddistribute "nal blue s$y survey

'0

Print "nal prospectus in #uantitydetermined by underwriters

0

;otify syndicate of closing date andgive instructions concerning payment=determine how selling stoc$holderswish to receive funds

'1& 0& SS

(ile /8 copies of "nal prospectus withS30 pursuant to +ule C?Cb. "le withintwo days of the earlier of the date the"nal prospectus is "rst used or the datethe oering price is determined.

00

%eliver copy of "nal prospectus to(I;+)& securities exchange and blues$y authorities

'0& 00



0ontact ban$note company to arrangefor printing of stoc$ certi"cates

0& 00

C!oin7 (T . or T )(:!oin7 $"t o::"r no !ter t&n t&e .r ?"ine * %ter t&e

pri:in7 o% t&e oerin7 or t&e t& ?"ine * i% pri:in7 t@e p!:e%ter t&e $r@et :!oe)4

Wee@ 3 3xecute and deliver to %T0 thecompany4s letter of representations

0& 00

Sign Selected %ealers )greement '1

Provide names and denominations tocompany and transfer agent for stoc$certi"cates

'1

%eliver company counsel4s opinion andinstructions for certi"cates to transferagent

0& 00

,ring-down due diligence call 1or$ing2roup

0lose and settle IPO includes thedelivery of all closing documentspursuant to the closing agenda.

1or$ing2roup

ail copies of closing documents tomembers of the syndicate

'1

PotC!oin7 Fi!in7 n A:tion

1/ * %terEe:tie Dte

3arliest date on which to "le Form S- to register stoc$ issuable pursuant toemployee bene"t plans

0& 00

Wit&in = *%ro$ en o% 3t#:! '"rter

enin7 %terEe:tie Dte("n!e it i !t#:! '"rter o% t&e *er)

(ile Form 1.-Q with S30 0& 00& )

Wit&in 1/ *%ro$ en o% #:!

(ile Form 1.-/ with S30 0& 00& )











*er enin7 %terEe:tie Dte

32/ * %ro$ eno% #:! *er in

<&i:& Ee:tieDte o::"r

Dast date on which to "le registrationstatement with respect to common

stoc$ under the 3xchange )ct on (orm>-)& if stoc$ not previously registeredunder the 3xchange )ct

0& 00

4 W&t re o$e o% t&e t@ ino!in7 "e i!i7en:e>

• In"tr*+5r@et D"e Di!i7en:e E Foull have to research the mar$et&

spea$ with experts& and "gure out where it might be headed in the future!? This includes management presentations and discussions& customer andsupplier calls or meetings& trips to company facilities& in-depth review of

"nancial positions and results and general discussions with the companysaccountants! A

• Le7! n IP D"e Di!i7en:e E Dawyers handle most of this E it

consists of reviewing contracts& registrations& and other documents! C Thisalso includes outstanding and even closed claims and litigation& loanagreement restrictions& third party consents& intellectual property& labor&environmental& regulatory or other issues and legal opinions= Gand

• Finn:i! n TJ D"e Di!i7en:e E )ccountants do most of this andcomb through historical "nancial statements& tax returns& and so on& and

loo$ for irregularities!H )lso& this includes audits& changes in accountingpolicies& critical accounting policies and tax issues& cheap stoc$ issues&capital structure and comfort letters and the level of comfort to beprovided!

? ,ee Nicole The Initial Public Offering (IPO. Process: ot /aceboo$ 0hares1

http:##!!!"mergersandin2uisitions"com#initial-public-offering-process-ipo#

A /re2uently 3s$ed 4uestions 3bout Initial Public Offerings http:##!!!"ntrc"go5"ph#files#3ssessment-of-the-Initial-

Public-Offering67+7)&up8"pdf 9

C ,ee op.cit "

G /re2uently 3s$ed 4uestions 3bout Initial Public Offerings Op. cit.

