Last Year We Were Preparing for an IPO.. NOW WHAT? January 19, 2016

Transcription

1 Last Year We Were Preparing for an IPO.. NOW WHAT? January 19, 2016

2 Last Year We Were Preparing for an IPO Now What? Page 2

3 Last Year We Were Preparing for an IPO Now What? Page 3

4 Last Year We Were Preparing for an IPO Now What? What happened last year? 2012-August 2015 presented great environment for IPO; however, major market driven issues will make 2016 tough had 170 (111 non-biotech) U.S. IPOs raising only $30 billion, a six-year low Oil fell below $40 a barrel Reduced growth estimates for China and other emerging markets Strengthening the $US has hurt earnings of many US companies Major volatility in major stock market indexes Uncertainty about Federal Reserve and European monetary policies Increase in M&A and private market transactions Page 4

5 How Will Investors Obtain the Liquidity they Require? Still significant deal activity, as bank financing for private equity continue to appear strong, investors still want access to public markets but seem to be willing to wait for better fundamentals. Market participants are having more prevalent discussions around these types of transactions that are providing liquidity: 144a (without registration rights) 144a (with registration rights) Carve-outs (coupled with private sale) Sale to strategic or financial buyer Reverse Mergers into public shells Page 5

6 What are the Benefits/Risks of these Types of Transactions? Alternative to an IPO Advantages Disadvantages 144a without registration rights No SEC review, quicker path to liquidity No ongoing SEC or other public company requirements Lack of short long term liquidity for investors may put negative pressure on pricing 144a with registration rights Carve-out coupled with private sale Sale to a strategic or financial buyer No initial SEC review, quicker path to liquidity SEC and public company requirements are deferred No SEC review Allows companies to divest non-core businesses on asset by asset basis No SEC review, quicker path to liquidity May allow for sale of larger equity stake than other public offerings Lack of short term liquidity for investors may put negative pressure on pricing Lack of IPO buzz Effort required to prepare carve-out financial statements Limited buyer market Pricing may be less than an IPO Limited buyer market Reverse merger into public shell Lower cost and time requirements Market timing less critical No capital is raised initially Merger vehicle identification challenges SEC scrutiny Lack of IPO buzz Page 6

7 Comparing Key Accounting Activities IPO 144a without reg. rights 144a with reg. rights Carve-out with private sale Strategic / financial buyer Reverse merger Need three years of audited financial statements for the issuer (JOBS act may impact number of periods required) Generally Yes No, unless condition of sale No, unless condition of sale Yes Subjected to due diligence scrutiny No No Yes Yes No Need to assess if any rule 3.05 financial statements are required Quarterization of historical results (auditor review of quarterly financial statements disclosed) No Yes No No Yes No Yes Maybe Maybe Yes Pro-forma financial statements Yes Yes Yes Yes Yes Control risk environment documentation No Yes No No Yes Drafting of a MD&A Yes Yes Maybe Maybe Yes SEC preclearance of significant accounting issues Drafting a registration statement or offering memorandum Requirement to do ongoing quarterly reporting No Yes No No Yes Yes Yes Maybe Maybe Yes No Yes Maybe Maybe Yes SEC review of filing No Yes No No Yes Compliance with public company accounting rules Page 7 No Yes No No Yes

8 Key Takeaways While the work plan to prepare for each of these transaction types will be different Each one requires a lot of work Need to plan appropriate time in work plan for third party review and comments Marketing approach will dictate some of the activities required NOT legislation Most of these transactions will require some form of Auditor comfort or report and this needs to be incorporated into the timeline appropriately Page 8

9 Considering the New ASC 606 Guidance How should you view the new ASC 606 Guidance in the context of one of these transactions? For many deals completed in H2 of 2016, transition to ASC 606 will be three years away. Consider how long-term financial forecasts could be impacted by transitions to ASC 606. Need more disclosures of certain categories of contracts. Transition and early adopt ASC 606 as part of the transaction OR wait and transition through available period: If registration rights granted, risk of complete transition may increase closer to implementation deadline. Confusion in market from transition after one or two years reporting under ASC 605 Impact changes under ASC 606 may have to covenants in future periods (particularly 144a bond offerings) Page 9

10 Biography: STEPHEN HAMILTON Senior Director Steve is a client serving Senior Director at Riveron Consulting. During his 25 years of experience, he has held senior financial management and corporate development roles, and has provided consulting services to both public and private companies. Steve has served a variety of industries including manufacturing, natural resources, and technology, with a focus on multi-national companies and projects. Steve is a native of Toronto, Canada and has been in the Dallas market for 10 years. Prior Experience Lighting Science Group Corp.: Chief Financial Officer & Vice President of Finance Quadrem International Holdings: Chief Financial Officer Noranda, Inc.: Group Controller Ernst & Young: Senior Manager Relevant Examples of Experience Led assessment/implementation of acquisition and divestiture transactions and corporate reorganizations for $10 billion public company including assisting on IPO of subsidiary Significant experience negotiating and implementing financing including start-up companies, joint ventures, project financing and public equity / debt offerings. Led projects to prepare carve out financial statements for spun off companies, including negotiating and implementing intercompany and transitional service agreements. Experience managing S-1 public offerings and 144a private / shelf offerings including drafting filing docs, managing advisors and discussing comments with SEC Page 10 Education/Professional Certifications Bachelor of Commerce in Accounting and Finance University of Toronto Chartered Accountant Institute of Chartered Accounts of Ontario

11 Biography: SCOTT GORRELL Director Scott is a client serving Director at Riveron Consulting. Scott s sixteen years of experience in accounting and financial leadership roles include transaction advisory, technical accounting, and financial reporting. He provides technical accounting advisory services to clients and leads client engagements, including IPO readiness, acquisitions and purchase accounting, financial reporting, audit preparation, carve-outs, and general accounting and advisory services. Scott s background includes twelve years with the Big Four and includes experience with acquisitions, divestitures, GAAP conversions, restatements, initial public offerings and other capital raising transactions. Scott is a native of Oklahoma, but has primarily spent his professional career in Texas, Amsterdam and Denver. Prior Experience PricewaterhouseCoopers LLP: Director, Capital Markets and Accounting Advisory Services PricewaterhouseCoopers LLP: Manager, Assurance and Business Advisory Services Goodman Networks: Director of Financial Reporting and Corporate Controller Level 3 Communications: Senior Director of SEC Reporting and Technical Accounting Relevant Examples of Experience Led multiple IPO readiness and execution projects, including preparation of pro forma financial information, adoption of additional accounting requirements prescribed by the SEC, critical analysis and documentation of various technical accounting positions and drafting of Registration Statements on Forms S-1 or F-1. Led accounting projects related to domestic and cross border acquisitions and divestitures including preparation of relevant pro forma financial information, purchase price allocations, carve-out financial statements and drafting of Registration Statements on Form S-4. Led three-year revenue restatement project to change revenue recognition methodology for a telecommunications company with over 100,000 distinct revenue projects. Page 11 Education/Professional Certifications Masters of Accounting University of Oklahoma Certified Public Accountant

12 Stephen Hamilton, Senior Director O: C: Scott Gorrell, Director O: C: Brett Thames, Senior Director O: C: