Evaluation and development of the market value during IPO process

1. Evaluation and development of the market value during IPO process INCREASING THE VALUE OF BUSINESS:NEW INSIGHTS AND APPROACHESBIHE 7th Annual International ConferenceRiga, October 14, 2005

2. The right value is what someone is not only saying but really paying… value market value market value fair value external factors book value time fair value

3. …bookkeepers are beeing paid for the past, investors pay for the future. past buildt substance future earnings value value Discounted cash flows value of reinstallment a) Discounted EBIT book value Discounted EBT liquidation value time time a) cost (not activated) of installment

4. - As sophisticated the methods of evaluation are - the right price is the one someone pays. paid value value • interest rate • liquidity in the market • story of the branch • equity/sales story • exit possibilities potential effects of an IPO inner value • clients, contracts • management • past figures • rating • plannings • deliverers • know-how, technology • quality, organisation potential discount of necessity to sell + • hidden risks • forecasts • external factors

5. But to collect money has some (more) duties. not listed listed • daily price • possibility to turn shares into cash (but with limits) • shared influence • new equity, possibility of faster growth • no daily measurement of value • value of company is far away from liquidity • complete influence • equity is what owner can afford to bring in, limitation of growth

6. Going public (Initial Public Offer) starts with finding a fair value which will be accepted by the market and defining a new equity structure. comparable quoted companies relative evaluation (earning ratios compared to similar companies) company factors • market position • turnover • (relative) • growth rate • equity structure multiples of evaluation criteria of evaluation + - max. value Corridor of possible values criteria of evaluation internal rates (WACC) min. value absolute evaluation (discounted cash flows) method of DCF-concept + - common factors • capital markets • market of IPO • branch, story

7. The basis of both systems of evaluation is the company‘s financial prognosis. Financial prognosis • business plan, business story, 10 years (min) • calculation of risks • verification of future turnover • verification of costs DCF Peer group • quoted companies, same branch • comparable market value • comparable situation (if possible) • internal rate (e.g. 12%) • risk expectation • growth rate • inflation rate

8. The peer group shows what the market is ready to pay… branch with high growth rates, actual high investments, low actual yields, high future yields, successful IPOs figures show only examples

9. … the DCF shows what future earnings are expected underlying the opportunity rate and a special risk expectation. figures show only examples

10. Evaluation before increasing capital by IPO in our example is in a corridor between 220 and 260 Mio. € corridor of evaluation other value makers strong growth rates high market shares attractive branch for investors, other successful IPOs technology leadership actual earnings not very high, expected losses in 2007 a lot of market entries, increasing competition + + DCF + value/ EBIT + - value/ turnover - 100 150 200 250 300 Mio. €

11. The combination of evaluation and structuring the equity makes an IPO-concept. *paid by PE share price (value 240 Mio. €): 30,00 € volume of placement (2,5 Mio. shares): 75,0 Mio. € volume of Greenshoe (250.000 shares): 7,5 Mio. € volume of new capital: 67,5 Mio. €

12. Going public and staying listed successfully. share price important criteria • placement method • consortium • designated sponsor • lockup periods • corporate governance • ad hoc duties • private, institutional investors • market segment of listing • Investor Relations • general capital market trends share price 55 50 45 40 35 30 bookbuilding corridor 28 25 first price time