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Raising capital in difficult market conditions

Raising capital in difficult market conditions. Deutsche Bank presentation at Belarus Finance and Investment Forum Minsk, 22 October 2008. Elena Yassik Senior Associate, Equity Capital Markets, Central and Eastern Europe. Deutsche Bank’s global footprint in 75 countries. Equity underwriting.

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Raising capital in difficult market conditions

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  1. Raising capital in difficult market conditions Deutsche Bank presentation at Belarus Finance and Investment Forum Minsk, 22 October 2008 Elena Yassik Senior Associate, Equity Capital Markets, Central and Eastern Europe 8jld0174_DB screenshow – 09/11/2014 02:14:42

  2. Deutsche Bank’s global footprint in 75 countries Equity underwriting Equity trading dominance Distribution footprint Debt Capital Markets M&A Advisory Depository services Local presence in the CIS 8jld0174_DB screenshow – 09/11/2014 02:14:42

  3. Deutsche Bank – Leading equity franchise in the CIS (2007 – 2008YTD) Bookrunner US$ (bn) Market share (%) 1 Deutsche Bank 6,298.4 13.9 2 Credit Suisse 5,354.7 11.8 3 Renaissance Capital 4,975.9 11.0 4 JP Morgan 4,778.7 10.6 5 Morgan Stanley 4,517.2 10.0 6 Citigroup 4,091.2 9.0 7 Goldman Sachs 2,597.9 5.7 8 Troika Dialog 1,950.1 4.3 9 ABN AMRO Rothschild 1,391.4 3.1 10 Credit Suisse 1,072.7 2.4 8jld0174_DB screenshow – 09/11/2014 02:14:42

  4. Deutsche Bank – track record in the CIS Russia US$449m Initial Public Offering Sole Global Coordinator and Joint Bookrunner April 2008 US$€487m Follow-on Offering Joint Global Coordinator and Joint Bookrunner April 2008 €253m Initial Public Offering Sole Global Coordinator andJoint Bookrunner November 2007 US$1.9bn Initial Public Offering Joint Global Coordinator andJoint Bookrunner May 2007 US$8.0bn Initial Public Offering Joint Global coordinator and Joint Bookrunner May 2007 8jld0174_DB screenshow – 09/11/2014 02:14:42

  5. Ukrainian Government US$1,000m Bond Issuance Joint BookrunnerJune 2005 Deutsche Bank – track record in the CIS (continued) Ukraine US$419m Initial Public Offering Joint Bookrunner June 2006 Kazakhstan £1.5bn Initial Public Offering Sole Global Coordinator and Joint Bookrunner December 2007 €569m Initial Public Offering Joint Global Coordinator and Joint Bookrunner December 2006 8jld0174_DB screenshow – 09/11/2014 02:14:43

  6. What has happened in the equity markets? Widespread fears that US will go into recession and that Europe and EM will be affected Oil taxation reduction rally in Russia • Lehman files for Chapter 11 bankruptcy protection • BofA announces acquisition of Merrill Lynch • US Government takes control of Freddie Mac and Fannie Mae (22.0)% (25.0)% Russia’s economic indicators starting to slow • Sell-off driven by global jitters • Fed intervention (63.2)% War conflict in South Ossetia strikes markets (73.2)% 17th-Sept-08 Trading suspended on Russia’s two main stock exchanges due to erratic volatility Source: Bloomberg, October 2008 8jld0174_DB screenshow – 09/11/2014 02:14:43

  7. Capital markets outlook – Belarus vs other CIS countries Capital issuance – 2007 Index performance – 2008 YTD Source: Dealogic, October 2008 8jld0174_DB screenshow – 09/11/2014 02:14:43

  8. Economy outlook – fundamentals remains strong GDP growth(a)(%) Inflation (%) 2007 2008F 2009F (a) Real GDP Source: www.imf.org, World Economic Outlook, October 2008 8jld0174_DB screenshow – 09/11/2014 02:14:43

  9. Key capital raising alternatives The financing options Financing alternatives Factors influencing valuation Cost of capital • Investment story • Corporate structure/transparency • Corporate governance • Quality management • Financial history • Market forces • Primary listing • Secondary listing / Depositary receipts • High yield debt • Eurobonds • Private placements • Venture capital • Bank finance EquityCapitalMarkets Factors influencing cost • Company readiness • Bankers commission levels • Regulatory requirements • Adviser fees Time, complexity, stage in corporate lifecycle 8jld0174_DB screenshow – 09/11/2014 02:14:43

