Soup to Nuts Seminar Series May 19, 2001

Transcription

Soup to Nuts
Seminar Series
May 19, 2001

Presenter: Brian Kasser, Principal, Software Investment Banking Practice

Founded in Q4 1998 by Thom Weisel, former CEO of Montgomery Securities for 27 years, and
officially opened doors for business February 1999

Capital raised:
1999: $16B
2000: $28B

$ in M&A advisory transactions:
1999: $ 7B
2000: $ 76B

Annual revenue:
1999: $186MM
2000: $492MM

810 employees at 5/19/01

Offices in San Francisco, Menlo Park, New York, Boston and London

Focused exclusively on investment themes transforming the economy & targeting the high
quality growth companies

Merchant banking approach combining research, underwriting, M&A advisory and private
equity investment activities

Combines deep domain expertise with bulge bracket execution capabilities
Thomas Weisel Partners is the Leading Investment Bank
Exclusively Focused on Emerging Growth
2
Table of Contents
I.
IPO Process Overview
II. IPO Market Overview
III. Overview of Thomas Weisel Partners
3

Select the Team

Draft a Document / Conduct Due Diligence (Bankers & Research)

File Registration Statement with the SEC

Marketing (Roadshow)

Pricing / Trading
5
Characteristics of Companies that are Ready for an IPO
Today Institutional Investors are evaluating potential technology IPOs
based on the following metrics / attributes:

Quarterly revenue run rate greater than $10 million and attractive sequential growth

Visibility (2 quarters out)

Profitability (≤ 2 quarters after filing)

Market position (first mover advantage – market leaders)

Stable customers (Global 1000)

Solution sold at sizable average selling prices (“ASP”)

Proven business model

Strong strategic channel partners

Reasonable mix between license / service revenue

Reasonable mix between direct / indirect sales channels

Strong board representation

Well-recognized investors

Management (seasoned / experienced)
6
Identifying and Selecting Investment Banks for an IPO

Full-Service Investment Bank



Strong Research Capability with Domain Expertise and “Active” Approach Names
(Publishing) Dialogue with both Sales Force and Institutions
Focused and Active Sales and Trading within the Company’s Sector
Experienced Investment Banking Professionals with Sector Wide Knowledge and Advisory
Capabilities

Reputation and Strength of Firm

“Fit” and Comfort with the Firm
7
Landscape of the Leading Investment Banks (Unbiased)
Strong
Execution
Goldman Sachs
Merrill Lynch
Morgan Stanley
CS First Boston DLJ
Deutsche Bank Alex. Brown
Fleet Robertson
Salomon Smith Barney
J.P. Morgan Chase
UBS
SG Cowen
Banc of America
Piper Jaffray
First Union
RBC DRW
William Blair
Limited
Execution
Wit Soundview
Broad/
Diluted
Focus
Emerging
Growth
Focus
8
Timing, Participants and Tasks of the IPO Process
Time Frame
Key
Participants
Core Tasks
Drafting / Due
Diligence
SEC Review
Period
Marketing /
(Roadshow)
Weeks 1-4
Weeks 5 – 10
Weeks 11 – 12
Week 12
Beyond
Management
Bankers
Research
Attorneys
Accountants
Management
Bankers
Attorneys
Syndicate
Management
Inst. Investors
Bankers
Syndicate
Sales
Research
Inst. Investors
Syndicate
Attorneys
Management
Inst. Investors
Bankers
Research
Sales
Trading
Organizational
Meeting
Prepare
Roadshow
Presentation
Presentation to
Underwriters’
Salesforces
Bring Down Due
Diligence
Thorough
Research
Coverage
Respond to SEC
Comments
One-on-ones
with Institutions
Strong Sales
Support
Print
Preliminary
Prospectuses
Group
Presentations
Strong Trading
Support
Draft Registration
Statement
Market Positioning
Established
Financial/
Customer Due
Diligence
Commitment
Committee
Approval
File Registration
Statement
Pricing
After Market
Support
Price and Close
Formulate M&A
Strategy
Investor
Relations
MiniRoadshows
9
Proceeds of the Offering
Gross Proceeds:
The total offering size. Shares Offered * Expected Price
Gross Spread:
The percentage of the gross proceeds paid to underwriters to cover
management fees,selling commissions and underwriting
concessions. Almost always 7% on IPO’s; less on follow-ons
(usually negotiable)
Offering Expenses:
Expenses of the offering borne by the company. Typically
accounting and legal fees, filing fees and printing costs.
Net Proceeds:
Gross Proceeds - Gross Spread - Offering Expenses
Example:
Gross Proceeds -- 5.0 million shares issued X
$10.00/share expected price
$50.0 million
Less: Gross Spread @ 7% --$10.00 X .07 = $0.70 X 5.0 million shares
$ 3.5 million
Less: Offering Expenses ---$700,000
$
Equals: Net Proceeds
.7 million
$45.8 million
10
Mechanics of an IPO Valuation