H ,ee Op.cit "

/re2uently 3s$ed 4uestions 3bout Initial Public Offerings Op"cit"

http://www.mergersandinquisitions.com/initial-public-offering-process-ipo/

http://www.ntrc.gov.ph/files/Assessment-of-the-Initial-Public-Offering_62653upz.pdf



http://www.mergersandinquisitions.com/initial-public-offering-process-ipo/





=4 W&t re t&e en77e$ent !etter neee in n IPO>

Inet$ent Bn@ En77e$ent Letter

The parties to this letter are the company& any selling stoc$holder and

the investment ban$!

) typical form sets out:

T&e :ope o% t&e ?n@K ro!e n reponi?i!itie

These provisions specify what the investment ban$er will do forthe owners= that is basically helping them coordinate the process! )$ey to the scope of the engagement wording is to ensure that theengagement does not go beyond what the owner and the investmentban$er had agreed upon!>

T&e :o$$iion tr":t"re

)s to the fee on the enterprise value of the transaction what is $nownin most investment ban$ing agreements as J0onsiderationK.& the feewill typically be a certain percent up to a certain enterprise value ahigher percent if a smaller transaction.& with that enterprise value tobe agreed upon between owner and ban$ers as li$ely to be achieved!L

P*$ent o% t&e ?n@K eJpene

This is a $ey element in any engagement letter in that the totalconsideration is how the ban$er gets his or her fee! 0onsideration willinclude all payments to the owners and will also include: allassumption of debt but excluding ordinary payables. by the buyer=excluded assets that the owners get to $eep after the closing of thetransaction= if a stoc$ exchange& the value of the stoc$ be it public orprivate.= any over-mar$et terms on employment agreements ornoncompetition agreements= and all JrolloverK e#uity interests wherethe owners determine to maintain an ownership position in the buyer!In short& all amounts that the owners receive& or where they arerelieved of debt obligations& are included!/8

> ill ;ames ,. Investment banking engagement letters—please take them seriously "

http:##!!!"le<ology"com#library#detail"asp<1g=>f+b?+f*-7&c'-*)a7-b+ab-**d)caafb>c

LIbid "

/8 ill" Op. cit. http:##!!!"le<ology"com#library#detail"asp<1g=>f+b?+f*-7&c'-*)a7-b+ab-**d)caafb>c



Ine$nit* in %o"r o% t&e ?n@ %or !oe in:"rre in:onne:tion <it& t&e IPO!

Of all of the provisions in the engagement letter, this is the provision that is the most

“sacred” to investment banking firms and little negotiation can occur. Basically, the

company is required to indemnify the investment bank for any and all claims arising outof the transaction, or the process if the transaction does not occur. Unless it can be shown

that the investment bank was completely creating the liability due to its “wanton

misconduct or gross negligence” as determined by a final non appealable court decisionhighly unlikely, of course!, then the indemnification stands.""

Te$ n Ter$intion4

It is important to articulate in the engagement letter who will be onthe team& as you do not want to wor$ with only @unior investmentban$ers after being JsoldK by a senior investment ban$er! ;oinvestment ban$ can promise that a particular person will always beinvolvedMas he or she might leave the "rmMbut you can get a JbesteortsK type of arrangement! )s to termination& most engagementletters should allow either party to terminate on A8- days prior written

noticeMsome investment ban$s will as$ for at least six months before this termination can occur& and that may be reasonable under thecircumstances! )s noted below& mere termination does not eliminateother responsibilities the owner has to the terminated investmentban$ing "rm!/?

A"itorK En77e$ent Letter

The company retains the auditors to audit its current and if necessary.historical "nancial statements and deliver audit opinions and consents! The

auditors may also be re#uired to review and comment upon taxationmatters! The lead underwriter negotiates with the auditors regarding thepreparation of the comfort letters! The comfort letters are given to theunderwriters and& in certain cases& to the company!

// ill ;ames ,. Investment banking engagement letters—please take them seriously .

http:##!!!"le<ology"com#library#detail"asp<1g=>f+b?+f*-7&c'-*)a7-b+ab-**d)caafb>c

/? Ibid.



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