ACG Core Track: Capital Markets Update: From Leverage to IPO

ACG Core Track: Capital Markets Update:From Leverage to IPOWednesday, March 23, 8:45 – 9:30 a.m.Sponsored by William Blair & Company and BDO

From Leverage to IPOModerator: • Brett Paschke, William Blair & Company

Panel: • Duff Anderson, Solebury Capital Markets• Timothy R. Curry, Jones Day• Janis Koyanagi, Toronto Stock Exchange / TSX Venture

Exchange• Pam Buchanan, NASDAQ OMX

Sponsored by:

Equity Capital Markets Review

March 2011

Markets Have Recovered as Stability Returns

Money Market Assets Inflows to Equity Funds

Volatility Index LTM Equity Index Performance

Source: Equidesk, ICI Research and Fact Set.Data as of March 20, 2011.

($ in billions) (Index Value)


($ in trillions)

Apr 09

May 09

Jun 09

Jul 0

9

Aug 09

Sep 09

Oct 09

Nov 09

Dec 09

Jan 10

Feb 10

Mar 10

Apr 10

May 10

Jun 10

Jul 1

0

Aug 10

Sep 10

Oct 10

Nov 10

Dec 10

Jan 11

Feb 11

Mar 11

101520253035404550

04/2010 06/2010 08/2010 10/2010 12/2010 02/2011808590

95100105

110115120

125

DJ Industrial Average (10.01%) NASDAQ Composite Index (10.55%)S&P 500 (9.72%) Russell 2000 (16.59%)

1

Earnings Have Driven Market Recovery…

LTM Yield Rates S&P 500 P/E Ratio

($ in billions)

S&P 500 – Top Line Results Weekly Inflows to Equity Funds(Index Value)

Feb 10

Mar 10

Apr 10

May 10

Jun 1

0Ju

l 10

Aug 10

Sep 10

Oct 10

Nov 10

Dec 10

Jan 1

1

Feb 11

Mar 11

0%0.5%

1%1.5%

2%2.5%

3%3.5%

4%4.5%

5%

160bps

180bps

200bps

220bps

240bps

260bps

280bps

300bps

10Y Treasury (3.3%)2Y Treasury (0.6%)2Y/10Y Treasury Spread (2.7%)

Source: Bloomberg, FactSet Research Systems, and Investment Company Institute (ICI) Data as of March 20, 2011.

29.5x

7.3x

16.4x15.3x


2

…Resulting in Increased IPO Activity

IPOs Filed Monthly IPO Backlog

IPOs Priced Annually IPOs Priced Monthly

Source: Equidesk.Data as of March 20, 2011. Data does not include REITs, Closed End Funds, and SPACs.

0

0


3

IPO Pricing Environment Has Improved

Source: Dealogic as of March 20, 2011. Does not include REITs or CLEFs.

Average One-Day Return

Offer Price Relative to Filing Range10 10 11 8 11 9 16 20 19 6 15 (# of Deals) 3


4

Healthcare and Technology Lead the Way

IPOs Priced YTD by Primary Sector Current IPO Backlog by Primary Sector

Business Services

Consumer & Retail

Financial Services

Healthcare

Technology

Commercial & Industrial Business Services

Consumer & Retail

Financial Services

Healthcare

Technology

Commercial & Industrial

Source: Dealogic as of March 20, 2011. (1) Backlog defined as IPOs initially filed or revised within the past 180 days.


5

IPO Size and Structure ConsiderationsAverage Secondary Component of IPOsPercentage of Company Sold

Total Offerings: 122 207 231 163 71 794

Total Offerings w/ Secondary Shares: 13(11%) 87(42%) 133(58%) 91(56%) 31(44%) 355(45%)

By offering size:

Source: EquiDesk. Excludes Closed End Funds and REITs. January 1, 2005 through December 31, 2010. Average percentage of secondary shares sold calculated as a percentage of total shares (primary and secondary) sold; secondary component percentage data only includes deals with secondary components.

0%-20%

40%-60% 20%-40%

60%-80%

80%-100%

<150M

150M – 300M300M – 750M

750M – 1.5B

1.5B – 5.0B>5.0B

<150M

150M – 300M

300M – 750M

750M – 1.5B

1.5B – 5.0B>5.0B

Market Cap at OfferingImplied Market Cap at Initial Filing


6

Total Market Secondary LTMOffering Value Ownership Shares as a % LTM LTM EBIT

Percentile Size at Pricing Dilution of Offering Revenue EBIT Margin LTGR(1)

