IPO Readiness. Preparing the Company

Transcription

1 IPO Readiness Preparing the Company

2 What do you need to do to get ready? BR GAAP>> IFRS Conversion Pension scheme deficit Access to accounting records Financial and corporate structure Resources Ability to pay dividends Non-financial metrics People Financial reporting systems Relationships with suppliers and key customers Reward structure/ Employee incentives JV relationships Virtual Data Room? Slide 2

3 Preparing for life as a Public Company Before During After Slide 3

4 Audit (or reaudit) Consulting accounting issues (combinations, proformas, etc) Succession planning, HR, professional team Restructurings/ strategic partner/ exit strategy Tax planning Corporate restructurings Management of contingencies Offshores Internal controls & Procedures Enterprise Risk Management IT systems Before During After Reengineering processes to close the books Corporate Governance Strategy and sustainability consulting Selection of Sponsor, banks, lawyers Legal due diligence Sell side due diligence Search / finders fees UKLA & CVM consultations Corporate finance NPV Valuations Slide 4

5 Preparing for life as a Public Company Audit Profit forecasts Pro forma financial information Long form reports Prospectus drafting comments Working capital report Arrangement letters Comfort letters Before During After Project management Preparing the Prospectus Slide 5

6 Preparing for life as a Public Company On going audit requirements for LSE listed company Six monthly reports During IT Closing the books Corporate Governance Audit and other committees Environmental, etc HR After ITRs for CVM The New Brazilian 20F CVM and Novo Mercado Annual financial statements Sustainability Investor Relations and Corporate Communications Tax and dividend considerations Corporate structure Internal controls and procedures Risk management Slide 6

7 A successful public offering begins with: establishing a strong governance structure focused on coordination execution and monitoring of critical activities necessary to meet the timing of the market. Key questions management must address during the planning process. How does the offering affect the Company s existing strategy? How will the Company meet the reporting requirements for the first set of month-end, quarter-end, and year-end periods? How will corporate governance be developed and deployed at the Company as a public company? How will the Company measure and report performance as a public company (e.g., operating metrics, balanced scorecards, etc.)? IPO Governance Financial Reporting Infrastructure Services Internal Controls Slide 7

8 Assess the functional capabilities of the organization to: create the appropriate program structure to prioritize, execute and monitor the activities necessary for a successful IPO and position it as a high performing public company. Implementing a strong IPO Program Management structure. Allows management to focus its time and effort Identifies issues to avoid critical delays Efficiently coordinates the efforts of diverse transaction teams Validates new reporting requirements. Helps management collect and anticipate issues Facilitates management planning and preparation for the rigors of life as a public company, Assesses the security and controls frameworks IPO Governance Financial Reporting Infrastructure Services Internal Controls Slide 8

9 The IPO Framework Financial Reporting Assessment Infrastructure Services Assessment Internal Controls Review Program Management Office Assess the sufficiency and quality of global financial reporting information Review and assess the global financial reporting systems and processes Assess sufficiency of public company functions (management, counsel, board committees, internal audit) Outline potential accounting and reporting issues Review current activities and capabilities of key supporting processes and functions Assess current level of understanding related to support functions role in IPO activities Evaluate current activities and projects to understand organizational capacity to support IPO activity Define key initiatives and prioritizes initiatives lists Establish key readiness criteria possibly impacting offering date or price Assess the adequacy of the current internal control framework Assess the adequacy of the underlying control documentation, focusing on those controls and locations that are highest risk Perform controls testing, evaluate the impact of control deficiencies noted and suggest appropriate control remediation Perform re-testing as considered necessary Develop and maintain consistent format and tools: opportunity status, priority matrix, combined business model Develop overall program plan with project interdependencies and interfaces identified Manage issues between teams and track progress Ensure reporting is complete (i.e., drive the process) Direct communications with transition teams Slide 9

