Taking your company public

1. Taking your company public Some experiences www.Ricardo-Zettl.com

2. Disclaimer • This is not a workshop • Can't tell you in 10 minutes what others study for years in a university • Just personal examples • Needs and reasons why to do it, success and failure • None about Google or Facebook and company • Don´t believe in the big stories, yours will be different • Not a strategy handbook • I´m an accountant, the navigator, not the enlightened www.Ricardo-Zettl.com

3. What is going public? • Collecting money in huge dimensions • Especially for very big projects • Nowadays also smaller ones (new market, new economy) • Collecting equity not loans • A shareholder has no right • to get his money back • or to get a certain interest • There is a market for loans, too • But loans are only for the rich www.Ricardo-Zettl.com

4. Why to go public??? • Please refer to http://www.investopedia.com/ask/answers/04/061704.aspfor further information put “going public” in Google • “Advantages • Strengthens capital base [dramatically!!!] • makes acquisitions easier • diversifies ownership • and increases prestige.” • “Disadvantages • Puts pressure on short-term growth • increases costs • imposes more restrictions on management and on trading • forces disclosure to the public • and makes former business owners lose control of decision making.” www.Ricardo-Zettl.com

5. What do you need? • Change your legal form • Ltd.s or LLPs don´t serve for a stock exchange • Need a corporation, whatever it means • different in every State of the US • internationally it is called a SA • An army of layers • Need of handling this change • You will find yourself instantaneously in dire straits • Means more layers • Only the name of the corporation already is a legal defiance • An army of accountants • In-house accounting • According US-Gaap for public corporations or according IFRS • Appropriate software: NAVISION, SAP, ORACLE, HYPERION etc. • Public auditor: the “Big Four” • Prompt public reporting every 3 month www.Ricardo-Zettl.com

6. What do you need? • A consortium of banks • That are willing to take your shares to a stock exchange • You can´t do it neither by your own nor with just one bank (they represent the investors) • Approbation of a stock exchange for IPO • You have to present personally your project (prospectus) • Marketing • A “sexy story” • Investor relations • Road shows • Publicity • The share itself becomes a product to sell www.Ricardo-Zettl.com

7. Now the examples www.Ricardo-Zettl.com

8. The hero • KNURR, The hero of the entrepreneurs club • Avant-guardist 30 years ago • Sold his family enterprise on the stock exchange • Collected a lot of money to make his company grow • Got more money than needed • Came in troubled waters because he paid dividends from funds, not from earnings • Now it´s owned by a bigger group (acquisition) • It´s not listed anymore • http://www.technical-furniture.com/index.php/en/ www.Ricardo-Zettl.com

9. Apprenticeship 1 • COSIMA, now CONTI-group – internship http://www.conti-online.de/unternehmen/geschichte/ • Not listed, but collecting huge amounts of equity • Learned: • Road shows • Investor relations • Shareholders´ general meetings • Public accounting • Not always funny, but over all a success story www.Ricardo-Zettl.com

10. Apprenticeship 2 • OSRAM - financial controller of international subsidiaries http://en.wikipedia.org/wiki/Osram • Subsidiary of a listed corporation (Siemens) • Now is listed itself • Learned: • Reporting for public corporations • Controlling of international subsidiaries • Audits, acquisitions, due diligence, consolidation, presentation to the share holders • And so on www.Ricardo-Zettl.com

11. Apprenticeship 3 • CFO of GLUCK, a subsidiary of C.H.A. Chemie Holding, now InnoTec TSS • GLUCK was recently acquired by CHA • As subsidiary of a listed corporation GLUCK had to meet • accounting standards of a public corporation • and public audits • GLUCK itself was a group with nearly 20 subsidiaries • Some of these recently acquired and needed to be integrated • Conclusion: • Grew to fast • Not every acquisition was lucrative • Some had to be shot down after taking over • Burning a lot of shareholders money • CHA came in troubled water and had to be completely reconstructed • CHA is not listed any more • http://www.innotectss.de/unternehmen/kennzahlen.html www.Ricardo-Zettl.com