100% 18,140.1$ 49,500.0$ 100.0% 100.0% 131,037.0$ 4,205.0$ 98.7% 68.0%

95% 664.9$ 3,046.7$ 46.0% 95.8% 4,512.1$ 534.3$ 50.2% 46.0%

90% 356.9$ 1,556.9$ 34.9% 70.9% 1,924.3$ 265.5$ 41.3% 38.0%

80% 233.5$ 1,054.5$ 29.7% 34.5% 669.7$ 167.0$ 25.7% 30.0%

70% 159.1$ 687.3$ 26.1% 29.6% 419.1$ 69.5$ 19.0% 25.0%

60% 130.8$ 519.7$ 23.1% 19.4% 268.8$ 52.6$ 16.2% 23.5%

50% 102.6$ 397.6$ 21.1% 0.6% 188.0$ 32.3$ 12.7% 20.0%

40% 89.4$ 322.5$ 18.6% 0.0% 130.6$ 20.3$ 10.7% 18.7%

30% 75.2$ 239.1$ 16.9% 0.0% 89.9$ 14.7$ 8.5% 16.7%

20% 62.3$ 199.0$ 12.7% 0.0% 62.1$ 10.3$ 6.9% 15.0%

10% 42.0$ 129.7$ 6.6% 0.0% 32.1$ 6.9$ 3.7% 10.0%

5% 20.0$ 89.6$ 1.1% 0.0% 12.6$ 4.0$ 2.2% 9.8%

1% 8.4$ 40.0$ 0.0% 0.0% 1.7$ 1.5$ 1.1% 6.3%

IPO Company CharacteristicsIPOs Priced LTM($ in millions)

Source: Dealogic, excludes REITs and closed-end funds. LTM as of 3-20-11.Note: Each category independently sorted by decile.(1) Mean EPS Estimate 60 days after pricing


7

Small Cap Companies Dominate U.S. Exchanges

Less than $1 billion market cap companies are a majority of companies on U.S. Exchanges: 75% of NASDAQ 40% of the NYSE

NASDAQ

As of March 3, 2011.Source: CapitalIQ


8

Overall Follow-On Market Overview

% Marketing Type % Shelf Takedown

Relative Offering Size as a % of Market Value Offering Size vs. Liquidity

Source: Dealogic and FactSet Research Systems as of March 20, 2011. All values are median for each respective period. Offer/3 and 6 Month performance for follow-ons priced less than their specified time periods are calculated from pricing to present.


9

Overall Follow-On Market Overview (cont’d)

Pricing Relative to Filing and Last Trade Performance Since Offering

Average Secondary Share % for FOs with Selling Shareholder Component by Deal Value (1)

Source: Dealogic as of March 20, 2011. All values are median for each respective period. Offer/3 and 6 Month performance for follow-ons priced less than their specified time periods are calculated from pricing to present.(1) Averages do not include FOs where secondary shares offered equals zero. Data reflects IPOs priced LTM as of above reference date.

# FOs w/ Secondary Shares 15 24 36 36 24 135

# of Total FOs 152 100 100 88 52 492


10

1414

7thin Market

Capitalization

Canadian Markets… TSX & TSXV Global Leaders

8thin EquityFinancing

*S&P is a trademark owned by Standard & Poor’s Financial Services LLCAs at December 31 2010

15

Global Exchange Leader for New Listings in 2010

TSX/TSXV LSE/AIM NYSE/AMEXEuronext (US) Nasdaq ASX Hong Kong

ExchangesNumber of Issuers Listed 3,670 2,966 2,317 2,778 1,999 1,413

Quoted Market Value (US$ Billions)

2,277.5 3,613.1 13,394.1 3,889.4 1,454.5 2,711.3

New Listings 524 161 113 220 127 113

Equity Capital Raised (US$ Billions)

52.4 60.7 208.1 8.2* 53.8 109.5

Value Traded (US$ Billions) 1,383.6 2,741.3 17,795.6 12,659.2 1,062.6 1,496.4

Broad Stock Market Indexes (%Change over Dec. 31 2009)

14.5% 11.0% 10.8% 16.9% -0.7% 7.2%

*NASDAQ Information does not include secondary financingsSource: Exchange Websites, World Federation of Exchanges, (TMX analysis of public information)

16

27%32%

13%

28%

1%

16% 12%

71%

39% 38%

11% 12%3%

23% 19%

55%

31%

56%

7% 5%

57%

35%

5% 2%1%2%

13%

84%

<$50 Million $50 - $250 Million $250 - $500 Million >$500 Million TSX - 1519 Issuers, $2.3T Mkt Cap TSXV - 2168 Issuers, $78B Mkt Cap NYSE - 2436 Issuers, $20.7TNYSE Amex - 486 Issuers, $189B NASDAQ GS - 1508, $4.3T NASDAQ GM - 753, $170.5BNASDAQ CM - 479, $44.4B

Listed Issuers Span the Spectrum

Market Capitalization Distribution of Listed Issuers

Source: Capital IQ, TSX and TSXV Market Intelligence GroupAs at March 18 2011 for the US Exchanges and as at February 28 2011 for TSX and TSXV

17

94 9680

163153145

187158165

199 208

31

63

197

233

81

2003 2004 2005 2006 2007 2008 2009 2010

Canada USA

Average amount raised during IPO (2010) U.S. markets: US $252.9 million TSX: US $89.9 millionTSX Venture: US $6.6 million

Source: Hoovers IPO Central

Canadian equity marketplace is ideal for small to mid-cap IPOs

Total IPOs in Canada and U.S.