10 The Offering Roadmap Governance and Assessment Detailed Planning IPO Execution Public Operations Establish overall structure and assess: Establish IPO Program Governance Financial Reporting Assessment Assess Financial Organization Readiness Review impact on organizational Human Resource Readiness Complete diligence on organization's Information Technology capabilities to support IPO preparation and post-offering operations Review and assess status of Internal Controls frameworks, risks, and identified issues Readiness Assessment Complete Develop detailed plans and budgets to: Address findings and issues related to financial reporting Develop the offering framework, documentation, and processes Implement organizational changes necessary to execute the IPO and postoffering operations and reporting Implement Controls Frameworks changes that are necessary to facilitate controls adequacy, testing, and reporting Make Information Technology changes necessary for business process changes related to the IPO and postoffering operations Implement appropriate communications processes and systems to external constituents Establishment of Corporate Governance Execute work plans and processes for: Completing the offering activities in Finance Completing Financial filing activities Establishing Corporate Governance Establishing financial systems and processes Deploying adequate controls prior to offering for certification by management Establishing compliance reporting for Human Resources Executing IT Day One changes as necessary Establishing appropriate communication to external constituents Offering Date Oversee Post Offering Operations: Financial Operations Changes Public Financial Reporting Prospects - New Brazilian 20F Public Controls Testing and Reporting Investor Relations Processes Information Technology Governance Controls and Change Management Corporate Governance and Reporting Slide 10

11 All major capital markets are moving toward IFRS Top 10 Global Capital Markets US Japan Converging to IFRS Converging to IFRS UK France Canada IFRS IFRS Converging to IFRS Brazil Converging to IFRS Germany Hong Kong IFRS IFRS Countries converging to IFRS with the goal of adoption Countries that require or permit IFRS Countries with no announced plan to adopt Spain Switzerland Australia IFRS IFRS or US GAAP IFRS Slide 11

12 What does a conversion involve? CHANGING NUMBERS Addition of another GAAP and / or change in primary GAAP - Accounting policies determination; Chart of Accounts review, Opening Balance Sheet,. CHANGING PEOPLE (a new business language) - Communication - Internal - External - Training: - at different levels - not only Finance people CHANGING PROCESSES - Existing processes to be enhanced: - New processes created - Budgeting & forecasting - Internal controls revisited CHANGING SYSTEMS - Data availability and system requirements - New systems components: datawarehouse, calculation engine - Re-alignment of management information systems - Multi-GAAP solutions - Primary GAAP changeover - Performance management to be embedded across : - Performance measure / KPIs - Management accounts - Remunerations / bonuses - Budgeting / forecasting CHANGING BUSINESS - Financial and Business impact analysis: debt covenants - Different valuations Slide 12

13 How to do it? Phase 1 Phase 2 Phase 3 Preliminary Study 2.1 Project Set-Up 2.2 Component Evaluation & Issues Resolution 2.3 Initial Conversion Embedding aka Integrate Change Slide 13

14 Establishing a Methodology & Designing Tools

15 Financial Reporting Assessment To be successful Review existing financial information and convert it to IFRS compliant financial statements Establish the financial consolidation and combination processes Leverage your existing auditor to: Identify, research, and respond to accounting and reporting issues. Define financial information requirements given the nature and timing of the offering. Resolve and pre-clear issues with CVM/ LSE Developing interim financial statement processes and requirements. Draft the offering, including: Financial information table Management's Discussion and Analysis Pro forma financial statements GAAP and Non-GAAP metrics Capitalization, dilution, sources and uses and other financial schedules Manage reporting of complicated accounting issues and respond to formal regulator comment letters Ensure consistency of public financial information and other marketing financial information (e.g., analyst presentations) Prepare verification files for legal due diligence and comfort letter process 1 Project Initiation Understand acquisition and consolidation accounting 4 Assess financial reporting information, systems and processes, public company information Outline accounting and reporting issues Phase I Approach 5 Outline offering document framework, public reporting requirements, IPO work streams Assess IPO Timeline 6 Review Findings High-level understanding of business Project calendar and strategy Documentation request list Interview schedule Preliminary systems/controls assessment Preliminary list of significant issues Summarize and prioritize findings and issues relating to financial reporting areas Outline of requirements and assess timeline Outline Phase II recommendations and work streams Comprehensive written report on all areas reviewed Communication of findings Next steps Deliverables Slide 15

