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com

NY2-672999

May 18, 2010

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 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 Initial jobless claims are down 3% since the beginning of the year and have fallen 32% since peaking in March 2009
U.S. Economic Growth
(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 2010 (Reported EPS) $25.0 20.0 15.0 10.0 5.0 0.0 (5.0) (10.0) (15.0) (20.0) (25.0) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 Actual 2009 Expected 2010

S&P 500 Earnings Power


(Forward P/E) 20.0x 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0

S&P / Case-Shiller Home Price Index


(Index) 250 (Monthly % Chng) 3.0% 2.0 200 1.0 150 0.0 (1.0) 100 (2.0) 50 Jan-00 Feb-02 Feb-04 Feb-06 Feb-08 (3.0) Feb-10 (% Unemployment) 10.5% 9.5 8.5 7.5 6.5 5.5 4.5 3.5 2.5 1.5 0.5 Jan-07 Jul-07

U.S. Unemployment
(Initial Jobless Claims) 9.9% 700 650 600 550 500 450 444 400 350 300 250 Feb-08 Aug-08 Mar-09 Oct-09 Apr-10

I. FINANCING ENVIRONMENT

Source: Bloomberg and FactSet as of May 14, 2010.

Euro Zone Debt Crisis Threatening Economic Growth


EU Deficits as a % of GDP
(Deficit as a % of 2010 GDP) 0.0% (2.0) (4.0) (6.0) (8.0) (8.0)% (10.0) (10.1)% (12.0) (14.0) (16.0) (14.7)%
Ireland

PIIGS Intra European Lending Web

GREECE ITALY
EU Average: (7.5)%

IRELAND

(12.8)%
Great Britain

(12.3)%

Euro / US$ Exchange Rate


(Euro / USD Exchange Rate) $1.55

I. FINANCING ENVIRONMENT

1.50 1.45 1.40 1.35 1.30 1.25 1.20 01/01/09 05/03/09 09/03/09 01/04/10 05/07/10

Portugal

Greece

Spain

PORTUGAL

Current: $1.243

SPAIN

Source: New York Times, SeekingAlpha.

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 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) 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
Bear Markets Recoveries(a)
(Indexed) 100 90 80 70 60 50 40 30 20 10 0
Day 0 250 Crash of 1929 Tech Crash 500 750 1,000 1,250 1973 Oil Crisis Global Financial Crisis
(53.9)% Global Financial Crisis 10/9/07 - ??? Crash of '29 9/3/29 - 7/8/32 (89.2)% (44.1)% (47.9)% 1973 Oil Crisis 1/11/73 - 10/3/74 (37.8)% Tech Crash 1/14/00 - 10/9/02

Indices Since 2009


(Indexed) 170 160 150 140 130 120 110 100 90 80 70 60 01/01/09 S&P 500 05/05/09 DJIA 09/07/09 01/09/10 05/14/10 Russell 2000

44.2%
28.7% 23.5% 18.5%

NASDAQ

Broad Market Volatility Since 2009


(VIX) 60 (% Change) 60.0% 50.0 50 40.0 40 30.0

Sector Performance Since 2009


57.7% 53.6%

I. FINANCING ENVIRONMENT

38.8% 31.1% 22.3%

30 LTM Avg. = 23.6

20.0 13.8%12.0% 10.0 8.9% 2.3% 0.0

20

5-Yr Avg. = 21.9

10 01/01/09 05/05/09 09/07/09 01/09/10 05/14/10

Health Care

(10.0)
Cons. Disc. Industrials Cons. Stp. Info Tech. Financials Materials

(5.9)%
Telecom Utilities Energy

Source: Bloomberg and FactSet as of May 14, 2010. (a) Based on number of calendar days from bull market peak to bear market trough.

