May 18, 2010
NY2-672999
© 2010 Morrison & Foerster LLP All Rights Reserved | mofo.com
IPOs:
Is the Window Open?
Panelists
 Nicholas Pettifer, Americas Editor, IFLR
 Grant Miller, Managing Director - Equity Capital Markets, Cowen and
Company, LLC
 David Ryan, Assurance Partner, PricewaterhouseCoopers LLP
 David Lynn, Partner, Morrison & Foerster LLP
This is MoFo. | 2
I. Financing Environment
U.S. Macro Economic Drivers
Real GDP was positive for the
third consecutive quarter in Q1
2010, growing at an annualized
pace of 3.2%, as consumer
spending rebounded to its
highest level in three years
I. FINANCING ENVIRONMENT
After bottoming at 9.9x
forward earnings in late 2008,
the S&P 500 now trades at
13.7x twelve-month forward
earnings
Home prices were flat in
February and are currently
perched above their April 2009
low point after falling 30%
from their July 2006 highs
U.S. Economic Growth
S&P 500 Earnings Power
(GDP QoQ % Change)
6.0%
5.0
4.0
3.0
2.0
1.0
0.0
(1.0)
(2.0)
(3.0)
(4.0)
(5.0)
(6.0)
(7.0)
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2007
Actual
2008
2009
Expected
(Forward P/E)
20.0x
20.0
18.0
15.0
16.0
10.0
14.0
5.0
12.0
0.0
10.0
(5.0)
8.0
(10.0)
6.0
(15.0)
4.0
(20.0)
(25.0)
2010
2.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2007
S&P / Case-Shiller Home Price Index
(Index)
(Monthly % Chng)
250
3.0%
2.0
1.0
150
2008
Actual
2009
Expected
0.0
(% Unemployment)
(Initial Jobless Claims)
9.9%
10.5%
100
(2.0)
Jan-00
(3.0)
Feb-02
Feb-04
Feb-06
Feb-08
Source: Bloomberg and FactSet as of May 14, 2010.
2
Feb-10
700
9.5
650
8.5
600
7.5
550
6.5
500
5.5
450
4.5
(1.0)
50
0.0
2010
U.S. Unemployment
200
Initial jobless claims are down
3% since the beginning of the
year and have fallen 32% since
peaking in March 2009
(Reported EPS)
$25.0
444
3.5
400
2.5
350
1.5
300
0.5
250
Jan-07
Jul-07
Feb-08
Aug-08
Mar-09
Oct-09
Apr-10
Euro Zone Debt Crisis Threatening Economic Growth
“PIIGS” – Intra European Lending Web
EU Deficits as a % of GDP
(Deficit as a % of 2010 GDP)
0.0%
GREECE
(2.0)
ITALY
(4.0)
(6.0)
EU Average: (7.5)%
IRELAND
(8.0)
(8.0)%
(10.0)
(10.1)%
(12.0)
Portugal
Spain
Ireland
(16.0)
Greece
(14.7)%
Great Britain
(12.8)%
(14.0)
(12.3)%
Euro / US$ Exchange Rate
(Euro / USD Exchange Rate)
I. FINANCING ENVIRONMENT
$1.55
1.50
PORTUGAL
1.45
1.40
1.35
1.30
Current: $1.243
1.25
SPAIN
1.20
01/01/09
05/03/09
09/03/09
01/04/10
05/07/10
Source: New York Times, SeekingAlpha.
3
Equity Market Internals
The Dow Jones Industrial
Average has risen 19% since
the beginning of 2009 and
63% since its March 2009
lows, representing the most
powerful rebound since the
epic crash of 1929
(Indexed)
100
(Indexed)
170
90
160
80
150
44.2%
70
140
28.7%
130
23.5%
18.5%
60
50
(37.8)%
(44.1)%
1973 Oil Crisis
1/11/73 - 10/3/74
(47.9)%
40
The VIX recently touched its
lowest point since 2007 and
despite recent sharplyincreased volatility, overall
recessionary concerns have
ebbed and systemic risk in the
financial system has dissipated
Tech Crash
1/14/00 - 10/9/02
110
100
(53.9)%
30
90
Global Financial Crisis
10/9/07 - ???
20
120
Crash of '29
9/3/29 - 7/8/32
10
(89.2)%
0
80
70
60
Day 0
250
500
750
Crash of 1929
Tech Crash
1,000
1,250
01/01/09
1973 Oil Crisis
Global Financial Crisis
05/05/09
S&P 500
Broad Market Volatility – Since 2009
09/07/09
DJIA
01/09/10
NASDAQ
05/14/10
Russell 2000
Sector Performance – Since 2009
(% Change)
(VIX)
60.0%
60
57.7%
53.6%
50.0
50
38.8%
40.0
40
31.1%
30.0
22.3%
20.0
30
LTM Avg. = 23.6
20
13.8%12.0%
10.0
8.9%
5-Yr Avg. = 21.9
2.3%
Source: Bloomberg and FactSet as of May 14, 2010.
(a)
Based on number of calendar days from bull market peak to bear market trough.
4
Telecom
(5.9)%
Utilities
(10.0)
Energy
05/14/10
Cons. Stp.
01/09/10
Financials
09/07/09
Industrials
05/05/09
Cons. Disc.
01/01/09
Materials
10
Health Care
0.0
Info Tech.
I. FINANCING ENVIRONMENT
Though the equity market had
rallied recently, the recent
spike in volatility and broad
market sell-off left one sectors
in the red (since the start of
2009)
Indices – Since 2009
Bear Markets Recoveries(a)
Lower Volatility Enhanced Equity Financing Conditions
Although the May 14th 32.9%
increase in volatility represents
the highest single-day spike
since September 2008, news of
the EU’s financial support
package stabilized recessionary
concerns and will likely
revitalize the equity financing
market
NASDAQ versus VXN
(NASDAQ )
(VXN)
March Lows in
Equity Markets
3,000
85
75
2,500
65
55
2,000
45
35
1,500
25
15
1,000
5
I. FINANCING ENVIRONMENT
Jan-07
The equity financing
environment has been
particularly active since May
2009, corresponding with a
narrowing of discounts as
financial markets have rallied
Apr-07
Jul-07
Nov-07
Feb-08
May-08
Sep-08
Dec-08
Mar-09
Jul-09
Oct-09
Jan-10
May-10
Equity Financings by Product Type
(# of Deals)
120
107
64
92
86
81 84
90
75
108
98
105
69
55
60
62
58
66
98
79
89
81
78
70
61 58
43
45
23
30
49
27
61
42
33 35
25
58
58
55
36
32
24
18 21 17 21 19
15
0
Jan-07
May-07
Sep-07
Jan-08
Follow-Ons
Source: ECM Analytics, FactSet and PlacementTracker as of May 14, 2010.
Note:
Excludes strategic transactions and deals with proceeds raised and market values below $5 million.
5
May-08
Sep-08
Registered Directs
Jan-09
May-09
Sep-09
Equity PIPEs
Jan-10
May-10
IPO Market Activity
Despite substantial
improvements in the IPO
market, recent lower-thanexpected IPO pricings (relative
to filing range midpoints)
suggests that investors
continue to take a disciplined
approach to their deal
selections and push for wider
discounts
SEC Registered IPO Volume
(US$ in billions)
$21.0
18.0
15.0
$0.0
12.0
9.0
6.0
3.0
$4.5
$5.2
$6.9
$6.3
$4.8
$0.0
$11.5
$3.1
$0.7
$5.2
$7.4
0.0
Q1
Q2
Q3
Q4
$0.2
$0.7 $3.3
Q1
Q2
$0.4
$0.9
$0.1
Q3
Q4
$0.2
$1.2
$4.4
$5.0
$0.8
Q1
Q2
Q3
Q4
2008
2007
$2.2
Non-Growth Sector Proceeds
$0.7
$1.9
$1.2
Q1
2009
Growth Sector Proceeds
The one-year rolling IPO
backlog has grown in recent