16 Infrastructure Services Assessment Finance, Human Resources, IT, Communications To be successful Establish best financial organizational model to meet public company regulatory and reporting requirements and business objectives Update financial processes to support public reporting requirements Review employment agreements for change in control and other triggers Design and implement Human Resource policy changes for all levels of the organization 1 Project Initiation 2 3 Key Documentation Request and Collection Project Calendar Project Plan Deliverables Data Request List Calendar of Assessment Sessions List of Finance, IT and HR systems and processes impacted by IPO Activities Determine how equity as a currency will effect total rewards Determine what disclosures of executive compensation will include Establish benefits policy changes for executive/management/employee Establish the right retention/ separation strategy and non-compete documentation as a public company Review, establish and monitor security and control priorities and frameworks as a public company Prioritize current and future IT projects from exposure, cost, or timeliness or other factors Review existing and update external and internal communications strategies to manage expectations of the organization and other constituents Develop and coordinate changes to signage or other external messaging Rapid Assessment Sessions Finalize Assessment Review Findings Prioritized list of business projects requiring Finance, IT or HR support Prioritized list of Finance, IT and HR projects and activities to support IPO Identified Finance, IT and HR improvement opportunities in the areas of project management, governance, strategic alignment, delivery and support, and standard operating procedures to implement prior to the IPO Assessed Finance, IT and HR organization to support the IPO Initial Communication of Findings Communication of Findings Next Steps

17 Internal Controls To be successful Define control assurances necessary by the IPO Underwriters/ Sponsors Define the nature and extent of company level controls Perform a risk assessment to quickly identify relevant financial reporting risks Define the frameworks to support control activities and implement it on a consistent global basis Review the impact of the acquisition on the control framework Update the controls framework Leverage monitoring or automated controls to speed implementation of an updated framework Review and address control issues identified by management or external audit Re-evaluate decisions and frameworks for outsourced functions, spreadsheets, segregation of duties, etc. 1 2 Project Initiation Key Documentation Request and Collection 3 Rapid Assessment Sessions 4 Finalize Assessment 5 6 Project Calendar Project Plan Deliverables Data Request List Calendar of Assessment Sessions List of different control frameworks as well as list of IT systems and processes in scope from a controls perspective Assessment of the as is control environment based on review of the existing control frameworks, a sample of process documentation and the results of control testing performed by KPMG as part of their 2006 financial statement audits Determination of extent of existing documentation (control frameworks and documentation) as well as gap identification Suggested priority for remediating any identified gaps, including plan for performing initial testing to evaluate control effectiveness Review IT risk and control points, retest and remediate Review and update formal controls documentation 8 Review Findings Suggested priority for level of commonization and rationalization based on quality of existing documentation and timing needed to complete certification Initial Communication of Findings Next Steps Slide 17

18 Integration Program Management Office To be successful Determine the priorities of the different projects to understand what should be done first, second, etc. Determine the project interdependencies and manage to meet optimal market timing Monitor, track, and resolve issues on an overall program basis Determine the impact that a change in one project may have on the overall program Dependencies Milestones Due dates Resources Financials Establish project status reporting rules and formats to projects to improve visibility which require management attention Manage the resources of multiple projects that are competing for the same management resources Generate clear and concise communications on the program s status to the appropriate personnel Track and communicate quick wins along the overall program s lifecycle Report with confidence on the overall program s status 1 Project Initiation Develop Program Communications Plan Project Planning, Prioritization and Program Planning Program Office Development 5 Ongoing Project Management 6 Deliverables Project Charter PMO project plan Communication strategy developed Communications templates established Communication plan implemented List of projects documented Project plan templates developed Activity level project plans documented in templates Project prioritization criteria established Prioritized project roadmap developed High-level integrated project plans for overall program Program office roles and responsibilities developed Program office charter developed Program office operational Achievement reports delivered Initial communications delivered Issue & risk tracking implemented Slide 18