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 EUs financial support package stabilized recessionary concerns and will likely revitalize the equity financing market
NASDAQ versus VXN
(NASDAQ ) 3,000

March Lows in Equity Markets

(VXN) 85 75

2,500

65 55

2,000

45 35

1,500

25 15

1,000 Jan-07 Apr-07 Jul-07 Nov-07 Feb-08 May-08 Sep-08 Dec-08 Mar-09 Jul-09 Oct-09 Jan-10

5 May-10

I. FINANCING ENVIRONMENT

The equity financing environment has been particularly active since May 2009, corresponding with a narrowing of discounts as financial markets have rallied

Equity Financings by Product Type


(# of Deals)

120 105 90 75 60 45 30 15 0 Jan-07 64 81 84 69

107 98 86 66 58 43 23 27 49 42 33 35 25 18 21 17 21 19 32 70 61 58 61 92 98

108 89 79 62 55 81 58 78 58 36 24

55

May-07

Sep-07 Follow-Ons

Jan-08

May-08

Sep-08 Registered Directs

Jan-09

May-09

Sep-09

Jan-10

May-10

Equity PIPEs

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.

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 12.0 9.0 6.0 3.0 0.0 Q1 Q2


2007

$0.0 $4.5 $3.1 $4.8 $19.7

$0.0

$0.0 $11.5

$5.2

$0.7 $5.2 $6.9 $6.3 $7.4 $0.2 Q3 Q4 Q1 $0.7 $3.3 Q2


2008

$0.4 $0.9 Q3

$0.1 Q4

$0.8 Q1

$0.2 $1.2 Q2
2009

$4.4

$5.0

$2.2 $1.9

$0.7 $1.2 Q2
2010

Q3

Q4

Q1

Growth Sector Proceeds

Non-Growth Sector Proceeds

Visa IPO

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

IPO Pricings, Filings and Withdrawals


(# of Deals) 100 87 80 58 42 40 78 64 60 54 47 38 28 20 10 0 Q1 Q2 2007 Pricings Filings Q3 Q4 Q1 Q2 2008 Withdrawn Q3 Q4 Q1 Q2 2009 Marketed and Failed to Price Q3 Q4 Q1 2010 Q2 16 10 10 9 24 26 30 19 12 5 1 5 1 3 30 31 15 15 10 6 31 31 24 12 5 11 11 18 10 51 Current IPO Backlog: 89 Filings for $20.1 BN

46

40

A. IPO

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.

IPO Pricing Trends


 The IPO pricing environment has improved since March
 67% of IPOs since March 1st have priced within or
(% of Total) 100.0% 80.0 60.0 50.0% 22.2% 60.0% 38.7% 100.0% 100.0% 40.0 55.6% 20.0 0.0 Q1 Q2 2008 Below Range Within Range Q3 Q4 Q1 40.0% 40.0% 30.0% 10.0% Q2 2009 Above Range 16.7% Q3 Q4 Q1 2010 Q2 45.2% 53.3% 36.4% 75.0% 45.5% 10.0%

Pricing Dynamics(a)(b)
0.0% 0.0% 22.2% 60.0% 33.3% 0.0% 0.0% 8.3% 16.1% 18.2% 13.3%

above their ranges


 70% of deals in Jan-Feb priced below their ranges

 IPO pricing conditions remain situation specific, with investors pressuring valuations in cases where growth prospects are more binary
 Tech IPOs have priced well and generally traded up  Pre-commercial biotech IPOs have struggled due to

clinical risk of drug approval


% Downsized / Upsized(a)
(% of Total) 100.0% 80.0 60.0 40.0 20.0 0.0 Q1 Q2
58.3% 40.0% 33.3% 22.2% 20.0%20.0% 25.0% 19.4% 6.5% 27.8% 22.2% 100.0%

Median % Returns
(Median %) 120.0% 80.0
56.0% 102.2% 109.7%

40.0 0.0 (40.0)


(57.6)% (48.9)% 5.2% 0.0% (3.9)% (6.4)% (1.3)% 10.1%

23.2% 3.1% 5.1% 0.6%2.3% 1.3% 0.0% (2.1)% (15.2)%

16.7% 10.0% 0.0%

0.0%0.0% 0.0%0.0% 0.0%

(80.0) Q3 2009 % Upsized Q4 Q1 Q2 2010 Q1 Q2 2008 Offer/1 Day Q3 Q4 Q1 Q2 Q3 2009 Offer/Current Q4 Q1 2010 Q2

Q3 2008

Q4 % Downsized

Q1

Q2

A. IPO

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.