weeks, with 7 companies
submitting their initial S-1/F-1
filings during the week ended
May 14 and 10 IPOs expected
to price prior to May 20
$0.0
$19.7
Q2
2010
Visa IPO
IPO Pricings, Filings and Withdrawals
(# of Deals)
100
Current IPO Backlog:
89 Filings for $20.1 BN
87
78
80
64
58
60
54
51
47
42
38
40
28
16
20
10
10
10
24
19
15
12
9
5
40
31
31
31
30
30
24 26
46
5
1
1 3
10
15
6
12
18
11
11
10
5
0
A. IPO
Q1
Q2
Q3
Q4
Q1
Q2
2007
Q3
Q4
2008
Pricings
Filings
Q1
Q2
Q3
2009
Withdrawn
Q4
Q1
Q2
2010
Marketed and Failed to Price
Source: ECM Analytics as of May 14, 2010. Excludes closed-end funds, REITs, units, best efforts offerings, non-U.S. offerings and offerings less than $10 million. Proceeds include over-allotment amount.
Note: Growth sectors defined as aerospace and defense, alternative energy, consumer, health care, technology and telecommunications.
8
IPO Pricing Trends
 The IPO pricing environment has improved since March
 67% of IPOs since March
1st
Pricing Dynamics(a)(b)
have priced within or
(% of Total)
above their ranges
100.0%
 70% of deals in Jan-Feb priced below their ranges
10.0%
50.0%
60.0
22.2%
60.0%
55.6%
20.0
40.0%
Q1
Q2
Q3
Q4
Q1
120.0%
102.2%
16.7%
10.0%
Q3
Q4
Q1
25.0%
19.4%
0.0
27.8%
22.2%
Q1
Q2
2010
Above Range
Q2
56.0%
23.2%
(3.9)%
6.5%
Q4
Q1
(6.4)%
(57.6)%
(80.0)
Q3
10.1%
5.2%
0.0%
3.1%
5.1%
0.6%2.3% 1.3%
0.0%
(2.1)%
(1.3)%
(15.2)%
(40.0)
0.0%
2009
% Downsized
Q4
109.7%
40.0
40.0%
2008
53.3%
36.4%
Median % Returns
58.3%
Q2
33.3%
(Median %)
60.0
Q1
Q3
Within Range
80.0
0.0% 0.0% 0.0% 0.0% 0.0%
13.3%
45.5%
2009
Below Range
80.0
0.0
18.2%
16.7%
Q2
2008
100.0%
33.3%
22.2%
20.0%20.0%
45.2%
10.0%
% Downsized / Upsized(a)
A. IPO
75.0%
30.0%
40.0%
0.0
“clinical” risk of drug approval
20.0
38.7%
100.0%
100.0%
 Pre-commercial biotech IPOs have struggled due to
40.0
16.1%
60.0%
40.0
 Tech IPOs have priced well and generally traded up
100.0%
8.3%
22.2%
80.0
 IPO pricing conditions remain situation specific, with
investors pressuring valuations in cases where growth
prospects are more binary
(% of Total)
0.0%
0.0%
0.0%
0.0%
Q1
Q2
2010
Q2
(48.9)%
Q3
Q4
Q1
2008
% Upsized
Q3
2009
Offer/1 Day
Source: ECM Analytics as of May 14, 2010. Excludes closed-end funds, REITs, units, best efforts offerings, non-U.S. offerings and offerings less than $10 million.
(a)
Based on number of pricings/filings.
(b)
Excludes life sciences offerings.
9
Q2
Offer/Current
Q4
Q1
Q2
2010
IPO Structural Trends
Number of IPOs by Sector
Number of IPOs by Market Cap
(% of Total)
(% of Total)
100.0%
100.0%
7.7%
8.1%
15.2%
31.0%
31.5%
32.0%
80.0
80.0
39.9%
24.0%
40.0
19.7%
20.0
14.2%
21.7%
31.0%
8.7%
0.0
4.4%
2006
A&D
4.5%
4.0%
2007
Alt. Energy
3.7%
8.0%
1.5%
Consumer
38.1%
16.7%
16.0%
0.0%
2008
3.7%
3.7%
14.3%
2.4%
0.0%
2.4%
Health Care
20.0
31.5%
50.8%
11.9%
19.2%
2006
2010 YTD
TMT
Other
2008
$250MM - $500MM
2009
$500MM - $2BN
2010 YTD
>$2BN
Number of IPOs by % Secondary
(% of Total)
100.0%
16.0%
30.9%
100.0%
9.3%
23.8%
33.9%
80.0
4.4%
6.6%
15.8%
4.0%
6.1%
12.0%
11.6%
4.0%
16.0%
14.2%
24.7%
60.0
60.0
84.0%
69.1%
2.4%
2.4%
19.0%
22.2%
16.7%
12.0%
14.8%
40.0
76.2%
66.1%
9.3%
13.0%
90.7%
59.0%
53.5%
59.5%
56.0%
20.0
20.0
40.7%
0.0
0.0
2006
2007
"Large or Profitable"
A. IPO
13.0%
2007
<$250MM
(% of Total)
40.0
28.6%
28.0%
0.0
2009
Finance
28.0%
34.3%
Number of “Small and Unprofitable” IPOs(a)
80.0
37.0%
40.0
16.7%
4.0%
2.2%
24.0%
19.7%
38.1%
12.0%
13.1%
60.0
24.1%
28.0%
2.4%
21.9%
38.4%
60.0
18.5%
20.0%
26.8%
2008
2009
2006
2010 YTD
"Small and Unprofitable"
No Secondary
2007
<25%
2008
25% - 50%
2009
50% - 75%
Source: ECM Analytics as of May 14, 2010. Excludes closed-end funds, REITs, units, best efforts offerings, non-U.S. offerings and offerings less than $10 million.
(a)
“Small and Unprofitable” designation based on issuers that are not profitable and have less than $100 million in revenue for the most recent year end data at the time of IPO.
10
2010 YTD
>75%
A. IPO
U.S. IPO Activity – 2010 Year-to-Date
Pricing
Date
Issuer
05/14/10
05/13/10
05/13/10
05/13/10
05/12/10
05/12/10
05/04/10
05/04/10
04/28/10
04/28/10
04/21/10
04/21/10
04/21/10
04/21/10
04/21/10
04/21/10
04/09/10
04/08/10
03/31/10
03/30/10
03/30/10
03/30/10
03/25/10
03/23/10
03/23/10
03/23/10
03/15/10
03/11/10
03/11/10
03/10/10
03/09/10
03/01/10
02/10/10
02/10/10
02/10/10
02/02/10
01/28/10
01/27/10
01/25/10
01/25/10
01/21/10
01/21/10
Kingtone Wireless
info Solution
Software
JinkoSolar
Alt. Energy
Noranda Aluminum
Metal & Steel
-Processing
TeleNav
Navigation Products
Express
Specialty Retail
Roadrunner Transportation Systems Transportation
-Services
CharmCommunications
Avertising
Douglas Dynamics
Automobile Equipment
Alpha & Omega Semiconductor
Semiconductors
Convio
Software
Alimera Sciences
Life Sciences
Codexis
Life Sciences
DynaVox
Software
Global Geophysical Services
Oil & Gas
Mitel Networks
Comm. Equipment
SPS Commerce
Software
Tengion
Life Sciences
Metals USA
Metal Distributor
Primerica
Life Insurance
Meru Networks
Comm Equipment
Scorpio Tankers
Shipping
SS&C Technologies
FinTech
China Lodging Group
Hotels & Motels
Calix
Comm. Equipment
First Interstate BancSystem
Commercial Ban
ks
MaxLinear
Semiconductor
Financial Engines
Financial Technology
AVEO Pharmaceuticals
Life Sciences
Crude Carriers
Shipping
Sensata Technologies
Industrial Technology
Baltic Tradin
g Ltd
Shipping
Anthera Pharmaceuticals Inc
Life Sciences
Generac Holdings Inc
Electrical Machinery
Graham Packaging Co Inc
Industrial
QuinStreet Inc
Internet Marketing
Ironwood Pharmaceuticals Inc
Life Sciences
China Electric Motor Inc
Industrial Technology
IFM Investments Ltd (Century 21 China)
Mortgage Broker
Andatee China Marine Fuel Services Corp
Oil & Gas
China Hydroelectric Corp
Electric Power
Cellu Tissue Holdings Inc
Pulp & Paper
Symetra Financial Corp
Life Insurance
Sector
Company Characteristics
Critial Mass > 40%Rev.
($100m+ Rev) Growth
Profitability Proceeds
—








