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Summary Overview
1. Choosing an Investment Bank
Key Criteria The Market Leader
2.
3.
A Typical Offering
A Look at Valuation
4.
Wrap-Up
2. Equity Research
Serves as the primary link between buyside investors and the Company Third party validation is key
3. Variety of Products
Breadth and depth of products ensures the most complete corporate finance advice
4. Retail Distribution
Improves transaction success rate Better diversifies shareholder base
83,000+ Employees 937 Offices in 30+ Countries $871 Billion in Assets Under Management or Supervision
62,679+ Employees 603 Offices in 27 Countries $548 Billion in Assets Under Management or Supervision
23,050+ Employees 42 Offices in 20+ Countries $581 Billion in Assets Under Management or Supervision
Total Equity(1)
#1 / #4
#5/ #3
#3 / #1
IPOs(1)
#1 / #3
#3 / #1
#2 / #2
Research(2)
#1
#3
#5
Announced M&A
#1 / #3
#5 / #2
#3 / #1
Convertibles
#3 / #3
#4 / #5
#5 / #2
#1 / #1
#3 / #3
#4 / #4
#2 / #3
#4 / #6
#7 / #7
Source: Securities Data Corporation for the period of 1/1/00 through 9/30/01. (1) All North American issues. (2) Based on number of Institutional Investor ranked analysts as of 12/31/00. (3) All U.S. debt (includes all public and Rule 144A debt securities).
Largest
Institutional Salespeople(1)
675
400
560
Highest Ranked
#1 #1
#3 #3
#2 #6
Most Experienced
238 111
26 #1
154 81 13
#2
197 80
17 #4
Technology Focused
* ** (1)
Domestic equity new issues for the period of 1/1/00 through 9/30/01 (includes IPOs and Follow-On offerings). Global equity new issues for the period of 01/01/00 through 9/30/01 (includes IPOs and Follow-On offerings). Includes international high net worth brokers employed by the Credit Suisse Group.
Number of Brokers
500
250
500
Number of Brokers
750+
100
100
Traditional Retail
Pershing 17,000
Online Distribution
CSFBdirect #1
MS Online #7
GS Online NA
* Barrons, March 2001 (1) Includes high net brokers employed by the Credit Suisse Group.
Trading Support
Rank %
#1 11.0% #1 8.6%
#5 5.4% #3 6.4%
#4 5.5% #5 5.2%
Rank %
745
550
450
# of Market Makers
35
21
18
21
26
25
Source: AutEX / Block DATA * Includes OTC stocks traded by CSFB and DLJ.
For CY2000.
23%
Goldman Sachs Morgan Stanley Dean Witter Merrill Lynch Salomon Smith Barney 17 16 9 6
11%
14 14 12 12
Category
Quality of new equity issues Due diligence on new issues Pricing of new equity issues Equitable allocation of new issue product Quality of research product and service in the aftermarket Aftermarket performance of equity issues
1st Place
* In a survey dated July 19, 2000, Reuters surveyed 75 of the largest institutional managers of active US equity funds. They estimate that their sample represents 88% of the active institutional funds invested in mid- and small-cap equities. Responses have been weighted by fund size.
400 350
389
$400.00 $350.00
$380.9 $350.5
300
$300.00
233
$250.00 $200.00
143
$150.00
99
98
$100.00 $50.00 $0.00
CSFB
GS
MS
JPM CIT/SSB ML
DBAB
LEH
CSFB
MS
GS CIT/SSB JPM
ML
LEH
BofA
Notes: Transactions announced 1/1/00 through 9/30/01. Includes private placement deals.