IPO Structural Trends


Number of IPOs by Sector
(% of Total) 100.0%
15.2% 26.8% 32.0% 31.5% 31.0%

Number of IPOs by Market Cap


(% of Total) 100.0%
7.7% 8.1% 20.0% 18.5% 2.4% 31.0% 38.4% 24.0%

80.0
39.9%

80.0

21.9%

60.0

24.0%

60.0
28.0% 24.1% 38.1%

19.7%

37.0%

38.1%

40.0

19.7% 21.7% 12.0% 4.0% 13.1% 8.7% 4.4% 2.2% 4.5% 4.0% 1.5% 8.0%

40.0
16.7% 3.7% 16.7% 16.0% 0.0% 3.7% 3.7% 2.4% 0.0% 2.4% 11.9% 14.3% 50.8%

28.0% 34.3% 31.5%

20.0

14.2%

20.0
28.0% 19.2% 13.0% 28.6%

0.0

0.0 2010 YTD TMT Other 2006 <$250MM 2007 $250MM - $500MM 2008 2009 $500MM - $2BN >$2BN 2010 YTD

2006 A&D Alt. Energy

2007 Consumer

2008 Finance

2009 Health Care

Number of Small and Unprofitable IPOs(a)


(% of Total) 100.0%
16.0% 30.9% 9.3% 23.8% 33.9%

Number of IPOs by % Secondary


(% of Total) 100.0%
4.4% 6.6% 15.8% 4.0% 6.1% 11.6% 12.0% 4.0% 16.0% 14.2% 24.7% 12.0% 22.2% 16.7% 14.8% 13.0% 76.2% 9.3% 2.4% 2.4% 19.0%

80.0

80.0

60.0
90.7%

60.0

40.0
69.1% 66.1%

84.0%

40.0
59.0% 53.5% 56.0% 40.7% 59.5%

20.0

20.0

0.0 2006 2007 "Large or Profitable" 2008 2009 "Small and Unprofitable" 2010 YTD

0.0 2006 No Secondary 2007 <25% 2008 25% - 50% 2009 50% - 75% 2010 YTD >75%

A. IPO

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

U.S. IPO Activity 2010 Year-to-Date


Pricing Date 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 Mean Median Issuer Kingtone Wireless Solution info JinkoSolar Noranda Aluminum TeleNav Express Roadrunner Transportation Systems Charm Communications Douglas Dynamics Alpha & Omega Semiconductor Convio Alimera Sciences Codexis DynaVox Global Geophysical Services Mitel Networks SPS Commerce Tengion Metals USA Primerica Meru Networks Scorpio Tankers SS&C Technologies China Lodging Group Calix First Interstate BancSystem MaxLinear Financial Engines AVEO Pharmaceuticals Crude Carriers Sensata Technologies Baltic Tradin Ltd g Anthera Pharmaceuticals Inc Generac Holdings Inc Sector Software Alt. Energy Metal & Steel -Processing Navigation Products Specialty Retail TransportationServices Avertising Automobile Equipment Semiconductors Software Life Sciences Life Sciences Software Oil & Gas Comm. Equipment Software Life Sciences Metal Distributor Life Insurance Comm Equipment Shipping FinTech Hotels & Motels Comm. Equipment Commercial Bans k Semiconductor Financial Technology Life Sc iences Shipping Industrial Technology Shipping Life Sciences Electrical Machinery Company Characteristics Critial Mass > 40% Rev. ($100m+ Rev) Growth Profitability Proceeds                                                           $ 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 $ $ Market Value 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 1,415.9 546.3 430.4 Above/ Below/ Proceeds/ % Mkt Value Secondary In Range 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 33.2% 29.3 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 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 4.7% 0.1 (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 1.3% (0.5)

A. IPO

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 & Gas Oil China Hydroelectric Corp Electric Power Cellu Tissue Holdings Inc Pulp & Paper Symetra Financial Corp Life Insurance

11

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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 companys profile and credibility with customers and suppliers.  Potentially maintain founder and management control of the companys 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 PublicAdditional Considerations


 Upfront costs.  Management timeboth before and after.  Increased disclosure and reporting obligations.  Corporate governance requirements.  Trading restrictions on insiders and directors.  Compliance costs.  Public shareholdersactivism and litigation threats.  Investor relations.  Uncertaintylegislative and regulatory changes.