Some Form of Public Comparable Company Analysis: Price-to-Revenue, Price-toEarnings, Combined with a Discounted Cash Flow
Pricing an “Art” Not a “Science” (Within Accepted Metrics)

Aftermarket Demand and Performance

Majority of Shares Still Held by Founders and Existing Investors

Market Ultimately Prices the Deal Based Upon Demand Characteristics

Post Offering, Valuation Fluctuates Based on:

Operational Progress and Announcements

Meeting “Street” Expectations Quarter After Quarter

Research Coverage and Visibility

Trading Volume and Liquidity
11
Variables of an IPO Valuation

Trading Multiple:
Based on comparable analysis, the multiple at which the investment
banks believe a company will trade in the public markets.

IPO Discount:
The amount by which the investment bank discount the trading
multiple to calculate the IPO Multiple. Typically, IPOs are priced such
that the stock price is expected to appreciate 15%.

IPO Multiple:
The multiple at which a company is taken public.
Trading Multiple/ (1 + IPO Discount)

Post Money Equity Value:
The equity value of the company at an assumed IPO price.
Post Deal Shares Outstanding * IPO Price

Pre-Money Equity Value:
Post-Money Equity Value - Offering Size

Primary Shares:
New Shares sold by the company

Secondary Shares:
Existing Shares Sold by Insiders (Typically Not Applicable
for an IPO)
12
Typical Stock Splits Prior to an IPO

Prior to going public, companies will usually effect a stock split or reverse stock split.

This is done to manipulate the price range of the common stock. To get it into a
reasonable “filing range” (Typically low to mid teens)

A stock split does not change the company’s capitalization just the number of shares
outstanding and consequently the earnings per share and per share price.
13
IPO Market Overview
Overview of the Current Economy

The slowing U.S. economy has resulted in a reduction of capital spending by
enterprises, especially on IT equipment and software

The reduction in IT equipment and software spending has resulted in weak financial
performance for technology companies and significant stock price declines

The combination of a slowing U.S. economy and significant valuation adjustments
has all but dried up the IPO market for early-stage emerging growth companies