1998
1999
2000
2001+
10
Weak Equity Markets Further Challenged by the Impact of the Tragic Events
Equity Market Performance
130% 120% 110% 100% 90% 80% 70% 60% 50%
YTD
Fed cuts rates: Jan 3: 50bps Jan 31: 50bps Mar 20: 50bps April 18: 50bps May 15: 50bps June 27: 25bps Aug 21: 25bps Sept 17: 50bps Oct 2: 50bps
1/29 2/28 3/29 4/29 5/29 6/29 7/29 8/29 9/29 10/29
Dow
-13.6%
Dow S&P 500 -2.4% -8.3% -8.7% -9.8% -2.9% -0.5% -13.6% -17.7%
S&P 500
Nasdaq
-29.3%
CSFB Tech
-37.4%
40% 12/29
Increased volatility: extreme intra-day shifts as market is trading on news and rumors Recent volumes on both Nasdaq and NYSE greater than year-to-date averages Expectations of negative preannouncements
NASDAQ NYSE
Outflows of $29.5bn for month of September; consequently, cash reserves at mutual funds are high
12
21%
28%
30%
60%
79%
83%
85%
13
30%
20%
10%
0%
-10%
-20%
-30%
-40% 1/1/90
4/1/90
7/1/90
10/1/90
1/1/91
4/1/91
7/1/91
10/1/91
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(1)
% of Total
$ 7,000 $ 6,000 $ 5,000 $ 4,000 $ 3,000 $ 2,000 $1 ,000
$2 4 6 $15 $1,6 4 5 $9 72 $1,12 9 $1,6 72 $60 $1,754 $2,000 $2 ,6 4 9 $2 ,8 8 4
$2,119
IPO Amt # of Iss $2,786 18 $0 0 $1,850 1 $702 10 $244 7 $564 2 $740 5 $671 7 $590 3 $0 0 $8,147 $8,349 53 55
Follow-ons Amt # of Iss $957 8 $1,177 2 $25 1 $1,094 6 $858 9 $228 5 $0 0 $0 0 $0 0 $0 0 $4,339 $5,091 31 40
15
16
Now
August 2001 Profitability
1 to 2 quarters to profitability Strong quarter-over-quarter
Revenue and P/E multiple $10-15 million Quality, diversified customer base Well-financed customers
investors
Type of Entrant
necessary
Infrastructure in place to grow to
profitability
Solid management team Near-term visibility towards steady
state model
Investors comfortable with soft
state model
Investors expect specifics
17
In 2001, only 15 tech IPOs have been completed Aftermarket trading performance of these stocks has exceeded the tech IPO classes of 1999 and 2000 --- 2001 IPOs are down 5.1% from offer to current
Amount # of 15 223 327 IPO $44,325 $227,328 $203,761 Midpoint to Offer -7.9% 20.1% 25.5% Offer to Day 1 20.5% 77.3% 92.8% Current -5.1% -61.6% -32.8%
Average IPO performance: (54.6%) IPOs trading below issue price: 83.1% Average loss of IPOs below issue: (73.6%) IPOs below 1st day close: 90.0%
Date 8/9/2001 7/30/2001 7/26/2001 7/18/2001 6/27/2001 6/20/2001 6/7/2001 5/17/2001 5/16/2001 5/1/2001 3/27/2001 3/20/2001 3/8/2001 2/15/2001 2/7/2001 Average
Issuer Mykrolis Corp HPL Technologies PDF Solutions, Inc. Accenture Ltd. Monolithic System Technology Multilink Technology Corp. Alliance Data Systems Corp Instinet Group LLC Tellium Inc. Simplex Solutions Inc. Agere Systems Inc. Verisity Ltd. Loudcloud, Inc. Riverstone Networks Inc. KPMG Consulting, Inc
Amount Offer from ($MM) Orig. Mdpt $ 105.0 $ 66.0 $ 54.0 $ 1,667.5 $ 50.0 $ 72.0 $ 156.0 $ 464.0 $ 135.0 $ 48.0 $ 3,600.0 $ 23.3 $ 150.0 $ 120.0 $ 2,024.7 (6.3%) 0.0% 0.0% 3.6% 0.0% 0.0% (7.7%) 16.0% 7.1% 9.1% (53.8%) (22.2%) (45.5%) 0.0% (19.4%) (7.9%)
% Change in Price Offer to Day 1 Current 8.3% 21.4% 26.3% 4.6% 12.2% 24.3% 16.7% 21.7% 39.5% 76.7% 0.3% 14.3% 2.6% 8.9% 30.5% 20.5% (32.3%) 13.7% 36.8% 21.5% 19.7% (53.7%) 32.7% (32.9%) (47.7%) 16.8% (15.0%) 42.9% (59.2%) 13.8% (33.6%) (5.1%)
1st Day to Current (37.5%) (6.3%) 8.3% 16.2% 6.7% (62.7%) 13.7% (44.9%) (62.5%) (33.9%) (15.3%) 25.0% (60.2%) 4.5% (49.1%) (19.9%)