12. Now we go public • Finally I was a recognized expert in financial administration of a public listed international corporation with subsidiaries • In the late 1990ies there was a boom of IPOs • Especially with click companies (new economy) • They needed urgently experts in financial administration • Here I am! www.Ricardo-Zettl.com

13. Example 1 • easypay – CFO • Electronic cash with bank cards in the point of sale • Need financing the devices where you put the card in • Every new customer you have to buy a new device • Means: Fast growth needs a lot of money • If you don´t grow fast, competition will do • Brick company • Project: platform for internet payment with international dimensions • Development of software • Development of new contracts • Much more hardware in the datacenter • Development of a new sales organization • Click company www.Ricardo-Zettl.com

14. Example 1 • Conclusion: Going public to collect the money needed • What do you need? See above … • I started to work the list • Auditors • Consortium of banks • Accounting • Change of legal form • And so on • As shareholders became concern of what it means to go public some of them stopped the project. www.Ricardo-Zettl.com

15. Example 1 • End of the story: • I lost my job • easypay could not grow enough • Stayed alive for a while but • The competition made the race: PayPal • easypay doesn't exist any more www.Ricardo-Zettl.com

16. Example 2 • Webmiles – interim consultant for IPO • Going public was still booming, especially for click companies • I went out of the easypay office an the same day into the Webmiles office • We had to hurry because there was already the tell of a bubble in the new market. www.Ricardo-Zettl.com

17. Example 2 • Webmiles idea: Every time you buy something in Internet you get “miles” like the airlines already did for flights • There was competition, but not much • Who will do the race? • Just one who does it internationally • For that it´s called Internet • And customers are already internationally • A very “sexy story” for going public and • A pure click company, the favorites of the new market www.Ricardo-Zettl.com

18. Example 2 • What do you need? See above … • I started to work the list: • The entire list, see details there • We were very close to the IPO • Audits for all subsidiaries passed • approbation by the Frankfurt stock exchange received • Consortium of banks ready • Prospectus ready • Than the bubble burst • stock prices went down to nearly zero • IPO was canceled and Webmiles was sold to a customer • Webmiles still exists https://www.webmiles.de/ www.Ricardo-Zettl.com

19. Going down • I lost my job • All my life I have prepared for taking companies public • Now I was one of the bad guys how burned the money of the poor share holders • From than on I worked in different acquisitions of international companies www.Ricardo-Zettl.com

20. Example of going down • Tiscaly – CFO of the German subsidiary telecommunication • International trend: privatize former state owned service companies • Energy supply • Telecommunications • Railways • Airports and so on • Grow fast! • To reach the critical mass for being profitable • Buy every thing you can get • And that internationally www.Ricardo-Zettl.com

21. Example of going down • Tiscaly did • Collected money at the stock exchange • Made a lot of acquisitions when ever possible • Bought licenses for billions of Euros (UMTS and others) • But did not win the race • There was not enough money to run the business • UMTS was a flop • Acquisitions were bad handled (to fast)and without functioning accounting • Share price went down to nearly zero • How to exit from the disaster? • Sell the business www.Ricardo-Zettl.com

22. Example of going down • What do you need? (to sell the business) See above … • I started to work the list: (as far as possible) • Reconstruction of the accounting • Clear tax accounts and intercompany accounts • Clear provider and customer relations • Forming subsidiaries to transfer the business some one wants to buy • Pass through audits • Take the new companies, not public, to the buyer • Great part of the business was sold, the rest liquidated. • Rest of Tiscali now belongs to Telefonica, it is not listed any more. www.Ricardo-Zettl.com

23. Conclusions • Don´t be afraid of going public, but do it right (see What do you need?) • First of all you have to know and manage your business well • A well managed business is the best guaranty for a successful IPO • Going public or being acquired are nearly the same (see What do you need?) www.Ricardo-Zettl.com

24. Thank you for your attention Ricardo A.M. Zettl www.Ricardo-Zettl.com