This is MoFo. | 15

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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 earlyno 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 companyact 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. Dont 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 Companys 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 Globals 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 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

A. IPO EXAMPLE #1: GTEC

13

GTEC: Valuation Driven by EBITDA and Earnings


Comparable Company Valuation (US$ in millions, except per share data)
EV as Multiple of Stock Price (US$ in millions) CACI International ManTech SAIC Inc. SRA International ICF International NCI Stanley Overall Median Mean Core Peer Group: Micro Cap Median Mean (11/3/09) $48.29 44.82 17.84 18.97 $28.54 26.40 29.29 % of 52W High 99% 74 87 82 92% 77 81 Market Value(a) $1,465 1,616 7,159 1,073 $445 369 725 Enterprise Value(a)(b) $1,795 1,564 7,314 1,073 $663 411 865 EBITDA CY09E 7.0x 7.6 6.8 7.1 9.6x 10.0 9.7 7.6x 8.3 9.7x 9.8 $14.00 15.00 16.00 NA NA NA $129 138 148 $130 136 143 8.3x 8.8 9.2
(c)

Price/ Earnings(c) CY09E 15.1x 14.4 14.0 16.6 21.2x 17.6 15.9 15.9x 16.4 17.6x 18.2 NM NM NM CY10P 13.8x 13.2 12.2 14.3 17.3x 15.6 14.8 14.3x 14.4 15.6x 15.9 14.0x 15.0 16.0

CY10P 6.6x 7.0 6.2 6.5 8.0x 8.7 9.1 7.0x 7.4 8.7x 8.6 6.4x 6.7 7.1

A. IPO EXAMPLE #1: GTEC

GTEC GTEC GTEC

14

IPO Valuation
2010 EBITDA IPO Valuation
IPO Step-up Valuation

(US$ in millions, except per share data)


Low Mid High

2010E EBITDA EBITDA Trading Multiple Public Market Equity Valuation Fully-Traded Enterprise Value Less: Pre-IPO Net Debt(a) Plus: Net IPO Proceeds to GNA Fully-Traded Equity Value Less: IPO discount Equity Value at Pricing Equity Value at Pricing New Investor % Ownership Enterprise Value at Pricing Implied EBITDA Multiple at Pricing

20.3 7.4x

20.3 7.7x

20.3 8.2x

$ 149.6 (21.3) 22.8 $ 151.0 15.0% $ 131.3 38.1% $ 129.9 6.4x

$ 156.6 (21.3) 22.8 $ 158.0 15.0% $ 137.4 36.4% $ 136.0 6.7x

$ 166.0 (21.3) 22.8 $ 167.4 15.0% $ 145.5 34.4% $ 144.1 7.1x

Enterprise Value at Pricing

A. IPO EXAMPLE #1: GTEC

Marketing Range
GTEC Statistic $20.3 Median Core Group Comp Multiple 8.7x

(US$ in millions, except per share data)


Range of Prices $15.00 6.7x (22.3%) 12.2x (13.3%)

Valuation Metric 2010P EBITDA Multiple Premium/(Discount) to Core Peer Group Comparables 2010P Adjusted P/E Multiple Premium/(Discount) to Core Peer Group Comparables

$14.00 6.4x (26.2%) 11.4x (19.3%)

$16.00 7.1x (18.5%) 13.0x (7.4%)

$11.3

14.1x

(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
 

Transaction Overview

November 19, 2009 Base Shares Offered Green Shoe (Exercised) Filing Range Issue Price Total Amount Raised 4,600,000 236,726 $14.00 - $16.00 $13.00 $62,877,438

The order book was almost 1.5x subscribed 25% of conference calls/meetings resulted in orders

NCI Inc, one of Globals 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

Mkt Val at Issue $117,473,616 Proceeds as a % of Mkt Val 50.9% % Secondary 34.8%
Multiples at Pricing(a)

EBITDA Mult iple P/E Multiple A. IPO EXAMPLE #1: GTEC

2008A 2009E 2010E NA 7.7x 5.9x NA NM 12.9

(Multiples) Median Peer EBITDA 8.7x Median Peer P/E 17.3

7.5x 15.1

6.9x 13.6

(a)

Comparable Companies include: CACI International, ICF International, ManTech, NCI, SAIC, SRA International and Stanley.