Comm. Software and Enhanced Services IT Consulting & Computer Services Software Semiconductor Capital Equipment Internet / New Media & eCommerce Test & Measurement Latin America Internet Communications ICs Imaging All Technology Sectors
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52.2%
$8,297 $8,000
51.9% 45.1%
50.0%
30.0%
$6,000
2.9%
$3,612 $3,782
1.7%
1.2% -2.6%
$4,000
-10.0%
$2,534 $2,026 $2,000 $1,050 $1,005 $1,211 $952 $605 $191 $0
MAY MAR MAR AUG MAY APR APR JAN 00 JAN 01 AUG JUN JUN JUL OCT DEC JUL NOV OCT FEB SEP FEB SEP
-6.9% -7.2%
-6.4% -9.7%
-6.3%
$2,145 $1,788
-19.2% -30.0%
-40.5% -50.0%
MAY
MAR
MAR
AUG
MAY
APR
APR
JAN 00
JAN 01
AUG
JUN
JUN
JUL
OCT
DEC
JUL
NOV
120.0%
-10.0%
105.1% 100.0%
-10.4% -21.3%
80.0% 67.4% 61.5% 60.0% 47.1% 40.0% 50.0% 33.5% 46.0% 46.9% 34.6% 24.1% 25.4% 20.0% 19.7% 17.7% 17.4%
-32.3% -40.0% -50.0% -60.0% -70.0% -80.0% -90.0% -76.0% -65.4% -54.9% -53.2% -53.1% -63.1% -69.7% -77.3% -52.8% -45.5%
-64.1%
5.7% 0.0%
MAY MAR MAR AUG MAY APR APR JAN 00 JAN 01
8.3%
-100.0%
MAY
MAR
MAR
AUG
MAY
APR
APR
JAN 00
JAN 01
AUG
JUN
JUN
JUL
OCT
JUL
OCT
OCT SEP
FEB
SEP
FEB
DEC
FEB
SEP
AUG
JUN
JUN
JUL
OCT
DEC
JUL
19
NOV
OCT
FEB
SEP
FEB
SEP
NOV
FEB
SEP
20
Valuation Methodology
Review and refine Company projections to create street case Typical haircuts between 15-30% based on: Analysis and diligence of Companys financials Companys track record
Apply three valuation frameworks to triangulate a fully distributed trading value Comparable Company Analysis, Recent IPO Analysis and Intrinsic Value Analysis Assumptions An offering that takes place in early 02 will be valued on 03 multiples at that time Filing/Pricing multiple discounted 20-25% from fully distributed trading multiples
21
Valuation Frameworks
Identify peer group: Infrastructure Management Software Vendors Calculate trading multiples Apply relevant multiples to Companys results to determine potential fullydistributed value
Identify pricing statistics for recent IPOs of peer group companies Calculate filing, pricing and trading multiples Apply relevant multiples to Companys results to determine marketing approach and potential filing, pricing, and trading values
Project out future cash flows Determine discount rate and intrinsic value multiples Apply relevant multiples to Companys results to determine potential value
22
Deal Size:
Shares Offered: Domestic / International Split: Institutional / Retail Split:
Directed Shares:
Lockup:
Up to 5%
180 days
23
S 6 13 20 27
JANUARY 2002 T W T 1 2 3 7 8 9 10 14 15 16 17 21 22 23 24 28 29 30 31
F 4 11 18 25
S 5 12 19 26
S 3 10 17 24
FEBRUARY 2002 T W T F S 1 2 4 5 6 7 8 9 11 12 13 14 15 16 18 19 20 21 22 23 25 26 27 28
Denotes Holiday
3 4 10 11 17 18 24 25 31
MARCH 2002 T W T F 1 5 6 7 8 12 13 14 15 19 20 21 22 26 27 28 29
S 2 9 16 23 30
S 7 14 21 28
M 1 8 15 22 29
APRIL 2002 T W T 2 3 4 9 10 11 16 17 18 23 24 25 30
F 5 12 19 26
S 6 13 20 27
DATE
EVENT
Organizational meeting Initial due diligence and management presentations Initial drafting session Continue due diligence Continue drafting sessions Drafting sessions at printer File S-1 with unaudited Q3 results Roadshow preparation Receive 1 set of SEC comments File Amendment No. 1 to S-1 with audited year-end results Receive 2 set of SEC comments File Amendment No. 2 to S-1 Management presentation to Underwriters Salesforce European & US Roadshow Pricing Closing