—
—
—



—
—


—
—




—
—
—
—

—
—



—
—
—
—
—


—
—
—

—
—
—
—
—
—
—

—
—
—
—
—
—
—
—
—
—

—
—

—
—
—
—
—
—
—
—
—



—

—
—
Mean
Median
11









—
—
—

—


—


—



—

—

—

—
—
—
—
—

—






$
Market
Value
16.0
64.2
80.0
56.0
272.0
148.4
74.2
112.5
105.3
53.1
72.1
78.0
140.6
90.0
147.4
49.2
31.0
240.0
368.5
75.7
168.4
185.0
126.8
94.6
166.8
103.8
146.3
89.7
256.5
654.1
228.2
46.2
269.1
182.3
150.0
215.6
25.9
87.4
22.7
96.0
107.9
419.5
$
$ 145.6
106.6
$
Above/
Below/
Proceeds/
%
Mkt Value Secondary In Range
56.0
239.1
430.3
339.0
1,602.0
435.9
371.1
239.1
336.4
146.5
341.6
440.8
444.2
430.5
623.0
131.1
31.8
777.1
1,125.0
233.3
241.0
1,062.0
738.1
484.2
619.8
436.6
482.9
275.5
294.5
3,080.9
314.5
155.3
876.0
630.1
673.7
1,095.9
90.5
116.6
60.5
766.9
261.6
1,415.9
28.6%
26.9
18.6
16.5
17.0
34.0
20.0
47.0
31.3
36.3
21.1
17.7
31.7
20.9
23.7
37.5
97.5
30.9
32.8
32.4
69.9
17.4
17.2
19.5
26.9
23.8
30.3
32.6
87.1
21.2
72.6
29.8
30.7
28.9
22.3
19.7
28.6
75.0
37.5
12.5
41.2
29.6
0.0%
0.0
0.0
21.4
34.4
15.1
0.0
35.0
33.2
29.2
0.0
0.0
0.0
6.7
0.0
39.0
0.0
0.0
100.0
18.5
0.0
23.3
0.0
34.2
0.0
20.1
44.6
0.0
0.0
16.7
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
67.8
31.9
546.3
430.4
33.2%
29.3
13.6%
0.0
Below
Above
Below
Below
Below
In Range
In Range
Below
In Range
Below
Below
In Range
In Range
Below
Below
In Range
Below
Above
Above
In Range
Below
In Range
In Range
In Range
In Range
Above
Above
Below
In Range
In Range
In Range
Below
Below
Below
Below
Below
Below
Below
Above
In Range
Below
In Range
% Chng Offer/
1 Day
Current
(1.5)%
0.1
10.0
22.5
(1.5)
(1.8)
(1.1)
0.4
(1.7)
13.8
0.0
2.0
0.0
0.0
(12.1)
13.3
0.4
(8.6)
31.0
27.8
(3.4)
0.5
13.6
16.2
8.3
33.6
43.8
(0.1)
(2.4)
2.8
(0.3)
0.1
(1.2)
2.0
0.0
3.6
(1.1)
4.3
(8.4)
(6.1)
(8.5)
6.3
(1.5)%
0.1
10.0
15.0
(6.7)
(1.1)
(4.1)%
2.8
(18.3)
6.8
(4.5)
0.2
(2.1)
(12.8)
(17.8)
8.3
(19.4)
(25.1)
63.7
1.3
(14.5)
11.3
19.8
(16.2)
9.2
12.4
29.5
(5.6)
(5.8)
6.9
(8.3)
(1.4)
3.7
22.3
9.0
17.4
66.4
(26.4)
(11.9)
(35.9)
(26.9)
6.6
4.7%
0.1
1.3%
(0.5)
© 2010 Morrison & Foerster LLP All Rights Reserved | mofo.com
Considerations in Deciding
to Go Public
Considerations in Deciding to Go Public
Why you should go public:
 Access to cash and capital markets for future financings and
growth.
 Create a currency for future tax free acquisitions.
 Liquidity for investors (after lock-up period).
 Provide a vehicle for performance-linked employee
compensation.
 Raise the company’s profile and credibility with customers and
suppliers.
 Potentially maintain founder and management control of the
company’s future.
This is MoFo. | 13
Considerations in Deciding to Go Public
Pre-IPO exit strategy as an alternative:
 Possible higher valuation if technology is strong but
earnings potential is weak.
 More certain cash-out of existing investors.
 Avoiding time and cost of the going public process.
 Avoiding the burdens of living as a public company.
 Ability to keep things confidential.
 No need to fill out management team.
This is MoFo. | 14
Going Public—Additional Considerations









Upfront costs.
Management time—both before and after.
Increased disclosure and reporting obligations.
Corporate governance requirements.
Trading restrictions on insiders and directors.
Compliance costs.
Public shareholders—activism and litigation threats.
Investor relations.
Uncertainty—legislative and regulatory changes.
This is MoFo. | 15
© 2010 Morrison & Foerster LLP All Rights Reserved | mofo.com
Launching a Successful IPO
Launching a Successful IPO
Get your corporate house in order before running up
your costs:








Assemble an experienced management team.
Recruit independent members of the board of directors.
Prepare necessary financial statements.
Implement appropriate executive compensation policies.
Clean up the capital structure.
Organize corporate records, minute books and stock ledgers.
Document material agreements.
Adopt appropriate defensive measures.
 Identify potential issues early—no surprises.
This is MoFo. | 17
Launching a Successful IPO
Get your business in order before you get distracted by
the IPO process
 Make sure your intellectual property is protected.
 Make sure your balance sheet is strong enough to
withstand delays and expenses.
 Will your results be impacted by the focus of management
on the IPO?
 Do your projections take into account the costs of being a
public company?
 Address risk management and insurance issues.
 Deal with potential “cheap stock” issues.
This is MoFo. | 18
Launching a Successful IPO
The Business of being a public company—act like a
public company, starting now!
 Does your board look and feel like a public company
board?
 Are your internal controls adequate for public company
requirements?
 Will your executive compensation programs and policies
withstand scrutiny?
 Are there related party transactions that must be
eliminated?
 Are you prepared to deal with public stockholders?
This is MoFo. | 19
Launching a Successful IPO
Five ways to make your IPO a success:
1. Every team needs a captain that plays the whole game.
2. Don’t hold your organizational meeting until people have
seen a good draft of the business section of your
prospectus.
3. Know what kind of shape your financial statements are
in, and develop reasonable expectations about when the
audit will be completed.
4. Establish a realistic timetable that involves no more
drafting sessions than are really required.
5. Avoid surprises.
This is MoFo. | 20
II. IPO Valuation and Structure
A. IPO Example #1: GTEC
Global Defense Technology & Systems, Inc. (GTEC) Overview
Situation Overview and Objectives

Global Defense Technology & Systems, Inc.
(GTEC) provides mission-critical
technology-based systems, solutions, and
services for national security agencies and
programs of the U.S. government

The Company’s services and solutions
address counter-terrorism and intelligence
analysis, command, control and decision
support systems and solutions for the
design, engineering and integration of
highly mobile mission support system
A. IPO EXAMPLE #1: GTEC

Global’s objective was to create a liquidity
event for certain insiders and their parent
company GLOBAL while using the remaining
proceeds raised from primary shares to deleverage the Company's balance sheet
13
Consensus Estimates
Revenues
EBITDA
EPS
2008A
$ 189.4
18.4
$ 0.18
2009E
$ 212.0
15.6
$ 1.01
2010E
$ 250.0
20.3
$ 1.01
Transaction and Marketing Highlights

Global filed its S-1 on September 1, 2009
and launched its roadshow on November 9,
2009