Investors have returned to historical less aggressive metrics to evaluate public
technology companies and initial public offerings
 Companies architected for the investor environment of 1999 and 2000 must
be restructured
 No more “top line growth at any cost” mentality
 Earnings matter!!!
15
150
100
50
0
Apr-99
Apr-98
Apr-97
Apr-96
Apr-95
Apr-94
Apr-93
Apr-92
Apr-91
Apr-01
200
Mar-01
250
Apr-00
Siebel Historical P/E Multiple
Nov-00
Jul-00
Mar-00
Nov-99
Jul-99
Mar-99
Nov-98
Jul-98
Mar-98
Nov-97
Jul-97
Mar-97
Return to Historical Valuations
Oracle Historical P/E Multiple
120
100
80
60
40
20
0
16
IPO Market Overview
Monthly Initial Public Offerings: 1996 to Present
Number of
Transactions
$ Amount Raised
($ in Billions)
1996
1997
1998
1999
2000
2001 (a)
January
February
March
April
May
June
July
August
September
October
November
December
21
54
56
47
71
77
44
46
45
82
65
38
23
41
31
18
30
54
47
38
41
64
77
32
11
37
33
35
40
49
39
16
1
3
11
14
10
31
20
26
45
54
53
27
41
52
54
38
18
48
53
35
24
35
48
63
27
26
20
9
3
7
8
4
2
Total
Average/month
646
54
496
41
289
24
451
38
406
34
24
5
1996
1997
1998
1999
2000
2001 (a)
January
February
March
April
May
June
July
August
September
October
November
December
$1.3
2.7
4.0
6.8
6.2
5.4
2.5
2.4
2.8
6.8
5.3
2.0
$1.3
2.7
1.6
1.3
3.5
5.5
3.8
2.8
3.6
6.1
8.2
2.0
$0.8
2.5
2.7
3.9
3.9
4.8
3.8
1.3
0.1
5.1
3.7
3.1
$0.9
4.6
4.4
1.9
7.9
5.4
11.2
2.6
3.4
7.1
17.1
4.5
$4.0
8.5
14.4
15.9
2.3
10.9
10.8
6.4
5.1
8.7
6.5
2.8
$0.2
3.8
4.2
2.2
0.1
Total
Average/month
$48.1
4.0
$42.3
3.5
$35.8
3.0
$71.1
5.9
$96.4
8.0
$10.4
2.1
17
IPO Market Overview
Pricing Trends in IPOs
The Big IPO Party…...
Initial Public Offerings
100%
80%
60%
40%
20%
May-01
Mar-01
Jan-01
Nov-00
Sep-00
Jul-00
May-00
Mar-00
Jan-00
Nov-99
Sep-99
Jul-99
May-99
Mar-99
Jan-99
Nov-98
Sep-98
Jul-98
May-98
0%
……..And The
Morning Hangover
% Priced Below Filing Range
% Priced Within Filing Range (a)
% Priced Above Filing Range
18
IPO Market Overview
After Market Performance of IPOs that priced in 2001, 2000, and 1999
2001 IPOs: After-Market Performance
50.0%
42.4%
40.0%
32.6%
30.0%
25.0%
20.0%
22.9%
16.3%
10.0%
0.0%
Jan
(10.0%)
Feb
Mar
Apr
May
YTD
(20.0%)
(23.1%)
(30.0%)
60.0%
38.2%
40.0%
20.0%
37.8%
36.4%
13.0%
13.5%
2.1%
0.2%
0.0%
(1.6%)
(3.6%)Jan
Feb
Apr(1.9%)
Mar
May
Jun
Jul
Aug
(11.7%)
(20.0%)
Sept
(14.7%)
(3.0%)Oct
Nov
Dec
(10.7%)
(15.0%)
(17.3%)
YTD
(15.5%)
(24.6%)
(30.3%)
(40.0%)
(30.5%)
(37.1%)
(47.4%)
(60.0%)
(56.8%)
(49.5%)
(57.5%)
(62.1%)
(80.0%)
400.0%
354.8%
350.0%
250.0%
292.6%
281.6%
300.0%
317.1%
305.7%
234.8%
224.3%
222.0%
195.4%
184.2%
200.0%
153.2%
150.0%
128.9%
108.5%
100.0%
98.2%
82.7%
79.0%
38.1%
50.0%
51.7%
31.9% 26.3%
22.0%
21.2%
8.2%
10.0%
11.7%
Jul
Aug
19.1%
8.7%
0.0%
(50.0%)
Jan
Feb
Mar
(42.3%)
(42.9%)
Apr
May
Jun
(31.2%)
(2.8%)
Sept(21.7%)
Oct
(21.2%)
(34.5%)
(9.9%)
Nov(21.0%)
Dec
YTD (8.7%)
(46.2%)
(53.8%)
(100.0%)
19
Overview of Thomas Weisel Partners

Strategic Positioning




Business Momentum




Management Team



Global Reach



Focused exclusively on investment themes transforming the economy
Target selected growth industries and highest quality companies
Merchant banking approach combining traditional institutional brokerage with significant
private equity investment activities
Comprehensive banking services for growth companies including equity underwriting,
convertible debt, private placements, M&A advisory and private client services
Founded in Q4 1998, officially opened doors for business February 1999
810 employees, expected to increase to over 900 by end of 2001
$40.4 billion in equity capital raised
$85.7 billion in M&A advisory transaction volume announced/completed
Thom Weisel, CEO of Montgomery Securities for 27 years
At Montgomery, Thom and other founders supervised an organization that in the 1990s
raised $100 billion in 988 equity offerings and executed 385 M&A transactions representing
$100 billion in value
Other senior executives with 20+ years experience at Merrill Lynch, Credit Suisse First
Boston, Salomon Smith Barney, Alex. Brown and others
San Francisco: Institutional Brokerage, Research, Corporate Finance, Private Client Dept. &
Private Equity
New York: Research, Private Client Dept. & Corporate Finance
Boston: Institutional Brokerage & Corporate Finance
London: Institutional Brokerage & Corporate Finance
Thomas Weisel Partners is the Leading Investment Bank
Exclusively Focused on Emerging Growth
21
Thomas Weisel Partners Status Report
 IPOs and Follow-ons Completed