19 Description: Proposed Action Executive Summary Plan: (include key Business Strategy Summary: intitiatives / Protect andgrowexistingprofitablesegment 1business identifyopportunitiestoenhancegrowthwhilereducing milestones) overallcosts. Operating Tactics Summary: Evaluation Team: Segment 1willremaininitscurrent locationwithexistingpersonnel andequipment, supportedby backoffice, andtakingadvantageof somecapacityand technicalinfrastructureload-sharingwithsegment 2. Current ( Avg.) Size/Performance Future (2006) Size/Performance Impediments / Growth Metrics Target Deal Company2 Combined Total % Total Co. Risks: Combined Co. % Total Co. CAGR (5.5 Years) Revenues $50M N/A $50M 51% $41M 34% 6% EFO 10% N/A 10% 108% 18% 43% 12% Accountable Set / Anticipated Operational Model Personnel (include Issues to Resolve Area Not Set leader and team Maintain current operating model, Operations, Set Identify and retain members): key operating personnel. including customer interface, quality and People Verify current location is sufficient for future (core franchise) needs. workflow efficiency Verify model ofcritical using other Path types of professionals. Prerequisites: Segment 1 capacity (people and Operations, Not Set Determine capacity utilization profile (of both segments) over time. equipment) will be load shared with People Assess operational compatibility of Segment 1 and Segment 3. Segment 3 Technology, Set Establish cross-company operational and technical teams to share knowledge postmerger (including clear milestones). Time Frame / Approvals Operations, business Months to start: 0 Functional Sign Off: Continue cost reduction opportunities. People, Not Set Assess technical/labor efficiency improvement opportunities. Months to complete: 0 Technology, Review capacity utilization and ongoing capital requirements (with aim to reduce Months to full run rate: 0 IMSO Sign Off: Operations CAPEX to historical maintenance run rates). Operations Not Set Assess excess capacity availability and cost-effectiveness. Synergy Calculation Determine feasibility of doing print-processing Description and printing (since OS exited this divisions. businessacoupleof yearsago). Evaluate need for additional hires (to cover 24/7 operation, if necessary). Joint Sales/Customer interface with Sales/ Not Set Evaluate sales personnel and identify opportunities for integrated delivery. Segment 3sales group. Customer Analyze potential for cross selling between Segment 3 and post production services. Interface Evaluate difficulty of cross training sales force to learn the full Company offerings. Continue transition from Technology 1 to Technology, Set Determine rate of transition of film-based shows from Technology 1 to Technology 2 Technology 2 Operations and whether additional capital will be required to fulfill this demand. Estimate rate of substitution for origination and how OS will be able to manage the potential loss of segment 3andsegment 4revenues. Financial Measures Estimated Costs: Capital Expenditure Non-recurring P&L Costs Purchase Accounting Total Non-recurring Costs Total EBITDA Impact Estimated EBITDA Benefit 0 Benefit - 6 months 0 0 Benefit - 12 months 0 0 Benefit - 24 months 0 0 Full Annual Benefit (Run Rate) 0 The Role of the Integration Program Management Office Form PMO structure then standardized tools and methodologies Integration Initiative Business Case Summary: [NUMBER] [Title of Business Case Initiative] Transfer operational knowledge from OS Segment 1toexpandedSegment 3 Segment 3 will be managed under Segment 1but willfully support other E E Project future Technology 1 vs. Technology 2pricing trends (including potential erosionof Tech1premium). Prioritization Tools & Templates Project Management Program Milestone Tracking / Issue Resolution Achievement Reporting Ongoing Communication Develop and maintain consistent format and tools: opportunity status, priority matrix, combined business model Work with teams as needed to use tools and build cases Assess business cases, facilitate their completeness Ready templates for management review Prepare tools and reporting templates Train users on the project management tools Assist in the development of individual project plans Develop overall program plan with inter-project dependencies and interfaces identified Work with the teams to be fully up to speed on progress and issues Highlight issues to sponsors and executives, as needed Manage issues between teams and track progress Anticipate shortfalls or off plan activity Propose solutions to off track initiatives Review reporting templates Determine reporting frequency by type Train teams on the reporting process Ensure reporting is complete (i.e., drive the process) Structured communication plan Frequent and honest communications on value driver status Direct communications with transition teams Slide 19