18

19.223.1

20.925.8

29.1 28.4

46.241.8

47.6

35.3

60.0

44.1

2.4 1.1 2.4 4.16.1 5.5 4.8

9.811.17.9

1.4

49.7 54.0

64.9

40.8

58.8

19.2 25.5 22.027.3 31.5 32.5

52.2

1999* 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Toronto Stock Exchange TSX Venture Exchange

Access to Capital

*TSX Venture Exchange commenced operations on November 29 1999

Toronto Stock Exchange and TSX Venture ExchangeTotal Financings (C$Billions) 1999 – 2010

19

TMX Group Serves Companies at all Stages of Growth

Market Capitalization Toronto Stock Exchange and TSX Venture

Exchange

Unique feeder system

491 graduates+ 97 M&A*

*From January 1, 2000 – December 31, 2010

19

Toronto Stock Exchange issuer base: 1,516 issuers, ~$2.2 trillion market capTSX Venture Exchange issuer base (excludes NEX): 2,154 issuers, ~$71.5 billion market cap

As at December 31, 2010

31%40%

86%

12%2%

28%

<$50 Million $50 - $250 Million >$250 Million

% of TSX Issuers% of TSXV Issuers

428 Issuer

s

612Issuers

476Issuers

1847Issuer

s256

51 Issuers

20

International Companies Choose to List on TSX

and TSXV

Other, 16, 5%

Mexico & Central/ South

America, 19, 6%

South Africa/ Africa, 12,

4%

UK/ Europe, 26, 8%

Australia / NZ/ PNG, 38,

12%

USA, 154, 48%

China/ Asia, 53, 17%

Life Sciences, 14, 4%

Clean Technology, 23,

7%

Tech, 17, 5%

Financial Services & Products, 23,

7%

Oil & Gas, 31, 10%

Mining, 154, 49%

Diversified Industries, 56,

18%

Total International Listings as at December 31, 2010 = 318TSX = 176 listings, QMV=$180.5 BTSXV = 142 listings, QMV= $6.6 B

TSX and TSXV International Listingsby Country/Region

TSX and TSXV International Listings by Sector

Other includes Bermuda, BVI, British West Indies, Cayman Islands, Channel Islands, Dubai, Guernsey, Israel, Trinidad

21

U.S. Based Companies by Numbers & Sector•

155US

Companies TSX (80) TSXV (75)

$95B

Market Cap

$3.0B

Raised Through

122 Financings

in 2010

21New US

Companies Listed in

2010

Life Sciences, 10, 6%

Oil & Gas, 16, 10%

Tech, 11, 7%

Clean Technology, 17,

11%Financial Services & Products, 18,

12%

Mining, 61, 40%

Diversified Industries, 22,

14%

Total U.S. Listings as at February 28 2011 = 155

TSX = 80 listings, QMV=$92.4BTSXV = 75 listings, QMV= $2.8B

22

2008 - $255 M raised 2009 - $151 M raised2010 - $223 M raised

2008 - $707 M raised2009 - $1.8 B raised2010 - $2.8 B raised

U.S. Based Listed Company Financings

$1,341.4$1,707.1

$2,284.0$1,943.6

$962.2

$1,967.3

$3,027.9

$3,568.5

68

102

64

12286

75

6168

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

2003 2004 2005 2006 2007 2008 2009 20100102030405060708090100110120130

Amount Raised (C$ Millions) # of Deals

*Companies that are headquartered in the US

TSX Venture Exchange is a global benchmark of

excellence for junior public equities and along with Toronto Stock Exchange forms a first-rate tiered system for the growth of

emerging public companies.

23

International Investment Community Trades on Toronto Stock Exchange

25 International Brokers including:

• Barclays Capital• Citigroup• CSFB• Deutsche Bank• Goldman Sachs• HSBC• JP Morgan• Macquarie Capital Markets• Merrill Lynch• Morgan Stanley• Raymond James• Thomas Weisel• State Street• UBS

80 Canadian Brokers including:

• BMO Nesbitt Burns• Canaccord Genuity• CIBC World Markets• GMP Securities• RBC Capital Markets• Scotia Capital Markets• TD Securities• National Bank Financial

~40% of daily trading originates from International brokers

104.6

118.5

96.1

109.2

64.261.3

82.0

191.3 189.1

40.355.2

182.9

118.6

85.7

50.0

75.0

100.0

125.0

2004 2005 2006 2007 2008 2009 20100

50

100

150

200

Volume (B) Number of Transactions (M)

Volume CAGR 9%

Transactions CAGR 29%

Toronto Stock Exchange Volume and Transactions

(2004-2010)

24

performerscompanies with annual returns greater than 50%2004 2005 2006 2007 2008 2009 2010

614 713 930 556 96 1,301 956

TSX & TSX Venture

24

Coming Up Next…• ACG Core Track (Elizabeth G)

• 10:00 – 11:00 a.m. The Sell Side Process: Tactics for a Changing Game

• 11:15 a.m. – Noon Lower Middle Market Update

• 2:00 – 3:00 p.m. Strategies for Add-On Acquisitions

• Noon – 1:45 p.m. Lunch & Keynote with General Stanley McChrystal (Ret)Sponsored by Fifth Street Capital (Elizabeth Ballroom)

ACG Core Track: Capital Markets Update: From Leverage to IPO

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