nd st
December 21, 2001 Weeks of January 2-25, 2002 Week of January 28 - February 1, 2002
Week of February 4-8, 2002 Week of February 11-15, 2002 Weeks of February 19 - March 5, 2002 March 5, 2002 March 11, 2002
24
Gameplan
Establish Early Momentum
Global Penetration
25
26
Post-IPO Support
Detailed initiation report; quarterly updates; realtime electronic dissemination of intra-quarter news Commitment to be leading market maker; willingness to use capital Institutional investor follow-up road shows to broaden investor base Post-IPO technology conferences M&A ideas, analysis and execution Introduction to strategic partners Financing alternatives (secondary, convertible, debt, bridge financing)
CREDIT SUISSE FIRST BOSTON CORPORATION Equity Research - Americas (415) 836-7716 wendel.laidley@csfb.com Wendell Laidley
jim.marks@csfb.com
Buy
Empowering Change
COMPANY
28
IPO Marketing
Post-IPO
Significant front-end effort to position companys story in prospectus and roadshow Sales force teach-in to begin communicating the Company opportunity
Detailed report issued immediately after 25-day quiet period expires Timely communication with the market as company events dictate (e.g., high profile customer wins, acquisitions, significant industry events) Frequent updating to institutional salesforce to ensure institutions Monthly First Call Notes Quarterly earnings reports
Equity Research - Americas CREDIT SUISSE FIRST BOSTON CORPORATION Equity Research - 836-7716 wendel.laidley@csfb.com Wendell Laidley (415) Americas
Equity Research - Americas
Jim Marks (212) 325-6550 jim.marks@csfb.com
Life-Altering Technology
COMPANY
29
4. Wrap-Up
Difficult market conditions have drastically reduced that number of IPOs in 2001
Criteria for going public has become more stringent -- back to fundamentals A buyers market
The right companies can still access the public equity markets!
Bill Rodoni is a Vice President in the Investment Banking Division of the Credit Suisse First Boston Technology Group (CSFB) where he focuses on raising private capital for both privately-held and public technology companies. The CSFB Private Equity Group, of which Bill is a member, has completed 77 transactions in the past 5 years and has raised over $4.7 billion for its clients during this timeframe. While at CSFB, Bill has raised money for such notable clients as Plumtree Software, Packet Video and Storageway.
Prior to joining CSFB, Bill was a senior attorney in the Corporate Securities Group at Gray, Cary, Ware & Freidenrich, one of the largest law firms in the country, where he represented both privately-held and public technology companies in a wide range of transactions including public offerings, mergers and acquisitions, private placements and technology licensing. While at Gray Cary, Bill's client base included Ascend Communications, The Vantive Corporation, Aspect Development and 3Com. Prior to joining Gray Cary, Bill was a financial/legal analyst at First Pacific Company in Hong Kong, a large, multinational Asia-based conglomerate. Bill has both a J.D. (summa cum laude) and a B.S. in Finance from Santa Clara University.
Bill can be reached via phone at 415-249-8893 or via email at bill.rodoni@csfb.com.
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