20 The Working Capital report for the LSE Slide 20

21 The London Regulatory Map Prospectus Directive Transparency Directive Market Abuse Directive CESR Recommendations Prospectus Rules FSA Handbook chapters Listing Rules Disclosure Rules Slide 21

22 Working Capital - Directors undertaking The directors must have undertaken appropriate procedures to support the working capital statement. Preparation of supporting working capital projections for at least 18 months from the prospectus date. The projections should consist of a forecast income statement, balance sheet and cash flow statement at monthly rests Assumptions should be clear and identifiable The projections are usually based on management s existing forecasting procedures Slide 22

23 What does the Rule say Prospectus Rules Item 3.1 of Annex III Listing Rules R Listing Rules 8.4.2R (5) Minimum Disclosure Requirements for the Share Securities Note: Statement by the issuer that, in its opinion, the working capital is sufficient for the issuer s present requirements or, if not, how it proposes to provide the additional working capital needed. An applicant for the admission of shares must satisfy the FSA that it and its subsidiary undertakings (if any) have sufficient working capital available for the group s requirements for at least the next 12 months from the date of publication of the prospectus for the shares that are being admitted. A sponsor must not submit to the FSA an application on behalf of an applicant, in accordance with LR 3, unless it has come to a reasonable opinion, after having made due and careful enquiry, that: the directors of the applicant have a reasonable basis on which to make the working capital statement required in LR R. In addition further guidance on working capital statements is given in paragraphs of CESR s recommendations for the consistent implementation of the European commission s Regulation on Prospectuses n o 809/2004 Slide 23

24 Working Capital the Reporting Accountants role Issue a working capital report, privately, to Issuer and the Sponsor as part of the due diligence process. Opinion will center around the statement made by the Issuer in the prospectus. Confirm whether the Directors have a reasonable basis on which to make the Working Capital Statement. Slide 24

25 Working Capital - what might the auditor look at? Does the business have sufficient cash for the forecast period? Is there sufficient headroom? Do sufficient committed facilities exist? Do the assumptions reflect understanding of the business? Is the model robust? What is the model sensitive to? Are management capable of forecasting? Are the covenants complied with? Can management forecast? Slide 25

26 Main building blocks for directors working capital statement The Company Sponsor Auditor Working capital projections Auditor field work and due diligence Board memorandum Board minutes adopting board memo and working capital projections Public statement of directors in the prospectus Sponsor s due diligence Private letter from sponsor to UKLA Auditor working capital report Private letter from Auditor to Board and Sponsor confirming that in our opinion the Directors have a reasonable basis on which to make the working capital statement Slide 26

27 Diagnostic Are you ready to go Public? Corporate Governance Sustainability Model Back Office Controls and Procedures Investor relations Tax and dividends Control Self Assessment ERP Benchmarking Pre - IPO Closing the books to meet deadlines Contingency planning IT Supply chain The Working Capital Report Slide 27

28 IPO Readiness Preparing the Company Slide 28