Professional advice on Capital Markets:
- Corporate preparations for IPO;
- Participation in long-term strategy elaboration;
- Participation in investment program elaboration;
- Organization of placement or share sales among selected financial investors - private placements.
Main methods of share capital financing:
Efforts to attract financial investors into business
Financial investors could provide appropriate financing for corporate growth
in exchange for share in its capital - usually from 10% to 49% of share capital. The main goal of financial investor is assets/capitalization growth with opportunity to sell its share after certain period (1.5-3.5 yrs);
Efforts to attract strategic investors
The goal of strategic investors is to develop their businesses - i.e. to come into new markers, to improve their production facilities and technologies, etc. One of the most effective ways to develop production facilities - is to buy acting enterprise in their industry.
As a rule, strategic investor is going to buy not less than 25% of share capital (i.e. blocking holding) of such enterprise.
Requirementsof strategic/financial investors for the enterprise to be considered:
- high growth potential for the company; clear development strategy;
- promising, growing market;
- competent management; ready to realize chosen strategy;
- business transparency: clear organizational structure, accounting according to international standards, information disclosure for investors.
Technology of direct investments formation
A company can attract investors in two ways:
- to perform private placement (i.e. to place additional issue of shares among selected investors).
Private placement is usually used in order to realize particular project (production facilities modernization, launch of new products, new markets entry) and also to attract strategic investor.
- to perform public placement (i.e. to place additional issue of shares for public).
Public placement is used by companies being in the process of permanent development which need persistent financing income for the support of growth. Public placement is the most expensive, but the most effective method for the share capital mobilization because only open market could give the maximal price for the shares issued.
Areas of business preparations for capital mobilization:
- Emphasis on promising development directions
- Structuring of company subdivisions
- Organization of financial planning/accounting system
- Increase of industrial assets liquidity
- Evaluation of corporate business/property
Main stages of initial public offering ("IPO")
- Decision regarding issue of shares
- choice of consultants and arrangers/underwriters
- paperwork (decision regarding issue of shares/prospectus) for state registration of the issue. Preparation of investment memorandum.
- Registration of Decision & other documents in FFMS
- information disclosure
- access of shares for placement on stock exchange
- PR events, advertising
- shares placement on stock exchange
- Registration of placement report
- access to secondary market in RTS
Successful IPO: main requirements
1. Business requirements for successful IPO:
- Well-established business with large share of the market
- Stable competitive positions
- Sufficient business size
- Profitability comparable to average in industry
- Optimal financing structure
2. Requirements for corporate governance and transparency:
- Clear and transparent business organizational structure
- Regular financial statements according to IAS/US GAAP
- Advanced IR-policy
- Dividend policy
- Independent directors
3.Requirements for development strategy:
- Clearly formulated business development strategy
- Clearly formulated strategy in capital markets; focused on capitalization growth
- Professional management team
4.Goodwill is important part of capitalization:
For the capital mobilization on the most beneficial terms it is necessary not just make the business effective, but also to create goodwill
Investment bank — financial institution, specialized on issuing, placement guarantee and trading of securities; also support for clients on various financial problems is provided.
Functions of Investment Bank:
1. Arranger/underwriter for new issue launch:
- Analysis, evaluation, preparation of business for IPO
(Cooperation with auditor, legal adviser, appraiser)
- Elaboration of market entry strategy, elaboration of IPO concept
- Paperwork for registration of new shares issue
- Registration of issue in FFMS
- Information disclosure
(Cooperation with financial and legal advisers)
- Formation of issuing syndicate and underwriters group
- Cooperation with potential investors: search for investors, negotiations, marketing campaign (public presentations, publications in media, road-show arrangement)
- Secondary market support
- Market-making (in cooperation with stock exchange)
- Analytical support of issuer
2. Asset management on behalf of clients (sale/purchase of financial instruments for clients, financial analysis, recommendations for clients financial operations).
3. Financial and consulting services regarding M&A transactions.
4. Securities trading.