16

GTEC: Current Valuation Compared to Comparables


GTEC Valuation
Stock Price (5/14/10) Defense Services CACI International Dynamics Research Global Defense Tech & Systems ManTech NCI SAIC Inc. SRA International Median Mean % of Market Enterprise Value(b) Revenue(c) CY10E CY11P

(US$ in millions, except per share data)


Enterprise Value as a Multiple of EBIT(c) CY10E CY11P EBITDA(c) CY10E CY11P
(a) 52W High Value

Price/ Earnings(c) CY10E CY11P

$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

0.6x 0.5 0.6 0.6 0.6 0.6 0.7


0.6x 0.6

0.5x 0.5 0.5 0.6 0.5 0.6 0.7


0.5x 0.6

9.2x 6.8 9.7 7.8 8.4 7.7 9.7


8.4x 8.5

8.2x 6.4 7.8 7.1 7.4 7.1 8.4


7.4x 7.5

7.2x 5.4 7.1 6.9 7.4 6.9 7.9


7.1x 7.0

6.5x 5.2 6.2 6.4 6.5 6.4 7.0


6.4x 6.3

13.6x 10.0 15.5 12.7 12.7 12.8 15.8


12.8x 13.3

12.2x 9.2 13.2 11.9 11.5 11.0 14.5


11.9x 11.9

A. IPO EXAMPLE #1: GTEC

17

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   Alimeras lead product Iluvien potential to be first drug approved for Diabetic Macular Edema (DME)


Financials Revenue EBITDA Net Inc 2010A 2011E 2012E $ 0.0 $ 15.0 $ 65.0 (26.0) (22.8) 7.2 $ (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

Phase III data in DME in hand at the time of IPO; revenues beginning in 2011

B. IPO EXAMPLE #2: ALIM

There were six Iluvien trials ongoing at the time of the IPO, as the Company evaluated the drugs use in the treatment of a variety of ophthalmic diseases


Wet age-related macular degeneration (AMD), dry AMD, and retinal vein occlusion (RVO)

19

Alimera Valuation Based On Various Methodologies Summary(a)


Alimera Valuation Based On Various Methodologies Summary
Methodology Comparable Company Analysis: Revenue (2011 Estimates) Net Income (2011 Estimates)
(b)

(US$ in millions)
Pre-Money Equity Value Range Mean High

Low

$ 285.2 $ 455.0 $ 176.0 $ 131.7

$ 343.2 $ 492.9 $ 414.9 $ 304.5

$ 401.3 $ 530.7 $ 976.4 $ 774.4

Historical Analysis of Companies with Phase III Data IPOs of NDA Stage Companies

(a) (b)

Supporting schedules on following pages. Value discounted back 1 year at 25%.

ALIM: Valuation Driven by Revenue


Comparable Company Valuation
Stock Price (US$ in millions) Ophthalmology Companies Inspire Pharmaceuticals QLT Inc. Ista Pharmaceuticals InSite Vision Inc Median Mean Near Term New Drug Comparnies Auxilium Pharmaceuticals Acorda Therapeutics Savient Pharmaceuticals VIVUS Inc Affymax Inc Cadence Pharmaceuticals Arena Pharmaceuticals Orexigen Therapeutics Median Mean ALIM ALIM ALIM $15.00 16.00 17.00 (11/3/09) % of 52W High Market Value(a) Enterprise Value(a)(b)

(US$ in millions, except per share data)


EV as Multiple of Revenue CY10E CY11P CY12P CY13P

$6.23 5.25 3.96 0.42

88% 96 58 64 76% 76%

$518 282 132 40 $243 $207

$414 94 92 75 $169 $93

3.8x 1.9 0.6 NA 2.1x 1.9

3.4x 1.9 0.5 NA 1.9x 1.9

2.3x 2.5 0.5 NA 1.7x 2.3

1.7x 1.4 0.4 NA 1.2x 1.4

B. IPO EXAMPLE #2: ALIM

$30.63 35.90 14.61 8.82 23.33 9.00 3.19 5.99

82% 98 88 69 91 71 54 55 76% 77% NA NA NA

$1,481 1,433 1,008 731 569 463 323 286 $787 $650 $489 522 554

$1,296 1,166 900 543 397 386 342 201 $654 $470 $571 609 648

5.5x 9.6 NM 14.7 2.9 NM 17.9 10.0 10.1x 9.8 NA NA NA

3.5x 4.4 8.3 6.9 2.0 6.5 3.5 4.3 4.9x 4.3 NA NA NA

2.7x 3.0 5.2 4.0 1.6 2.6 3.2 1.9 3.0x 2.9 8.8x 9.4 10.0

2.2x 2.2 3.7 2.9 1.1 1.5 2.0 1.0 2.1x 2.1 5.2x 5.5 5.9

20

Historical Analysis of Companies With Phase III Data(a)


Historical Analysis of Companies With Phase III Data
Low Comparable Companies Pre-Money Enterprise Value Less: 20% IPO Discount Pre-Money Enterprise Value Plus: Cash
(b)

(US$ in millions)
Mean $ 503.9 20.0% $ 419.9 9.9 (15.0) $414.9 75.0 $ 489.9 $ High $ 1,166.9 20.0% 972.4 9.9 (15.0) $ 967.4 75.0 $ 1,042.4

$ 217.3 20.0% $ 181.1 9.9 (15.0) $176.0 75.0 $ 251.0

Less: Debt(b) Pre-Money Equity Valuation Plus: Gross Proceeds Implied Post-Money Equity Valuation

Historical Analysis of Companies With Phase III Data


Company Savient Pharmaceuticals Inc. AMAG Pharmaceuticals Inc. AcordaTherapeutics Inc.
(c) Date

(US$ in millions)
Cash $ 127.1 190.0 212.7 92.3 226.9 143.5 63.3 46.0 63.8 $ 129.5 127.1 Debt $ 0.2 7.0 20.1 86.7 15.8 13.0 31.1 $ 19.3 13.0 Enterprise Value $ 1,166.9 819.5 751.6 316.6 465.0 299.8 217.3 227.9 270.5 $ 503.9 316.6

Price One Day (d) Post Ann. $ 23.90 71.34 25.15 5.04 8.34 3.85 6.90 7.52 5.00 $ 17.45 7.52

Post Equity Value $ 1,293.8 1,009.5 957.3 409.0 671.8 356.6 264.7 260.9 303.2 $ 614.1 409.0

05/08/08 04/12/07 09/16/09 12/08/08 11/19/09 10/28/09 12/18/08 07/21/09 08/18/08

B. IPO EXAMPLE #2: ALIM

Allos Therapeutics Inc. VIVUS Inc. Arena Pharmaceuticals Inc. Cadence Pharmaceuticals Inc . Orexigen Therapeutics Inc. Dyax Corp. Mean Median

(a) (b) (c) (d)

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 companys stock price one day after their Phase III data announcement.

22

IPOs of NDA Stage Companies 20042010 YTD(a)


IPOs of NDA Stage Companies 20042010 YTD
Low Pre-Money Equity Valuation at Pricing Plus: Gross IPO Proceeds Implied PostMoney Equity Valuation $131.7 75.0 $ 206.7 Mean $304.5 75.0 $ 379.5

(US$ in millions)
High $774.4 75.0 $ 849.4

IPOs of NDA Stage Companies 20042010 YTD


Pricing (b) Date 10/10/07 06/28/06 Initial Public Offering Filing Offer Amount (c) Price Price Filed 13.00 15.00 14.00 12.00 19.00 10.00 10.00 6.50 9.00 21.00 $ 74.8 75.0 74.9 85.2 123.5 Amount Offered $ 57.5 45.0 34.8 54.0 136.5

(US$ in millions)
% Change Offer to Current Price NA NA 124.6% (58.1) NA

Issuer Targanta Therapeutics Replidyne

% Change From File (d) Development Status Diluted Valuation to Offer Trans. Indications of Pre-Mon. Post -Mon. IPO Price Amount Lead Product (s) Value Value Step (f) -Up (23.1)% (33.3) (53.6) (25.0) 10.5 (23.1)% Gram -Positive Infections $ 166.3 (40.0) (53.6) (36.6) 10.5 Sinusitis, Pneumonia Deep Vein Thrombosis Heartburn Wet AMD 231.8 131.7 218.5 774.4 $ 223.8 276.8 166.5 272.5 910.9 1.1 1.2 1.0 2.0 2.9

Momenta Pharmaceuticals 06/22/04 Santarus Eyetech Pharmaceuticals 2004 2010 YTD Median Mean 04/01/04 01/30/04

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

(a) (b)

Includes NDA stage companies at time of IPO. Cash and debt figures as of October 21, 2009 per Alimera Sciences Management.

Alimera Sciences, Inc. (ALIM) $72.0 Million IPO


Transaction and Marketing Highlights Financials

Alimera priced a full size offering at $11.00, representing a 26.7% discount to the low end of the range


April 21, 2010 Base Shares Offered 6,550,000 Green Shoe (Not exercised) 982,500 Filing Range Issue Price $15.00 - $17.00 $11.00

Insiders contributed $20 million to the order book, helping the Company achieve a minimum proceed threshold

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 Iluviens approval status pending

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

B. IPO EXAMPLE #2: ALIM

23

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The IPO Process

Outside LawyersWhat Do They Do?


Company 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.

Underwriter counsel
Conduct due diligence. FINRA filings. Assist in drafting.

Selling stockholder counsel


Legal opinion. Selling stockholder documentation.

This is MoFo. | 36

Typical IPO TimelineNasdaq/NYSE


3-6 weeks before first SEC filing due diligence prospectus drafting adopt public co. policies/ controls/ procedures if not done already complete audit and review of interim financials corporate governance matters 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 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 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

print final prospectus and close offering

price deal commence public offering

Typically 2-3 weeks road show

This is MoFo. | 37

SEC Review Process


Insiders View of SECs 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 SECs review of the companys Form S-1
Pre-IPO Filing Considerations
Brainstorming session on disclosure matters Strategy on pre-filing letters Cold review of Form S-1 SECs knowledge of company based on Form S-1 and website

Post-IPO Filing Considerations

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

This is MoFo. | 39

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 managements 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. Phase II and III Being public involves corporate governance, 404 compliance, developing and sustaining quarterly close procedures.

Pre-Filing Phase 1 Phase 2


Going Public Activities Planning

Post-Filing Phase 3

Readiness Assessment

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 markets 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 Information system resources

Treasury and risk management

Technical accounting and issue resolution

External reporting

Risk management

302 processes

Fraud oversight

Income taxes

This is MoFo. | 43

SEC Financial Reporting


Registrant would be required to meet the following reporting requirements:
SEC Reporting Requirements
Baseline statements Unaudited interim statements Disclosures Selected financial data MD&A Pro-forma financial statements Significant acquisitions Significant equity investees 3 years Updated after 135 days of previous period Full US GAAP and SEC compliant 5 years 2 years + interim Most recent balance sheet date and year-end and interim income statement Required - S-X 3-05 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 companys 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 Pre-Effective Period Post-Effective Period

Week 1
  All Hands Organizational Meeting Management Due Diligence at Company    

Weeks 28
Prospectus Drafting Ongoing Due Diligence (Financial, Auditors, etc.) Customer Due Diligence File Registration Statement with SEC   

Weeks 918
SEC Review Period Roadshow Preparation Receive and Respond to SEC Comments and File Amendments Print and Distribute Red Herring Prospectus 

Weeks 1920
Management Presentations to Underwriters Sales Forces International and Domestic Roadshow Registration Statement Declared Effective by SEC   

Weeks 2021
Price Offering and Begin Trading Closing 3 Days After Pricing Quiet Period Begins

 

III. IPO EXECUTION

April 2010 S M T W T 1 4 5 6 7 11 12 13 14 18 19 20 21 25 26 27 28 F 2 S 3 S M

May 2010 T W T F S 1 2 3 4 5 9 10 11 12 16 17 18 19 23 24 25 26 30 31 6 7 8 13 14 15 20 21 22 27 28 29 S M

June 2010 T 1 W 2 T 3 F 4 S 5 S M

July 2010 T W T 1 4 5 6 7 11 12 13 14 18 19 20 21 25 26 27 28 F 2 S 3 S 1 M 2

August 2010 T 3 W 4 T 5 F 6 S 7 S

September 2010 M T W 1 5 6 7 8 12 13 14 15 19 20 21 22 26 27 28 29 T 2 F 3 S 4 S M

October 2010 T W T F 1 3 4 5 6 10 11 12 13 17 18 19 20 24 25 26 27 31 S 2 S

November 2010 M 1 T 2 W 3 T 4 F 5 S 6

8 9 10 15 16 17 22 23 24 29 30

6 7 8 9 13 14 15 16 20 21 22 23 27 28 29 30

10 11 12 17 18 19 24 25 26

8 9 10 15 16 17 22 23 24 29 30 31

8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

9 10 11 16 17 18 23 24 25 30

7 8 9 14 15 16 21 22 23 28 29 30

7 8 9 10 14 15 16 17 21 22 23 24 28 29 30

11 12 13 18 19 20 25 26 27

(a)

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:

810 days, with approximately 100+ one-on-one meetings

International Roadshow:

    

24 days, with approximately 2050 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 OConnor William Blair 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.