156 transactions

$40.4 billion raised

18 lead managed offerings
 IPOs and Follow-ons Pending

14 transactions filed/announced

$1.4 billion filed/announced

2 lead-managed offerings
 Mergers and Acquisitions

68 transactions completed/announced

42 transactions in backlog

$85.5 billion in completed transactions

$178 million announced
 Private Placements

25 transactions completed

15 transactions in process

$1.4 billion raised
 Convertibles

8 transactions completed

$3.1 billion raised
Dollars ($mm)
160
Brokerage
140
$136.3
Investment Banking
$134.0
$132.1
$126.5
120
$97.6
100
$80.9
80
60
$48.5
40
20
$31.5
$8.5
0
Q1 1999
Q2
Q3
Q4
Q1 2000
Q2
Q3
Q4
Q1 2001
As of April 9, 2001
IPOs and follow-ons completed include over-allotment and convertibles do not include over-allotment
22
Comprehensive Services Across the Entire Lifecycle of Today’s Emerging Growth Companies
Public
Private
M&A Advisory
Stage of Development
Research, Sales & Trading
IPO
Capital Raisings
Private Client Services
Private Placements
Late Stage Private Equity (TWCP)
Venture Capital (TWVP)
Company Life Span
23
Thomas Weisel Partners Equity Underwriting Expertise
Experience




20+ years experience in investment banking
Completed over 156 financings in Thomas Weisel Partners short history
Focused exclusively on emerging growth companies
Raised over $40 billion in equity financing since inception
Dedicated & Integrated Team



Deep relationships with strategic and institutional investors
Understanding of the strategic investor landscape
Highly integrated with M&A and Equity Research teams
Track Record of Success



Experience in managing and completing IPOs and secondary offerings
18 lead managed offerings completed
Deliver size and valuation objectives for clients
24
Thomas Weisel Partners Equity Expertise
25
Thomas Weisel Partners M&A Advisory Expertise
Experience



Average of 15 years experience in mergers and acquisitions advisory
Blend of bulge bracket, boutique and growth-oriented M&A experience
Led by two of the industry’s most respected M&A professionals

Mark Shafir -- former Head of Global Technology Investment Banking at Merrill Lynch
-- advised Cisco on more than 10 transactions
-- advised SDL on its $41 billion sale to JDS Uniphase

Bob Kitts
-- former Managing Director in the M&A Group at Morgan Stanley
 Deep understanding of the growth sector M&A landscape
 Highly integrated with Investment Banking and Equity Research teams


