北京大学私募股权投资退出机制

1BetterExitsExitRoutesApproachtoExitManagingBusinessforExitAppointmentofAdvisorsConclusionShidiZhangPKUssm2AReviewoftheProcessDuediligencePricingandNegotiationVentureCapitalFundSourceofCapitalManagementSkillScreenProjectsMonitor&AdviseDivestmentRejectBusinessPlanExitStructureInvestmentOrganizationFundraising&InvestorrelationsDealgenerationAgency&AdvisersStart-upFirmsAgency&AdvisersShidiZhangPKUssm3ExitRoutesLiquidationandwrite-offsSharebuybacksSalestofinancialbuyersTradesalesIPOShidiZhangPKUssm4LiquidationandWrite-offsCase2TermSheetLiquidationPaycostofpreferredSeriesAConvertible4millionshares$1/shareParticipationwhen=$50millionAsconvertedbasiswhen$50Write-offs……ShidiZhangPKUssm5ShareBuybacks/RedemptionCase2termSheetEqualannualinstallmentsYear5-7CostplusaccrueddividendsForVCswhenallotherexitroutesfailedPoorperformance,lackofinterestedbuyersManagementormajorityownersrefusetosellBuybacknotafavoredexitManagementhastofindthemoneyForbadinvestmentitistheonlywayoutManyVCsfailedtoincludeabuybacktermShidiZhangPKUssm6SalestoFinancialBuyersOpportunitiesforfinancialpurchasersTransitionfromearlystagetolaterstageprovideanindependentvaluationRefinancingattheendofafund’slifeNeedbytheowningVCtorealizeagain(fortaxorreportingreasons)FormanagementtostaywhenIPOnotpossibleBreakdownofrelationshipbetweenmanagementandinvestor,thebuyermaybeabetterownerShidiZhangPKUssm7TradeSaleAdvantagesMaygetpremiumforsynergy,marketshareorentry100%cashuponexitCheapercoststhanIPOFasterandsimplerOnlyoptionforsmallercompaniesOnlyonebuyertoconvince,notthewholeworldDisadvantagesManagerswilllosetheircontrol,therebymayopposeSometimesfewtradebuyers,hardtofindWarrantiessometimesrequestedyetVCnotwillingtoofferSiebelacquisitionofedocs$115millionuponacquisitionAdditionalpaymentsin2006BasedonrevenueandothercontractualmilestonesShidiZhangPKUssm8SiebelToAcquireedocsShidiZhangPKUssm9ShidiZhangPKUssm10ShidiZhangPKUssm11WarrantShidiZhangPKUssm12ShidiZhangPKUssm13ShidiZhangPKUssm14ShidiZhangPKUssm15ShidiZhangPKUssm16ShidiZhangPKUssm17QuantifyuserbenefitsShidiZhangPKUssm18ShidiZhangPKUssm19ShidiZhangPKUssm20ShidiZhangPKUssm21ShidiZhangPKUssm22ShidiZhangPKUssm23ShidiZhangPKUssm24ShidiZhangPKUssm25ShidiZhangPKUssm26InitialPublicOffering(IPO)ReasonsandAdvantagesRaisecapital,someneedhundredsofmillionsBanks:tooriskyVCs:10-15%inasinglefirmFutureroundeasierAchievingliquidity,higherreturnsFavoredbymanagement:control,diversificationVCs:outrightsalesandsharedistribution(appreciation)Imageofstabilityanddependability,highvisibilityCanbedualtrackapproach,provokingatradesalesShidiZhangPKUssm27InitialPublicOffering(IPO)DisadvantagesHighercoststhanotherroutes,10%ormoreDisclosureandscrutinytroublingRiskofunsuccessfulIPO,“tainted”Case2edocsNotabletogoIPObecausebeing“tainted”?Lock-upagreementprevents100%exitRetainedholdingsarisk,VCnolongerhavecontrolSmallerexchangelackofliquidityMessagehastobesimple,attractivetolarge#ofinvestorsNotanoptionforsmallercompaniesShidiZhangPKUssm28Exit:IPODecidetoproceedwithIPOI-bankers,lawyers,accountants,managementsRegistrationdocsreviewedbyexchangeRoadshowsandpricingIPO,underwritingagreementsignedSeveralmonths2months3weeks1daySelectadvisersDetermineexchangePrepareQuarterlyandannulfinancialstatementsOtherreportingrequirementsInterviewwithInvestmentbankers,Lawyers,InvestorrelationfirmsReviewRisks,EstablishorrestructurebusinessframeworkPrepareRegistrationdocs,Prospectus,DisclosurestatementsBoardapprovalIPO,RegistrationstatementsShidiZhangPKUssm29SelectionofUnderwriterSelectioncriteriaReputationofresearchanalystsCommitmentsmadetoprovideanalystcoverageafterIPOPerformanceofpastIPOs7%fees,pluslegalandothercostsastandardFinancialinstitutionsinvolvedMaybeseveralunderwritersSmallbank,specializedinparticularindustriesLargebank,abilitytomarketequityLeadunderwriter,keepbookandallocatesharestoinvestorsManagingbanks,recruitingotherbankstoformaconsortiumShidiZhangPKUssm30TheProcessBeforemarketingPrepareIPOdocumentsFiletogovernment(SEC)QuietperiodTheweekbeforeandafterIPOMarketingtheofferProspectusandroadshowBook-building“Firmcommitment”,reputablebanksAtasetprice,determinedthenightbeforeIPOFactorsinvaluation:demands,comparablecompanies,projectedcashflowsDayofofferingandbeyondTostabilizeshareprice,“GreenShoe”optionAnalystcoverageMarketmakerAdvisoryroleandfollow-onofferingsShidiZhangPKUssm31Exit:IPO2012NasdaqGlobalMarketIPOrequirementsStandardsRequirementsIncomeEquityMarketValueTotalAsset/TotalRevenueShareholders’EquityMarketCapitalizationTotalAssetsTotalRevenuePretaxIncomePubliclyHeldSharesMarketValueofPublicFloatMinimumBidPriceRoundLotShareholdersOperatingHistory$15mn$1mn1.1mn$8mn$4400301.11844002yrs$75mn1.1205400$75mn$75mn1.1201400ForDetials,seeNASDAQ“InitialListingGuide”ShidiZhangPKUssm32Exit:IPO2012NasdaqCapitalMarketIPOrequirementsStandardsRequirementsNetIncomeEquityMarketValueShareholders’EquityMarketCapitalizationTotalAssetsTotalRevenuePretaxIncomePubliclyHeldSharesMarket