Boston
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


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

Preliminary Roadshow
Day 1 New York Day 2 Frankfurt/London Day 3 London Day 4 Mid-Atlantic Day 5 Boston Day 6 New York Day 7 New York Day 8 KC/ Denver Day 9 San Francisco Day 10 Portland/L.A. Mgmt Presentations/ 1x1 Mtgs 1x1 Mtgs 1x1 Mtgs/Group Lunch 1x1 Mtgs 1x1 Mtgs/Group Lunch 1x1 Mtgs 1x1 Mtgs/Group Lunch 1x1 Mtgs 1x1 Mtgs/Group Lunch 1x1 Mtgs

Denver/Salt Lake City


Arrowpoint Denver Investment Advisors Janus Capital Mgmt. Marsico Capital Mgmt. Platte River Capital Wasatch Advisors Wells Capital Mgmt.

Day 11 Chicago/Minneapolis 1x1 Mtgs (Conference calls will be scheduled as needed)

III. IPO EXECUTION

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

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. 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

Note:

Bold denotes top Cowen recommended accounts.

28

Selected Targeted Institutions in Europe


U.K. and Ireland
London
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.

Scandinavia
Sweden
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

Benelux Region
The Netherlands
APG Investments Delta Lloyd/Cyrte Investments ING Groep Interpolis Robeco

Switzerland
Bank Julius Baer Credit Suisse Asset Mgmt. Lombard Odier Darier Hentsch Cie SAM Sustainable Asset Mgmt. UBS Global Asset Mgmt.

Ireland

III. IPO EXECUTION

Bank of Ireland Asset Mgmt. Bloxham Eagle Star Irish Life Pioneer Setanta

Brussels
Dexia SA ING KBC Asset Mgmt. Aureo Gestioni Bipemme SGR BPU Ubibanca Eurizon

Italy

Note:

Bold denotes top Cowen recommended accounts.

29

Illustrative Roadshow Example


Summary Statistics


# Of Roadshow Days: # of Cities: # of One-on-Ones/ Two-on-Ones: # of Conference Calls: # of Three-onOnes/Group Meetings:

11 12 56 13 5

 

III. IPO EXECUTION

30

Marketing: Attack the Market to Create Excitement and Demand


The Issuers 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 Tech specialists Small cap specialists GARP funds

Targeting effort  Identify top prospects  Communicate aggressively

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 Bookrunners 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

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 issuers 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 Allocations that seed investors Reduces supply in aftermarket, stimulates aftermarket buying Investor confidence in aftermarket price and liquidity

III. IPO EXECUTION

  

Bookrunner utilizes allocation to ensure strong aftermarket performance of the share


  

32

Aftermarket Support Key Ingredients


Stabilization
 Creation of excess demand and a large syndicate short position through overallotment creates demand in the aftermarket  Repurchasing of shares from the Market

Sales and Trading


 Create a liquid two-way market for shares of the company  Capital commitment  Provide investors with ready liquidity for their investment (increases or decreases)

Strong Aftermarket Support


Research
 Continue regular publication of research reports and meetings/ conference calls with investors, updating them on the company

Investor Relations
 Provide regular flow of information on country, sector and the company to investors  Sponsor and organize roadshow presentations for the company to update investors on ongoing developments

III. IPO EXECUTION

 Provide company with ongoing feedback from investors  Monitor the research effort of syndicate members during offering process and in the aftermarket

33

Over-Allotment Option Overview


At Pricing Pricing Call: Allocations: Settlement (T+3): Underwriters Buy Underwriters allocate Underwriters pay for 5,000,000 Shares 5,750,000 shares at deal price (includes 15% overallotment option) 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)


Over-allotment option proceeds are delivered to the issuer

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)


Over-allotment option proceeds are not delivered to the issuer

III. IPO EXECUTION

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