Management marketed for 9 days in 13
European and U.S. cities, with 48 investor
one-on-ones and 7 group meetings

Represented the first defense services IPO
since SAIC in October 2006
GTEC: Valuation Driven by EBITDA and Earnings
Comparable Company Valuation
(US$ in millions, except per share data)
EV as Multiple of
A. IPO EXAMPLE #1: GTEC
(US$ in millions)
Stock Price
% of
(11/3/09)
52W High
Market
Value(a)
Enterprise
Value(a)(b)
EBITDA(c)
CY09E
Price/
Adju
Earnings(c)
CY10P
CY09E
Ear
CY10P
CACI International
ManTech
SAIC Inc.
SRA International
$48.29
44.82
17.84
18.97
99%
74
87
82
$1,465
1,616
7,159
1,073
$1,795
1,564
7,314
1,073
7.0x
7.6
6.8
7.1
6.6x
7.0
6.2
6.5
15.1x
14.4
14.0
16.6
13.8x
13.2
12.2
14.3
ICF International
NCI
Stanley
$28.54
26.40
29.29
92%
77
81
$445
369
725
$663
411
865
9.6x
10.0
9.7
8.0x
8.7
9.1
21.2x
17.6
15.9
17.3x
15.6
14.8
Overall
Median
Mean
7.6x
8.3
7.0x
7.4
15.9x
16.4
14.3x
14.4
Core Peer Group: Micro Cap
Median
Mean
9.7x
9.8
8.7x
8.6
17.6x
18.2
15.6x
15.9
8.3x
8.8
9.2
6.4x
6.7
7.1
NM
NM
NM
14.0x
15.0
16.0
GTEC
GTEC
GTEC
$14.00
15.00
16.00
NA
NA
NA
$129
138
148
14
$130
136
143
IPO Valuation
2010 EBITDA IPO Valuation
(US$ in millions, except per share data)
IPO Step-up Valuation
Low
2010E EBITDA
$
EBITDA Trading Multiple
Public Market Equity Valuation
Fully-Traded Enterprise Value
Less: Pre-IPO Net Debt(a)
Fully-Traded Equity Value
Less: IPO discount
Equity Value at Pricing
New Investor % Ownership
A. IPO EXAMPLE #1: GTEC
Enterprise Value at Pricing
Enterprise Value at Pricing
Implied EBITDA Multiple at Pricing
Marketing Range
Valuation Metric
$
20.3
High
$
20.3
7.4x
7.7x
8.2x
$ 149.6
$ 156.6
$ 166.0
(21.3)
Plus: Net IPO Proceeds to GNA
Equity Value at Pricing
20.3
Mid
(21.3)
(21.3)
22.8
22.8
22.8
$ 151.0
$ 158.0
$ 167.4
15.0%
15.0%
15.0%
$ 131.3
$ 137.4
$ 145.5
38.1%
36.4%
34.4%
$ 129.9
$ 136.0
$ 144.1
6.4x
6.7x
7.1x
(US$ in millions, except per share data)
GTEC
Statistic
Median Core Group
Comp Multiple
$14.00
Range of Prices
$15.00
$16.00
2010P EBITDA Multiple
Premium/(Discount) to Core Peer Group Comparables
$20.3
8.7x
6.4x
(26.2%)
6.7x
(22.3%)
7.1x
(18.5%)
2010P Adjusted P/E Multiple
Premium/(Discount) to Core Peer Group Comparables
$11.3
14.1x
11.4x
(19.3%)
12.2x
(13.3%)
13.0x
(7.4%)
(a)
Includes $12.6 million in term loans, $8.6 million drawn on line of credit, $0.3 million deferred interest and $0.1 million of cash as of December 31, 2008.
15
Global Defense Technology & Systems, Inc. (GTEC) — $62.9 Million IPO
Transaction and Marketing Highlights


Global priced a full size offering at $13.00,
or 7.1% below the low end of the range
The offering was well-received by investors

The order book was almost 1.5x
subscribed

25% of conference calls/meetings
resulted in orders
Transaction Overview
November 19, 2009
Base Shares Offered
4,600,000
Green Shoe (Exercised)
236,726
Filing Range
$14.00 - $16.00
Issue Price
$13.00
Total Amount Raised
$62,877,438
Mkt Val at Issue
$117,473,616
Proceeds as a % of Mkt Val 50.9%

NCI Inc, one of Global’s closest comps,
traded down (6.1)% the day before pricing
and (7.3)% over the marketing period
creating an additional challenge in pricing
the deal
% Secondary
Multiples at Pricing(a)
EBITDA Multiple
P/E Multiple
A. IPO EXAMPLE #1: GTEC
34.8%
2008A 2009E 2010E
NA
7.7x
5.9x
NA
NM
12.9
(Multiples)
Median Peer EBITDA 8.7x
Median Peer P/E
17.3
(a)
Comparable Companies include: CACI International, ICF International, ManTech, NCI, SAIC, SRA International and Stanley.
16
7.5x
15.1
6.9x
13.6
GTEC: Current Valuation Compared to Comparables
GTEC Valuation
(US$ in millions, except per share data)
Enterprise Value as a Multiple of
Stock Price
(5/14/10)
% of
Market
(a)
52W High Value
Enterprise
Value(b)
Revenue(c)
CY10E
CY11P
EBIT(c)
CY10E
Price/
EBITDA(c)
CY11P
CY10E
CY11P
Earnings(c)
CY10E
CY11P
Defense Services
CACI International
Dynamics Research
Global Defense Tech & Systems
ManTech
NCI
SAIC Inc.
SRA International
$48.39
12.43
15.20
43.43
21.31
17.22
21.79
91%
87
90
79
62
87
91
$1,479
125
139
1,571
298
6,710
1,246
$1,833
146
139
1,679
327
6,955
1,205
A. IPO EXAMPLE #1: GTEC
Median
Mean
17
0.6x
0.5
0.6
0.6
0.6
0.6
0.7
0.5x
0.5
0.5
0.6
0.5
0.6
0.7
9.2x
6.8
9.7
7.8
8.4
7.7
9.7
8.2x
6.4
7.8
7.1
7.4
7.1
8.4
7.2x
5.4
7.1
6.9
7.4
6.9
7.9
6.5x
5.2
6.2
6.4
6.5
6.4
7.0
13.6x
10.0
15.5
12.7
12.7
12.8
15.8
12.2x
9.2
13.2
11.9
11.5
11.0
14.5
0.6x
0.6
0.5x
0.6
8.4x
8.5
7.4x
7.5
7.1x
7.0
6.4x
6.3
12.8x
13.3
11.9x
11.9
B. IPO Example #2: ALIM
Alimera Sciences, Inc. (ALIM) Overview
Situation Overview and Objectives

Alimera Sciences, Inc. is a Phase III
biopharmaceutical company developing
ophthalmic pharmaceuticals focused on
diseases affecting the back of the eye, or
retina

Lack of effective treatment for retinal
damage creates large market opportunity
for Alimera

Alimera’s lead product Iluvien potential to
be first drug approved for Diabetic Macular
Edema (DME)
B. IPO EXAMPLE #2: ALIM


Phase III data in DME in hand at the
time of IPO; revenues beginning in
2011
There were six Iluvien trials ongoing at the
time of the IPO, as the Company evaluated
the drug’s use in the treatment of a variety
of ophthalmic diseases

Wet age-related macular degeneration
(AMD), dry AMD, and retinal vein
occlusion (RVO)
19
Financials
2010A 2011E
2012E
Revenue $
0.0 $ 15.0 $ 65.0
EBITDA
(26.0)
(22.8)
7.2
Net Inc
$ (25.5) $ (22.5) $
4.8
2012E
$ 110.0
35.3
$ 23.3
Marketing Re-Cap

Alimera filed an amended S-1 on April 9th,
signaling they were planning to offer
6,000,000 shares in a range of $15-$17

