Raising capital in difficult market conditions
-
Upload
illana-michael -
Category
Documents
-
view
26 -
download
0
description
Transcript of Raising capital in difficult market conditions
8jld0174_DB screenshow – 20/04/23 01:31 AM
Raising capital in difficult market conditions
Deutsche Bank presentation at Belarus Finance and Investment ForumMinsk, 22 October 2008
Elena YassikSenior Associate, Equity Capital Markets, Central and Eastern Europe
8jld0174_DB screenshow – 20/04/23 01:31 AM
Deutsche Bank’s global footprint in 75 countries
Equity underwriting
Equity trading dominance
Distribution footprint
Debt Capital Markets
M&A Advisory
Depository services
Local presence in the CIS
8jld0174_DB screenshow – 20/04/23 01:31 AM
Deutsche Bank – Leading equity franchise in the CIS (2007 – 2008YTD)
1 Deutsche Bank 6,298.4 13.9
2 Credit Suisse 5,354.7 11.8
3 Renaissance Capital 4,975.9 11.0
4 JP Morgan 4,778.7 10.6
5 Morgan Stanley 4,517.2 10.0
6 Citigroup 4,091.2 9.0
7 Goldman Sachs 2,597.9 5.7
8 Troika Dialog 1,950.1 4.3
9 ABN AMRO Rothschild 1,391.4 3.1
10 Credit Suisse 1,072.7 2.4
Bookrunner US$ (bn) Market share (%)
8jld0174_DB screenshow – 20/04/23 01:31 AM
Deutsche Bank – track record in the CIS
US$449m
Initial Public Offering
Sole Global Coordinator and Joint BookrunnerApril 2008
US$€487m
Follow-on Offering
Joint Global Coordinator and Joint BookrunnerApril 2008
€253m
Initial Public Offering
Sole Global Coordinator andJoint BookrunnerNovember 2007
US$1.9bn
Initial Public Offering
Joint Global Coordinator andJoint BookrunnerMay 2007
US$8.0bn
Initial Public Offering
Joint Global coordinator and Joint BookrunnerMay 2007
Russia
8jld0174_DB screenshow – 20/04/23 01:31 AM
Deutsche Bank – track record in the CIS (continued)
€569m
Initial Public Offering
Joint Global Coordinator and Joint BookrunnerDecember 2006
£1.5bn
Initial Public OfferingSole Global Coordinator and Joint BookrunnerDecember 2007
Kazakhstan
US$419m
Initial Public Offering
Joint BookrunnerJune 2006
UkraineUkrainian GovernmentUS$1,000mBond Issuance
Joint BookrunnerJune 2005
8jld0174_DB screenshow – 20/04/23 01:31 AM
What has happened in the equity markets?
Source: Bloomberg, October 2008
0
20
40
60
80
100
120
Jan-08 Feb-08 Mar-08 May-08 Jun-08 Jul-08 Aug-08 Oct-08
Re
ba
sed
S&P DJ Stoxx RTS PFTS
(25.0)%(22.0)%
(63.2)%
(73.2)%
Widespread fears that US will go into recession and that
Europe and EM will be affected
Oil taxation reduction rally in Russia
Sell-off driven by global jitters
Fed intervention
Russia’s economic indicators starting to slow
War conflict in South Ossetia strikes markets
Lehman files for Chapter 11 bankruptcy protection
BofA announces acquisition of Merrill Lynch
US Government takes control of Freddie Mac and Fannie Mae
17th-Sept-08Trading suspended on Russia’s two main stock exchanges due to erratic volatility
8jld0174_DB screenshow – 20/04/23 01:31 AM
Capital markets outlook – Belarus vs other CIS countries
Capital issuance – 2007 Index performance – 2008 YTD
Source: Dealogic, October 2008
38,198.3
1,472.30.0184
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Russia Ukraine Belarus
(US
$b
n)
(62.9)
(69.8)
(0.0)
(80)
(70)
(60)
(50)
(40)
(30)
(20)
(10)
0
Russia Ukraine Belarus
(%)
8jld0174_DB screenshow – 20/04/23 01:31 AM
Economy outlook – fundamentals remains strong
7.68.2
6.4
9.2
2.5
8.08.1
7.0
5.5
0
5
10
Russia Ukraine Belarus
GD
P g
row
th (
%)
2007 2008F 2009F
GDP growth(a) (%) Inflation (%)
15.312.8
8.49.0
25.3
14.0
9.6
18.8
12.0
0
5
10
15
20
25
30
Russia Ukraine Belarus
Yo
Y g
row
th (
%)
(a) Real GDPSource: www.imf.org, World Economic Outlook, October 2008
8jld0174_DB screenshow – 20/04/23 01:31 AM
Key capital raising alternatives
The financing options
Financing alternatives
Time, complexity, stage in corporate lifecycle
Cost of capital
Factors influencing cost
Factors influencing valuation
EquityCapitalMarkets
Primary listing
Secondary listing / Depositary receipts
High yield debt
Eurobonds
Private placements
Venture capital
Bank finance
Investment story
Corporate structure/transparency
Corporate governance
Quality management
Financial history
Market forces
Company readiness
Bankers commission levels
Regulatory requirements
Adviser fees
8jld0174_DB screenshow – 20/04/23 01:31 AM
Comparison of key equity capital raising alternatives
Type Description Characteristics Sale of control or joint venture (sale
