Taking your company public Some experiences 09-05-2014 1 www.Ricardo-Zettl.com
Dec 29, 2015
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
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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
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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.”
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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
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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
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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/
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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
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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
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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
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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.
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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
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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.
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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/
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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
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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
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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
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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.
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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?)
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