Management marketed for 10 days in 12
European and U.S. cities, with 57 investor
one-on-ones and 4 group meetings
Alimera Valuation Based On Various Methodologies — Summary(a)
Alimera Valuation Based On Various Methodologies — Summary
Methodology
(US$ in millions)
Pre-Money Equity Value Range
Mean
Low
High
Comparable Company Analysis:
Revenue (2011 Estimates)
$ 285.2
$ 343.2
$ 401.3
Net Income (2011 Estimates)(b)
$ 455.0
$ 492.9
$ 530.7
Historical Analysis of Companies with Phase III Data
$ 176.0
$ 414.9
$ 976.4
IPOs of NDA Stage Companies
$ 131.7
$ 304.5
$ 774.4
(a)
(b)
Supporting schedules on following pages.
Value discounted back 1 year at 25%.
1
ALIM: Valuation Driven by Revenue
Comparable Company Valuation
(US$ in millions)
Ophthalmology Companies
Inspire Pharmaceuticals
QLT Inc.
Ista Pharmaceuticals
InSite Vision Inc
(US$ in millions, except per share data)
Stock Price
% of
(11/3/09)
52W High
$6.23
5.25
3.96
0.42
B. IPO EXAMPLE #2: ALIM
Median
Mean
Near Term New Drug Comparnies
Auxilium Pharmaceuticals
Acorda Therapeutics
Savient Pharmaceuticals
VIVUS Inc
Affymax Inc
Cadence Pharmaceuticals
Arena Pharmaceuticals
Orexigen Therapeutics
$30.63
35.90
14.61
8.82
23.33
9.00
3.19
5.99
Median
Mean
ALIM
ALIM
ALIM
$15.00
16.00
17.00
Market
Value(a)
Enterprise
Value(a)(b)
EV as Multiple of Revenue
CY10E
CY11P
CY12P
CY13P
88%
96
58
64
$518
282
132
40
$414
94
92
75
3.8x
1.9
0.6
NA
3.4x
1.9
0.5
NA
2.3x
2.5
0.5
NA
1.7x
1.4
0.4
NA
76%
76%
$243
$207
$169
$93
2.1x
1.9
1.9x
1.9
1.7x
2.3
1.2x
1.4
82%
98
88
69
91
71
54
55
$1,481
1,433
1,008
731
569
463
323
286
$1,296
1,166
900
543
397
386
342
201
5.5x
9.6
NM
14.7
2.9
NM
17.9
10.0
3.5x
4.4
8.3
6.9
2.0
6.5
3.5
4.3
2.7x
3.0
5.2
4.0
1.6
2.6
3.2
1.9
2.2x
2.2
3.7
2.9
1.1
1.5
2.0
1.0
76%
77%
$787
$650
$654
$470
10.1x
9.8
4.9x
4.3
3.0x
2.9
2.1x
2.1
NA
NA
NA
$489
522
554
$571
609
648
NA
NA
NA
NA
NA
NA
8.8x
9.4
10.0
5.2x
5.5
5.9
20
Historical Analysis of Companies With Phase III Data(a)
Historical Analysis of Companies With Phase III Data
Comparable Companies Pre-Money Enterprise Value
Less: 20% IPO Discount
Low
Mean
High
$ 217.3
$ 503.9
$ 1,166.9
20.0%
Pre-Money Enterprise Value
20.0%
$ 181.1
(b)
Plus: Cash
Pre-Money Equity Valuation
Plus: Gross Proceeds
Implied Post-Money Equity Valuation
(15.0)
$176.0
$414.9
972.4
9.9
(15.0)
$ 967.4
75.0
75.0
75.0
$ 251.0
$ 489.9
$ 1,042.4
(US$ in millions)
Date(c)
Price
One Day
Post Ann.(d)
Post
Equity
Value
Cash
Debt
Enterprise
Value
Savient Pharmaceuticals Inc.
05/08/08
$ 23.90
$ 1,293.8
$ 127.1
$ 0.2
$ 1,166.9
AMAG Pharmaceuticals Inc.
04/12/07
71.34
1,009.5
190.0
—
819.5
AcordaTherapeutics Inc.
09/16/09
25.15
957.3
212.7
7.0
751.6
Allos Therapeutics Inc.
12/08/08
5.04
409.0
92.3
—
316.6
VIVUS Inc.
11/19/09
8.34
671.8
226.9
20.1
465.0
Arena Pharmaceuticals Inc.
10/28/09
3.85
356.6
143.5
86.7
299.8
Cadence Pharmaceuticals Inc
.
12/18/08
6.90
264.7
63.3
15.8
217.3
Orexigen Therapeutics Inc.
07/21/09
7.52
260.9
46.0
13.0
227.9
Dyax Corp.
08/18/08
5.00
303.2
63.8
31.1
270.5
$ 17.45
7.52
$ 614.1
409.0
$ 129.5
127.1
$ 19.3
13.0
$ 503.9
316.6
Company
B. IPO EXAMPLE #2: ALIM
$
9.9
(15.0)
Historical Analysis of Companies With Phase III Data
Mean
Median
(a)
(b)
(c)
(d)
20.0%
$ 419.9
9.9
Less: Debt(b)
(US$ in millions)
Includes Companies with Phase III data announcements. Pre-Money Enterprise Value based on day after final Phase III data announcement.
Cash and debt figures as of October 21, 2009 per Alimera Sciences Management.
Represents the day after Phase III data announcement.
Represents the company’s stock price one day after their Phase III data announcement.
22
IPOs of NDA Stage Companies — 2004–2010 YTD(a)
IPOs of NDA Stage Companies — 2004–2010 YTD
Pre-Money Equity Valuation at Pricing
Plus: Gross IPO Proceeds
Implied Post-Money Equity Valuation
(US$ in millions)
Low
Mean
High
$131.7
$304.5
$774.4
75.0
75.0
75.0
$ 206.7
$ 379.5
$ 849.4
IPOs of NDA Stage Companies — 2004–2010 YTD
Initial Public Offering
Filing
Offer
Amount
Price(c)
Price
Filed
Amount
Offered
(US$ in millions)
% Change From File
(d)
to Offer
Development Status
Diluted Valuation
Trans.
Indications of
Pre-Mon. Post-Mon.
IPO
Price
Amount Lead Product
(s)
Value
Value
Step-Up(f)
% Change
Offer to
Current
Price
Issuer
Pricing
Date(b)
Targanta Therapeutics
10/10/07
13.00
10.00
$ 74.8
57.5
(23.1)%
(23.1)% Gram-Positive Infections $ 166.3
$ 223.8
1.1
Replidyne
06/28/06
15.00
10.00
75.0
45.0
(33.3)
(40.0)
Sinusitis, Pneumonia
231.8
276.8
1.2
NA
Momenta Pharmaceuticals 06/22/04
14.00
6.50
74.9
34.8
(53.6)
(53.6)
Deep Vein Thrombosis
131.7
166.5
1.0
124.6%
Santarus
04/01/04
12.00
9.00
85.2
54.0
(25.0)
(36.6)
Heartburn
218.5
272.5
2.0
(58.1)
Eyetech Pharmaceuticals
01/30/04
19.00
21.00
123.5
136.5
10.5
10.5
Wet AMD
774.4
910.9
2.9
NA
75.0
86.7
54.0
65.6
(25.0)
(24.9)
(36.6)
(28.5)
218.5
304.5
272.5
370.1
1.2
1.7
33.3
33.3
$
NA
2004–2010 YTD
Median
Mean
(a)
(b)
Includes NDA stage companies at time of IPO.
Cash and debt figures as of October 21, 2009 per Alimera Sciences Management.
7
Alimera Sciences, Inc. (ALIM) – $72.0 Million IPO
Transaction and Marketing Highlights

Alimera priced a full size offering at $11.00,
representing a 26.7% discount to the low
end of the range


Investors placed a lower than expected
valuation on Alimera due to the precommercial status of its lead product and
current lack of tangible revenue
The Company was marketed as prepared for
an NDA filing imminently, with an FDA
decision on Iluvien’s approval status pending
B. IPO EXAMPLE #2: ALIM