of minority stake plus option for control in the future is possible)
Strategic scale (M&A)
Immediate cash act at premium Access to expertise and technologies of
the buyer Loss of control and possibility for equity
upside
Private placement
Sale of minority stake to a limited number of investors (with limited rights to participate in management)
Quicker and simpler way to receive financing
Keep the control No public stakes More expensive financing Participation in the Board may be required
Convertibles Structured debt product with
possibility to convert into the shares Quick way of getting financing Guaranteed return/downside protection
required
IPO
Public offer to a wide pool of investors
Market valuation Open up future M&A / follow on activity Keep the control Long preparation and high one off and
ongoing costs
8jld0174_DB screenshow – 20/04/23 01:31 AM
Comparison of key equity training alternatives
Liquidity
Independent strategy
ValuationLow value
(pre IPO discount)
Higher value(especially if
downside protection)
Market value for minority interest
Maximizing value
M&A PP Convertible IPO
Min
Min
Max
Max
8jld0174_DB screenshow – 20/04/23 01:31 AM
Potential rationale for IPO – pros and cons
Sharing equity upside
Time consuming and more applicable for mature business
High one-off transaction costs– 2% – 6% Broker fee (success based)
– ~US$3m – US$5m (min) – fixed transaction costs
High ongoing costs– audit
– stock exchange
– executive directors
– in-house accounting
Onerous ongoing reporting obligations
Discover the market value
Confirmation of ownership rights
Raising finance
Open up for future M&A activities/exit
Improve transparency and corporate governance
Implementation of long-term management incentive programme
Image enhancement, visibility and brand awareness
Common route for privatisation in many countries
IPO pros IPO cons
8jld0174_DB screenshow – 20/04/23 01:31 AM
Early preparedness for capital raising
Corporatestructure
Corporategovernance
HistoricalIFRS
financial statements
Managementteam
Strategy &investment case
Investorrelations
Practicalissues
8jld0174_DB screenshow – 20/04/23 01:31 AM
Key elements of an equity story
Stability of franchise/market share
Management
Earnings/profitability
Growth
Trackrecord
8jld0174_DB screenshow – 20/04/23 01:31 AM
EV/Revenue
Investors’ approach to valuation
Methodology Applicability
Comparable multiples analysis
EV/EBITDA
Discounted cash flow (DCF)
8jld0174_DB screenshow – 20/04/23 01:31 AM
Valuation positioning – comparable listed peer universe
Belarusiansectorpeers
8jld0174_DB screenshow – 20/04/23 01:31 AM
Price discovery in the IPO
IPOoffer price
Equity/Macro market environment
Review of IPO pipeline
Due diligenceDevelopment of theequity story Analysts presentation
Monitor markets comparables, and new issue trends
Research publication
Valuation ‘price talk’
ManagementroadshowPrice range
Investment banking valuation Research valuation Market valuation
Ma
rke
t d
riv
ers
Co
mp
an
y d
riv
ers Preliminary valuation
assessment
Managementprojections
8jld0174_DB screenshow – 20/04/23 01:31 AM
Key listing alternatives
International CIS
Ord GDR Ord DR Ord GDR Ord Ord RDR
Minsk MoscowLondon Warsaw Frankfurt
8jld0174_DB screenshow – 20/04/23 01:31 AM
Listing alternatives
Access to international capital pool for issuers from less developed markets
Flexible free float Can be recommended for deal size >US$500m 3 year track record and audited IFRS FS is required
No track record needed to obtain a listing More focused on UK rather than Emerging Markets Limited to deal size of US$200m
Main market (ordinary shares)
(GDR)
Deep liquidity for large capital raisings Recommended for deal size exceeding US$1bn 3 year track record + audited IFRS FS 25% min free float is mandatory Full compliance with the combined Code of Corporate Governance
8jld0174_DB screenshow – 20/04/23 01:31 AM
Listing alternatives (continued)
Good option for small and mid-cap companies
Retains emerging markets status
Gain goodwill with local regulators
Meaningless capital raising
Very limited trading
Access to local and international pool of investors
Simpler process vs LSE
Recommended for deal size of up to US$500m
Untested for foreign issuers
Through different listing segments allows CIS companies of different governance standards to list in a market with many peers