Experience in managing and completing M&A transactions
68 transactions completed/announced
26
M&A Environment & TWP Capabilities
Strategic US Advisory Rankings: 2001 YTD Ranked by Dollar Volume
M&A Technology Sectors (1)
M&A All Sectors
Rank
Advisor
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Goldman Sachs & Co
Credit Suisse First Boston
Morgan Stanley
Merrill Lynch & Co Inc
UBS Warburg
JP Morgan
Lehman Brothers
Dresdner Kleinwort Wasserstein
Greenhill & Co, LLC
Bear Stearns & Co Inc
Deutsche Bank AG
Touchstone Securities Ltd
Daniels & Associates Inc
Keefe Bruyette & Woods Inc
Petrie Parkman & Co Inc
FleetBoston Financial Corp
ABN AMRO
Waller Capital
Rothschild
Georgeson Shareholder
BMO Nesbitt Burns Inc
Lazard
Thomas Weisel Partners LLC
Societe Generale
# of
Deals
55
76
43
29
17
42
46
33
7
4
26
20
1
9
15
2
11
2
1
2
1
2
7
4
7
Trans. Val.
($MM)
$85,034
76,147
72,720
60,359
28,993
26,498
25,372
19,574
18,608
13,333
9,467
7,809
4,929
4,061
4,043
2,648
2,488
2,225
2,215
2,033
2,015
1,909
1,707
1,682
1,573
Rank
Advisor
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Goldman Sachs & Co
JP Morgan
Merrill Lynch & Co Inc
Credit Suisse First Boston
Morgan Stanley
Daniels & Associates Inc
Waller Capital
FleetBoston Financial Corp
Thomas Weisel Partners LLC
Societe Generale
Broadview
Lehman Brothers
Wit Soundview Group Inc
RBC Dominion Securities
Dresdner Kleinwort Wasserstein
Deutsche Bank AG
Bear Stearns & Co Inc
US Bancorp
Updata Capital Inc
UBS Warburg
CIBC World Markets
Houlihan Lokey Howard & Zukin
Banc of America Securities LLC
Alliant Partners
# of
Deals
20
21
8
33
16
18
7
1
7
3
6
9
15
3
1
2
10
9
5
6
7
7
5
4
3
Trans. Val.
($MM)
$18,964
15,807
13,724
9,816
7,814
6,220
4,061
2,215
2,092
1,682
1,573
1,390
1,316
1,062
1,023
1,018
922
918
710
691
574
356
184
151
133
(1) Technology Includes SDC Tech Industries (e.g. Biotechnology, Computer Equipment, Communications, Electronics, Robotics, etc…
Transactions counted in the period in which they are announced. Excludes spinoffs, buybacks & withdrawn deals
Transactions with undisclosed values are included in the deal count but do not contribute to the Txn Value Total
Source: Securities Data Corp. 4/4/01 - Transaction Values are equivalent to SDC’s rank values.
27
Thomas Weisel Partners Private Placement Expertise
Experience




17 years experience in dedicated private equity effort
Completed over 100 financings at Montgomery Securities during the 1990s
Focus on a broad set of growth company industry groups
Raised over $3 billion in private equity in the 1990s




Private equity team focused solely on the private equity placement market
Deep relationships with private equity investors
Understanding of the strategic investor landscape
Highly integrated with Investment Banking, M&A and Equity Research teams




Experience in managing and completing private placements
Completion in 8 to 14 weeks
Deliver size and valuation objectives for clients
Realize liquidity objectives through public offering or sale within 24 months
28
Thomas Weisel Partners Private Placement Transactions
29
Thomas Weisel Partners Private Placement Transactions
30
Thomas Weisel Partners Private Equity Funds
Fund
Thomas Weisel Capital
Partners (“TWCP”)
Tailwind Capital
Partners
TWP Global Growth
Partners
(“GGP”)
Size
$1.3B
$50mm
$500mm
Close Date
Fund Description
December 1999
Mid- to late-stage private
equity fund focusing on New
Economy Companies
July 1999 &
March 2000
Q4 2000
Thomas Weisel Venture
Partners (“TWVP”)
$260mm
Q4 2000
TWCP – Europe
$500mm
2001
Manager
Alan Menkes
 Former Partner – Hicks, Muse, Tate, &
Furst
Venture fund capitalized by
TWP employees
Andy Sessions
 Former General Partner – Technology
Crossover Ventures
 Former Senior Managing Director –
Montgomery Securities
“Fund of funds” - investing in
a portfolio of premier venture
and private equity funds
focused on growth company
investing
Derek Lemke
 Former Head of Private Equity –
Early stage venture funding
Andy Sessions
 Former General Partner – Technology
Crossover Ventures, and
David Crowder
Growth company investing in
Europe
Thomas Nilsson
 Previously with Investor AB
31
Thomas Weisel Capital Partners, L.P.
$1,311,503,386
Technology
Services
Media & Communications
Software & Internet Infrastructure
Healthcare
Technology
Over $700 million committed to 28 leading companies on the cutting edge of change in software and internet
infrastructure, technology services, media & communications, communications equipment and healthcare technology.
32
Private Client Services
Thomas Weisel Partners Private Client Services strives to preserve the capital
base of clients through wealth diversification and asset allocation
Management of
cash flow and
other short-term
capital needs
Corporate Cash
Management
Investment
Management
Consulting
Comprehensive
asset allocation and
diversification
Corporate
Services
Brokerage services
provided to
“friends” of the
deal; execution of
restricted security
transactions
Brokerage
Services
Identification of tax
efficient investment
strategies
Tax & Estate
Planning
Competitive
execution and agent
approach to fixed
income
33

Soup to Nuts Seminar Series May 19, 2001

Transcription

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