Insiders contributed $20 million to the
order book, helping the Company
achieve a minimum proceed threshold
23
Financials
April 21, 2010
Base Shares Offered
6,550,000
Green Shoe (Not exercised) 982,500
Filing Range
$15.00 - $17.00
Issue Price
$11.00
Total Amount Raised
$72,050,000
Mkt Val at Issue
$341,561,605
Proceeds as a % of Mkt Val 21.1%
% Secondary
0.0%
Multiples at Pricing(a)
EV / R evenue
2009E 2010E
6.9x
4.1x
© 2010 Morrison & Foerster LLP All Rights Reserved | mofo.com
The IPO Process
Outside Lawyers—What Do They Do?
Company counsel
Underwriter counsel
Pre-IPO housekeeping
and preparation.
Prepare the company for
due diligence process.
Legal requirements.
Manage drafting.
Submit filings and
responses to SEC.
Post-IPO obligations and
disclosure.
•Conduct due diligence.
•FINRA filings.
•Assist in drafting.
This is MoFo. | 36
Selling stockholder counsel
•Legal opinion.
•Selling stockholder
documentation.
Typical IPO Timeline—Nasdaq/NYSE
3-6 weeks before
first SEC filing
4-6 months
before IPO
6-12 months
before IPO
Company rounds out
management team (if
necessary); focus on
“corporate cleanup”
Company
formally
decides to do
IPO
• appoint
underwriter
• publicity
restrictions
commence
• print final
prospectus
and close
offering
This is MoFo. | 37
• due diligence
• prospectus
drafting
• adopt public
co. policies/
controls/
procedures if
not done
already
• complete
audit and
review of
interim
financials
• corporate
governance
matters
• price deal
• commence
public
offering
Initial filing
• file Form S1 with SEC
and submit
application
to exchange
• file
confidential
treatment
request, if
necessary
4 weeks
after filing
• receive first
round of
comments
from SEC
1-2 weeks
after receipt
of comments
• resubmit
revised S-1
Typically 3-5 months
after first filing
Typically 2-3
weeks
road show
• resolve
material
SEC
comments
• listing
approval
• bulk print
preliminary
(“red”)
prospectus
Comments at
2-4 week
intervals
• respond to
2nd (and
3rd, 4th and
5th) round
of
comments
from SEC
SEC Review Process
Insider’s View of SEC’s Division of Corporation Finance
Structure – lawyers and accountants
Underlying focus is on shareholder protection
Assignment of filing within SEC groups
Autonomy of Corp Fin Offices
Review focus – full scope, limited scope or special review
Secondary reviewer structure
Key to understand – nothing special about your filing
Gifts to SEC Staff
This is MoFo. | 38
SEC Review Process
Points to consider prior to and during the SEC’s review
of the company’s Form S-1
Pre-IPO Filing
Considerations
Post-IPO Filing
Considerations
This is MoFo. | 39
• Brainstorming session on disclosure matters
• Strategy on pre-filing letters
• Cold review of Form S-1
• SEC’s knowledge of company based on Form S-1 and
website
•
•
•
•
•
•
Initial communication – establish contact with SEC reviewer
Edgar search on SEC reviewer comments
Calls with SEC to discuss specific issues
Issues management
Comment letters
Appeals process
SEC Review Process: Who is Behind the
Curtain?
 The Division of Corporation Finance Review Team
 Legal (Examiner and Reviewer)
 Accounting (Examiner and Reviewer)
 Branch Chiefs, Assistant Chief Accountant, Senior Assistant Chief
Accountant, Special Counsel and Assistant Director





What are they looking for?
How does the staff review your registration statement?
What is the comment letter process?
What are the timing considerations?
How do you manage the review process?
This is MoFo. | 40
© 2010 Morrison & Foerster LLP All Rights Reserved | mofo.com
Public Company Financial
Reporting and Sarbanes-Oxley
Key Phases of the IPO Process
The basic financial reporting timeline for an IPO
Phase I
- Assessing readiness
allows for increased
accuracy in
management’s IPO
planning and timing.
Phase II
- Planning to set overall horizon
and key milestones.
- Going public activities, including
preparation and audit of relevant
historical financial data,
prospectus drafting and SEC
review process.
Pre-Filing
Phase 1
Phase 2
Readiness
Assessment
Phase II and III
– Being public involves corporate
governance, 404 compliance,
developing and sustaining
quarterly close procedures.
Post-Filing
Phase 3
“Going
Public”
Activities
Planning
“Being Public” Activities
This is MoFo. | 42
Assessing Readiness
Benefits of assessing readiness at start of IPO process
 Anticipate issues and avoid untimely delays in external financial reporting process that can lead to:
 A decrease in the market’s confidence in management,
- Damage brand image,
- Difficulties in raising capital, and
- Ultimately a lower market value for current and future capital market transactions.
 Assess state of readiness for life as public company in following areas:
Accounting
Financial
Close and
Reporting
Governance
Internal
Control
Legal
Information
Technology
Other
Accounting
standards and
uniformity
Close efficiency /
effectiveness
Structure of
Board and
committees
Controls over
financial
reporting and
other key areas
General counsel
Governance
Investor relations
Gap to GAAP
Consolidation
process
Code of
business
conduct
404 – Monitoring
Securities
counsel
General and
application
controls
Treasury and
risk
management
Technical
accounting and
issue resolution
External
reporting
Risk
management
302 processes
Fraud oversight
Information
system
resources
Income taxes
This is MoFo. | 43
SEC Financial Reporting
Registrant would be required to meet the following
reporting requirements:
SEC Reporting Requirements
Baseline statements
3 years
Unaudited interim statements
Updated after 135 days of previous period
Disclosures
Full US GAAP and SEC compliant
Selected financial data
5 years
MD&A
2 years + interim
Pro-forma financial statements
Most recent balance sheet date and year-end and
interim income statement
Significant acquisitions
Required - S-X 3-05
Significant equity investees
Required - S-X 3-09 and 4-08(g)
This is MoFo. | 44
SEC Financial Reporting
Common complex accounting and reporting
matters that companies often

address during the IPO offering process (including the SEC review process):
Differences between SEC GAAP and US GAAP (e.g., push down, carve-out, and disclosure
rules)
Quarterly financial data
Stock compensation and “cheap stock” issues
Other complex equity transactions with shareholders
Segment disclosures
Earnings per share
Business combinations, intangible asset recognition and valuations
Revenue recognition
Complex or numerous pro forma adjustments
This is MoFo. | 45
Sarbanes-Oxley Act of 2002
Section 302
302 reporting begins once a
company is an SEC registrant
Requires quarterly certification by the CEO/CFO regarding the
completeness and accuracy of reports filed under Section 13(a) and 15(d) of
the Securities Act of 1934 as well as the nature and effectiveness of internal
controls supporting the quality of information included in such reports.
Section 404
404 reporting begins with second
annual filing with SEC
Requires an annual report by both management and external auditors regarding the
effectiveness of the company’s internal controls over financial reporting.
This is MoFo. | 46
Internal Control and Process Considerations
Key process and internalcontrols considerations
Ensure Sarbanes-Oxley success begins prior to the filing
Gain common understanding of key business risks
Focus on key process and systems beyond financial reporting
Address systems and process scalability
Understand overall compliance requirements
Develop key policies and related management practices
Plan for training and education
Set up monitoring processes
Develop communication practices
This is MoFo. | 47
Internal Control Considerations

Avoiding surprises is key to success as a public company
Requires quarterly certification by the CEO/CFO
regarding the completeness and accuracy of
reports filed under Section 13(a) and 15(d) of
the Securities Act of 1934 as well as the nature
and effectiveness of internal controls
supporting the quality of information included
in such reports.
This is MoFo. | 48
III. IPO Execution
Managing the IPO Process
IPO Timing Considerations

Targeted First Filing (whenever unaudited financials ready)

Expected SEC Review (median for IPOs since 2009 is 75 days(a)

Re-File With Range (at the outset of marketing, based on market conditions)

Marketing (European / US roadshow over 2 week time period which does not interfere with any major market holidays)

Potential for early lockup release follow-on (once full audit complete)
Proposed IPO Timeline
Pre-Filing Period
Week 1
All Hands
Organizational Meeting

Management Due
Diligence at Company
Prospectus Drafting

SEC Review Period

Ongoing Due Diligence
(Financial, Auditors,
etc.)