  10. Strategic scale (M&A) • Sale of control or joint venture (sale of minority stake plus option for control in the future is possible) • Immediate cash act at premium • Access to expertise and technologies of the buyer • Loss of control and possibility for equity upside Private placement • Sale of minority stake to a limited number of investors (with limited rights to participate in management) • Quicker and simpler way to receive financing • Keep the control • No public stakes • More expensive financing • Participation in the Board may be required Convertibles • Structured debt product with possibility to convert into the shares • Quick way of getting financing • Guaranteed return/downside protection required IPO • Public offer to a wide pool of investors • Market valuation • Open up future M&A / follow on activity • Keep the control • Long preparation and high one off and ongoing costs Comparison of key equity capital raising alternatives • Type Description Characteristics 8jld0174_DB screenshow – 09/11/2014 02:14:43

  11. Comparison of key equity training alternatives M&A PP Convertible IPO Liquidity Min Max Independent strategy Min Max Maximizing value Market value for minority interest Higher value(especially if downside protection) Low value(pre IPO discount) Valuation 8jld0174_DB screenshow – 09/11/2014 02:14:43

  12. Sharing equity upside Time consuming and more applicable for mature business High one-off transaction costs 2% – 6% Broker fee (success based) ~US$3m – US$5m (min) – fixed transaction costs High ongoing costs audit stock exchange executive directors in-house accounting Onerous ongoing reporting obligations Discover the market value Confirmation of ownership rights Raising finance Open up for future M&A activities/exit Improve transparency and corporate governance Implementation of long-term management incentive programme Image enhancement, visibility and brand awareness Common route for privatisation in many countries Potential rationale for IPO – pros and cons IPO pros IPO cons 8jld0174_DB screenshow – 09/11/2014 02:14:43

  13. Early preparedness for capital raising Corporatestructure Corporategovernance HistoricalIFRS financial statements Managementteam Strategy &investment case Investorrelations Practical issues 8jld0174_DB screenshow – 09/11/2014 02:14:43

  14. Growth Earnings/profitability Stability of franchise/market share Trackrecord Management Key elements of an equity story 8jld0174_DB screenshow – 09/11/2014 02:14:43

  15. Investors’ approach to valuation Methodology Applicability Comparable multiples analysis EV/EBITDA EV/Revenue Discounted cash flow (DCF) 8jld0174_DB screenshow – 09/11/2014 02:14:43

  16. Belarusiansectorpeers Valuation positioning – comparable listed peer universe 8jld0174_DB screenshow – 09/11/2014 02:14:43

  17. Preliminary valuation assessment Research publication Due diligenceDevelopment of theequity story Analysts presentation Company drivers Managementprojections IPOoffer price Valuation ‘price talk’ ManagementroadshowPrice range Equity/Macro market environment Monitor markets comparables, and new issue trends Review of IPO pipeline Market drivers Investment banking valuation Research valuation Market valuation Price discovery in the IPO 8jld0174_DB screenshow – 09/11/2014 02:14:43

  18. International CIS London Warsaw Frankfurt Minsk Moscow Ord GDR Ord DR Ord GDR Ord Ord RDR WARNING! Do not remove logos from this staging area - (when coping/moving logos from slide-to-slide, take both members of pair) Key listing alternatives 8jld0174_DB screenshow – 09/11/2014 02:14:43

  19. WARNING! Do not remove logos from this staging area - (when coping/moving logos from slide-to-slide, take both members of pair) Main market (ordinary shares) (GDR) Listing alternatives • Deep liquidity for large capital raisings • Recommended for deal size exceeding US$1bn • 3 year track record + audited IFRS FS • 25% min free float is mandatory • Full compliance with the combined Code of Corporate Governance • Access to international capital pool for issuers from less developed markets • Flexible free float • Can be recommended for deal size >US$500m • 3 year track record and audited IFRS FS is required • No track record needed to obtain a listing • More focused on UK rather than Emerging Markets • Limited to deal size of US$200m 8jld0174_DB screenshow – 09/11/2014 02:14:43

  20. WARNING! Do not remove logos from this staging area - (when coping/moving logos from slide-to-slide, take both members of pair) Listing alternatives (continued) • Good option for small and mid-cap companies • Retains emerging markets status • Through different listing segments allows CIS companies of different governance standards to list in a market with many peers • Access to local and international pool of investors • Simpler process vs LSE • Recommended for deal size of up to US$500m • Untested for foreign issuers • Gain goodwill with local regulators • Meaningless capital raising • Very limited trading 8jld0174_DB screenshow – 09/11/2014 02:14:43

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