Taking your company public
Some experiences
09-05-2014
www.Ricardo-Zettl.com
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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
09-05-2014
www.Ricardo-Zettl.com
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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
09-05-2014
www.Ricardo-Zettl.com
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Why to go public???
• Please refer to http://www.investopedia.com/ask/answers/04/061704.asp
for further information put “going public” in Google
– “Advantages
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Strengthens capital base [dramatically!!!]
makes acquisitions easier
diversifies ownership
and increases prestige.”
– “Disadvantages
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09-05-2014
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.”
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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
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different in every State of the US
internationally it is called a SA
• An army of layers
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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
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09-05-2014
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
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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
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A “sexy story”
Investor relations
Road shows
Publicity
The share itself becomes a product to sell
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Now the examples
09-05-2014
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The hero
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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/
09-05-2014
www.Ricardo-Zettl.com
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Apprenticeship 1
• COSIMA, now CONTI-group – internship
http://www.conti-online.de/unternehmen/geschichte/
• Not listed, but collecting huge amounts of equity
• Learned:
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Road shows
Investor relations
Shareholders´ general meetings
Public accounting
• Not always funny, but over all a success story
09-05-2014
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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
09-05-2014
www.Ricardo-Zettl.com
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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:
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– 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
09-05-2014
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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!
09-05-2014
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Example 1
• easypay – CFO
• Electronic cash with bank cards in the point of sale
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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
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Development of software
Development of new contracts
Much more hardware in the datacenter
Development of a new sales organization
Click company
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Example 1
• Conclusion:
Going public to collect the money needed
• What do you need? See above …
• I started to work the list
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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.
09-05-2014
www.Ricardo-Zettl.com
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Example 1
• End of the story:
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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
09-05-2014
www.Ricardo-Zettl.com
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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.
09-05-2014
www.Ricardo-Zettl.com
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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
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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
09-05-2014
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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
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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/
09-05-2014
www.Ricardo-Zettl.com
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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
09-05-2014
www.Ricardo-Zettl.com
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Example of going down
• Tiscaly – CFO of the German subsidiary
telecommunication
• International trend:
privatize former state owned service companies
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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
09-05-2014
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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
09-05-2014
www.Ricardo-Zettl.com
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Example of going down
• What do you need? (to sell the business) See above …
• I started to work the list: (as far as possible)
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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.
09-05-2014
www.Ricardo-Zettl.com
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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?)
09-05-2014
www.Ricardo-Zettl.com
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Thank you for your attention
Ricardo A.M. Zettl
www.Ricardo-Zettl.com