Roadshow Preparation

Receive and Respond
to SEC Comments and
File Amendments
III. IPO EXECUTION

April 2010
F
S
1
2
3
8
9
10
2
11 12 13 14 15 16 17
9
5
6
W
7
S
M
T
W
T
June 2010
F
S
S
M
1
3
4
5
6
7
8
6
7
W
T
F
S
1
2
3
4
5
8
9
10 11 12
S
4
M
5
T
6
W
7
Weeks 20–21
Management
Presentations to
Underwriters’ Sales
Forces

International and
Domestic Roadshow

Registration
Statement Declared
Effective by SEC
August 2010
July 2010
T

Print and Distribute
“Red Herring”
Prospectus

File Registration
Statement with SEC
May 2010
T
4
T
Customer Due
Diligence
Post-Effective Period
Weeks 19–20


M
Weeks 9–18
Weeks 2–8

S
Pre-Effective Period
September 2010
T
F
S
S
M
T
W
T
F
S
1
2
3
1
2
3
4
5
6
7
8
9
10
8
9
10 11 12 13 14
S
5
M
6
T
7

Price Offering and
Begin Trading

Closing 3 Days After
Pricing

Quiet Period Begins
October 2010
W
T
F
S
1
2
3
4
8
9
10 11
S
3
M
4
T
5
W
6
T
7
November 2010
F
S
1
2
8
9
S
7
M
T
W
T
F
S
1
2
3
4
5
6
8
9
10 11 12 13
10 11 12 13 14 15
13 14 15 16 17 18 19
11 12 13 14 15 16 17
15 16 17 18 19 20 21
12 13 14 15 16 17 18
10 11 12 13 14 15 16
14 15 16 17 18 19 20
18 19 20 21 22 23 24
16 17 18 19 20 21 22
20 21 22 23 24 25 26
18 19 20 21 22 23 24
22 23 24 25 26 27 28
19 20 21 22 23 24 25
17 18 19 20 21 22 23
21 22 23 24 25 26 27
25 26 27 28 29 30
23 24 25 26 27 28 29
27 28 29 30
25 26 27 28 29 30 31
29 30 31
26 27 28 29 30
24 25 26 27 28 29 30
28 29 30
30 31
(a)
31
Denotes market holiday.
Denotes typical market slowdown.
Excludes offerings put on hold due to market conditions.
25
Marketing Program: The Roadshow
Marketing the Company

Opportunity for company to articulate ‘story’ and investment opportunity face-to-face with
investors

U.S. Roadshow:
•

8–10 days, with approximately 100+ one-on-one meetings
International Roadshow:
•
2–4 days, with approximately 20–50 one-on-one meetings

Investors prepare for meeting by reading the offering prospectus, having discussions with
research analysts and salespeople prior to meeting management

Critical focus on MD&A and analysis of comparable companies

Most sophisticated investors and institutions will spend time building earnings and valuation
models to test investment thesis

Market environment plays critical role in investment appetite

Critical juncture in deal process
Investors ask everything required to make an informed investment decision
III. IPO EXECUTION

26
The Roadshow Presentation
Elements of the Roadshow Presentation

Company and Underwriters will develop the roadshow presentation during the weeks following
initial filing with the SEC, and while awaiting the first round of SEC comments

Key components of a roadshow presentation:

Tagline or mission statement

Brief overview of Company

Description of the market opportunity

Highlights of Company strategy

Discussion of products/services and product/service roadmap

Discussion of customers, design wins, partners, etc.

Overview of competition and competitive differentiation/barriers to entry

Review of historical financial results and projected financial model (i.e., gross margins,
operating expenses as a % of revenues, operating margin, net margin)
Roadshow presentation should be approximately 25 minutes long

Critical to leave plenty of time during roadshow meetings for investor Q&A

Company management and Underwriters will rehearse roadshow presentation and Q&A numerous
times in advance of actual roadshow
III. IPO EXECUTION

27
Illustrative Roadshow Schedule and Targeted Accounts
San Francisco
7X7 Asset Mgmt.
Artis Capital Mgmt.
Ascend Capital
Capital Research Global
Cavalry Asset Mgmt.
Crosslink Capital
Farallon Capital Mgmt.
Franklin Advisers
J&W Seligman
Palo Alto Investors
Partner Fund Mgmt.
Passport Capital
RCM Capital
RS Investment Mgmt.
Security Global Investors
Seattle/Portland
Columbia Mgmt.
Mazama Capital Mgmt.
Rainier Investment Mgmt.
Roxbury Capital Mgmt.
Tygh Capital
Midwest
American Century
Arbor Capital Mgmt.
Artisan Partners
Calamos Advisors
Castleark Mgmt.
Citadel Investment Group
Columbia Wanger
Cortina Asset Mgmt
Driehaus Capital Mgmt
FAF Advisors
M&I Investment Mgmt.
Magnetar Financial
Next Century Growth
Northern Trust
Oberweis Asset Mgmt.
Peregrine Capital Mgmt.
RiverSource Investments
Segall Bryant Hamill
Skylands Capital Llc
Thrivent Investment Mgmt.
UBS O’Connor
William Blair
Boston
Adage Capital
Alydar Capital
BlackRock Advisors
Boston Partners
Columbia Mgmt.
Constitution Research
Copper Rock Capital Partners
Eaton Vance Mgmt.
Essex Investment Mgmt.
Evergreen Investment Mgmt.
Fidelity Mgmt. & Research
Fortis Private Investment Mgmt.
Grantham, Mayo, Van Otterloo
Lee Munder Investments
Loomis Sayles
MFC Global Investment Mgmt.
MFS Investment Mgmt.
Putnam Investment Mgmt.
Sirios Capital Mgmt.
State Street Global Advisors
The Boston Company Asset Mgmt.
Vinik Asset Mgmt.
Wellington Mgmt.
Westfield Capital Mgmt.
New York Area
Preliminary Roadshow
Day 1 New York
Mgmt Presentations/
1x1 Mtgs
Day 2 Frankfurt/London
1x1 Mtgs
Day 3 London
1x1 Mtgs/Group Lunch
Day 4 Mid-Atlantic
1x1 Mtgs
Day 5 Boston
1x1 Mtgs/Group Lunch
Day 6 New York
1x1 Mtgs
Day 7 New York
1x1 Mtgs/Group Lunch
Day 8 KC/ Denver
1x1 Mtgs
Day 9 San Francisco
1x1 Mtgs/Group Lunch
Day 10 Portland/L.A.
1x1 Mtgs
Day 11 Chicago/Minneapolis 1x1 Mtgs
III. IPO EXECUTION
(Conference calls will be scheduled as needed)
Los Angeles/San Diego
AIG Sun America Asset Mgmt.
Capital Guardian
Capital International
Capital World
Evolution Capital Mgmt.
Jacaranda Partners
Nicholas-Applegate Capital Mgmt.
PRIMECAP Mgmt.
TCW Asset Mgmt.
Wall Street Associates
Note:
Denver/Salt Lake City
Arrowpoint
Denver Investment Advisors
Janus Capital Mgmt.
Marsico Capital Mgmt.
Platte River Capital
Wasatch Advisors
Wells Capital Mgmt.
Mid-Atlantic
Texas/Kansas City
AIM Mgmt. Group
American Century Investment Mgmt.
Brazos
Highside Capital Mgmt.
Kornitzer Capital Mgmt.
Security Investors
Van Kampen
Waddell & Reed Investment Mgmt.
Bold denotes top Cowen recommended accounts.
28
Aberdeen Asset Mgmt.
Blackrock Advisors
Chartwell Inv. Partners
Columbia Partners
Delaware Investment Advisers
Federated Investment Mgmt.
Friess Associates
Legg Mason Fund Advisors
Redstone Investments
Sands Capital Mgmt.
T. Rowe Price Associates
Turner Investment Partners
Alkeon Capital Mgmt.
AllianceBernstein Capital Mgmt.
Balyasny Asset Mgmt.
BlackRock Advisors
Castlerock Mgmt.
Caxton
Chilton Investments
ClearBridge Advisors
Columbus Circle
DE Shaw
Deutsche Asset Mgmt.
Duquesne Capital Mgmt.
Federated Kaufmann
Fred Alger Mgmt.
FrontPoint Partners
George Weiss Associates
Gilder, Gagnon, Howe & Co.
Goldman Sachs Asset Mgmt.
Highbridge Capital Mgmt.
ING Investments
Intrepid Capital Mgmt.
J. & W. Seligman & Co.
Jennison Associates
JP Morgan Asset Mgmt.
Kingdon Capital Mgmt.
Lord Abbett
Maverick Capital
Moon Capital Mgmt.
Morgan Stanley Investment Mgmt.
Neuberger Berman
Northern Trust
Och-Ziff Capital Mgmt.
OppenheimerFunds
Palisade Capital Mgmt.
Royce & Associates
S.A.C. Capital
Schroder Investment Mgmt.
Straus Asset Mgmt.
TIAA-CREF
Tudor Investments
UBS Global Asset Mgmt.
Visium Asset Mgmt.
Weiss Multi-Strategy Advisers
York Capital Mgmt.
Ziff Asset Mgmt
Selected Targeted Institutions in Europe
U.K. and Ireland
Scandinavia
London
Sweden
Aerion Fund Mgmt.
AXA Framlington
Barings
BAE Systems
Blackrock Investment Mgmt.
British Airways Pension Inv Mgmt.
Cheyne Capital
Ecofin Ltd
F&C Management
First State Investments
Gartmore Investment Mgmt.
GLG Partners
Guinness Atkinson
Henderson
Insight Investment Mgmt.
Kuwait Investment Office
Legal and General
Neptune Investment Mgmt.
Newton Investment Mgmt.
Pictet Asset Mgmt.
Polar Capital Partners
RCM Capital
SAC Capital
Smith and Williamson Asset Mgmt.
Threadneedle Asset Mgmt.
Lannebo Fonder
Manticore
SEB Wealth Mgmt.
Swedbank Robur
Denmark
Bank Invest Asset Mgmt.
Carnegie Asset Mgmt.
Danske Bank
Nordea Investment Mgmt.
Norges Bank Investment Mgmt.
Norway
DnBNOR Asset Mgmt.
Germany
Allianz Global Investors
DWS Investment GmbH
DEKA Investment GmbH
INVESCO Kapitalanlage GmbH
Metzler Investments
Union Investment GmbH
Scotland
Aegon
Ballie Gifford
Ignis Asset Mgmt.
Martin Currie
Scottish Widows
III. IPO EXECUTION
Ireland
Bank of Ireland Asset Mgmt.
Bloxham
Eagle Star
Irish Life
Pioneer
Setanta
Benelux Region
Switzerland
The Netherlands
Bank Julius Baer
Credit Suisse Asset Mgmt.
Lombard Odier Darier Hentsch Cie
SAM Sustainable Asset Mgmt.
UBS Global Asset Mgmt.
APG Investments
Delta Lloyd/Cyrte Investments
ING Groep
Interpolis
Robeco
Brussels
Italy
Aureo Gestioni
Bipemme SGR
BPU — Ubibanca
Eurizon
Dexia SA
ING
KBC Asset Mgmt.
Note:
Bold denotes top Cowen recommended accounts.
29
Illustrative Roadshow Example
Summary Statistics




11
# of Cities:
12
# of One-on-Ones/
Two-on-Ones:
56
# of Conference
Calls:
13
# of Three-onOnes/Group
Meetings:
5
III. IPO EXECUTION

# Of Roadshow
Days:
30
Marketing: Attack the Market to Create Excitement and Demand
The Issuer’s story will be
well received by
institutional investors, but it
will not sell itself

Work extensively with management on roadshow presentation

Compelling story

Effective graphics

Comfortable and convincing voice-over

Robust Q&A prep

Institutional sales memo

Pertinent deal information

Sales points and positions

Anticipate investor questions

Management teach-in

Educate salesforce

Preview of anticipated Q&A

Net roadshow

Deal captain teach-in

Complements analyst teach-in with the “investor hooks”

Real-time adjustment to positioning based on feedback
•
Growth funds
Targeting effort
•
Tech specialists

Identify top prospects
•
Small cap specialists

Communicate aggressively
•
GARP funds
III. IPO EXECUTION


•
Long-term oriented hedge funds
Strategic design of roadshow

Shape roadshow to tap every pocket of demand

Schedule cities to generate early order momentum and buzz

Feedback loop to management

Leverage proprietary Cowen insight and senior-level relationships to drive anchor order
conversion

Develop and capitalize on demand tension

Strategic messaging to investors during roadshow

Find investors who will drive price
31
Pricing and Allocation of Shares
The Bookrunner’s Capital
Markets team will be the
source of pricing and
allocation advise as well as
a liaison between
management and the
salesforce
Pricing Considerations

Registration statement declared “effective” following clearance of SEC comments

Shortly before pricing, Underwriters conduct final “bring down due diligence call” with Company
management

Pricing call occurs shortly after being declared effective by the SEC

Changes in offering size or price:

Depending on the magnitude of changes, those changes may need to be filed as an
amendment with the SEC and approved before proceeding with the offering

Execution and delivery of Underwriting Agreement

Printing and distribution of Final Prospectus
III. IPO EXECUTION
Allocation Considerations

Allocations made by the bookrunner of the transaction

Bookrunner utilizes allocations as a tool to ensure strong aftermarket performance of the stock,
acting in both the issuer’s and investors’ best interests

Through allocations, bookrunner controls the institutional, retail and geographic distribution of the
offering

Allocates investors based on the following criteria:


Quality of institution

History of long-term holding and continued aftermarket interest in both previous IPOs and
comparable companies

Timing of order

Size of order

Anticipated aftermarket demand
Bookrunner utilizes allocation to ensure strong aftermarket performance of the share

Allocations that “seed” investors

Reduces supply in aftermarket, stimulates aftermarket buying

Investor confidence in aftermarket price and liquidity
32
Aftermarket Support — Key Ingredients
Stabilization
Sales and Trading
 Creation of excess demand and
a large syndicate short position
through overallotment —
creates demand in the
aftermarket
 Create a liquid two-way market
for shares of the company
 Capital commitment
 Provide investors with ready
liquidity for their investment
(increases or decreases)
 Repurchasing of shares from
the Market
III. IPO EXECUTION
Strong
Aftermarket
Support
Research
Investor Relations
 Continue regular publication of
research reports and meetings/
conference calls with investors,
updating them on the company
 Provide regular flow of
information on country, sector
and the company to investors
 Provide company with ongoing
feedback from investors
 Monitor the research effort of
syndicate members during
offering process and in the
aftermarket
33
 Sponsor and organize
roadshow presentations for the
company to update investors
on ongoing developments
Over-Allotment Option Overview
At Pricing
Pricing Call:
Underwriters Buy
5,000,000 Shares
Allocations:
Underwriters allocate
5,750,000 shares at deal price (includes 15% overallotment option)
Settlement (T+3):
Underwriters pay for
5,000,000 shares from company
Post Pricing
Post pricing of the initial
public offering, market
conditions and other factors
create three options
available to the underwriter
to support the issuer

Leaves underwriters with a 750,000 share short position

Stock trades above deal price: underwriters buy 750,000 shares from the issuer at deal price up
to 30 days after trade date (i.e. demand greater than supply)


Stock trades below deal price: underwriters use the 750,000 share short position to stabilize the
stock (i.e. demand less than supply — buy stock in the open market as buyer of last resort)

III. IPO EXECUTION

Over-allotment option proceeds are delivered to the issuer
Over-allotment option proceeds are not delivered to the issuer
Stock trades around deal price: underwriters may use a portion of the 750,000 share short
position to buy over-allotment shares from the issuer at deal price (i.e. demand equal to supply)

Over-allotment proceeds may be delivered to the issuer
34