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Initial Public Offerings An Issuer’s Guide (European Edition) July 2014

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  • Initial Public Offerings An Issuers Guide (European Edition)

    July 2014

  • This document is not to be disseminated or copied to anyone without our consent. It is to be used solely for the purpose of making

    a determination on the provision of legal services and for no other purpose.

    OTHER RECENT PUBLICATIONS PREPARED BY OUR LONDON CAPITAL MARKETS PARTNERS INCLUDE:

    CONVERTIBLE BONDS AN ISSUERS GUIDE (EUROPEAN EDITION)

    Authors: James Taylor and Robert Flanigan

    HIGH YIELD BONDS AN ISSUERS GUIDE (3RD EDITION)

    Author: Bernd Bohr

    LISTING AN OVERSEAS COMPANY ON THE LONDON STOCK EXCHANGE

    A GUIDE TO LISTING ON THE LONDON STOCK EXCHANGE

    Author: Greg Stonefield

    PLEASE CONTACT US IF YOU WOULD LIKE TO RECEIVE PDFS OR HARD COPIES

    OF THESE PUBLICATIONS.

    Convertible Bonds An Issuers Guide (European Edition)

    October 2013

    High Yield BondsAn Issuers Guide (3rd Edition)

    October 2013

    Listing an Overseas Company on the London Stock ExchangeA Guide to Listing on the London Stock Exchange

    Private & Confidential

    December 2013

  • CONTENTS Page

    INTRODUCTION 1

    GETTING READY 4

    OFFER STRUCTURE 13

    KEY DOCUMENTS 16

    KEY PARTIES 32

    CERTAIN SECURITIES LAW CONSIDERATIONS 35

    ONGOING OBLIGATIONS AS A PUBLIC COMPANY 45

    INDICATIVE TRANSACTION TIMETABLES 55

    EXHIBITS

    ANNEX I: Minimum Disclosure Requirements for the Share Registration Document 64

    ANNEX II: Pro Forma Financial Information Building Block 77

    ANNEX III: Minimum Disclosure Requirements for the Share Securities Note 79

    ANNEX XXII: Disclosure Requirements in Summaries 86

    GLOSSARY 95

  • If you have any questions about initial public offerings, please contact the authors of this guide or

    any of the other key members of our European equity capital markets practice listed on the

    following page.

    Bernd Bohr

    Partner

    [email protected]

    201 Bishopsgate

    London EC2M 3AF

    United Kingdom

    T +44 20 3130 3640

    F +44 20 3130 8760

    Greg Stonefield

    Partner

    [email protected]

    201 Bishopsgate

    London EC2M 3AF

    United Kingdom

    T +44 20 3130 3103

    F +44 20 3130 8774

    Robert Flanigan

    Partner

    [email protected]

    201 Bishopsgate

    London EC2M 3AF

    United Kingdom

    T +44 20 3130 3488

    F +44 20 3130 8760

  • OTHER KEY MEMBERS OF OUR EUROPEAN EQUITY CAPITAL MARKETS PRACTICE INCLUDE:

    Kate Ball-Dodd

    Partner

    [email protected]

    T +44 20 3130 3611

    F +44 20 3130 8760

    Robert Hamill

    Partner

    [email protected]

    T +44 20 3130 3558

    F +44 20 3130 8779

    Ulrike Binder

    Partner

    [email protected]

    T +49 69 7941 1297

    F +49 69 7941 100

  • mayer brown x 1

    INTRODUCTION

    For most companies and their owners, an initial public offering (IPO) is a once-in-in-a-lifetime

    event that may represent the culmination of many years of hard work. The IPO may provide both

    the shareholders and management of the company with a significant sense of accomplishment

    and will arguably be one of the most important milestones in the corporate evolution of a

    company, for its owners, management, employees and other stakeholders.

    An IPO, however, will also frequently bring with it a sense of upheaval as significant changes are

    often required to be made to the way a company operates and conducts itself membership of

    the new public world brings with it legal and compliance obligations that need to be both

    understood and complied with.

    This guide provides an overview of some of the key issues that we believe all directors, members

    of senior management, general counsels and other key decision makers of a potential IPO

    candidate should be familiar with. However, it is not intended as a comprehensive treatment of

    the subject matters covered by the guide or of all matters relevant to an IPO. This guide is also not

    intended as a substitute for legal advice and we encourage our readers to reach out to the

    authors of this guide, any of the other key members of our European Equity Capital Markets

    Practice listed in the back of this guide or any other regular contact at Mayer Brown before taking

    any action with respect to the matters discussed herein.

    WHAT ARE THE REASONS AND POTENTIAL BENEFITS OF CONDUCTING AN IPO?

    There are a number of different reasons why a company and its owners may consider an IPO and

    the listing of its shares on a stock exchange. Common reasons for an IPO include, but are not limited

    to:

    y the need to raise additional capital to fund further growth of the company, either organically

    or through acquisitions;

    y the need to provide existing shareholders in the company with a liquidity event and an

    option to exit all or part of their investment;

    y the need to facilitate the transition from an owner-managed company to a more widely-

    held company with a professional (non-owner) management team, frequently in connection

    with succession planning in family-owned or otherwise tightly-held companies;

    y the desire to provide value to shareholders through a spin-off of a particular division or line

    of business; and/or

    y the desire to enhance the profile and standing of the company with customers, suppliers,

    lenders, other investors and as an attractive employer.

    Being a public company can have significant benefits, including:

    y access to a much broader and potentially international investor base, consisting of both

    institutional and retail investors;

    y access to the capital markets as an additional source of capital, through both subsequent

    equity offerings and potential debt offerings, possibly on more favorable terms than those

    available in the private equity or loan markets;

    y increased liquidity for existing shareholders (including employees of the company that may

    have acquired shares as part of their compensation arrangements);

  • 2 x Initial Public Of ferings

    y the ability to use the listed shares of the company as a potential acquisition currency;

    y an enhanced ability to attract and retain key talent for the company by being able to offer

    executive and employee compensation and incentive arrangements such as incentive shares,

    stock options or similar arrangements; and / or

    y a generally enhanced company profile and increased confidence in the company by investors,

    creditors, customers, suppliers and other stakeholders in the company, deriving from its

    status as a public company and the enhanced transparency and disclosure that comes with

    that status.

    WHAT ARE THE POTENTIAL COSTS AND OTHER POTENTIAL DOWNSIDES OF

    CONDUCTING AN IPO?

    While being a public company can offer many advantages, the owners of a private company

    should not take the decision to conduct an IPO lightly and will need to carefully consider the

    various downsides that can come with being a public company, including:

    y the costs resulting from an IPO, i.e. both in connection with the IPO itself as well as the

    ongoing costs of being a public company, including costs of maintaining a public company

    board and management team, costs of ongoing reporting obligations, listing fees. costs of

    the companys auditors, costs of legal advisers and general compliance costs;

    y the loss of control by the existing owners (in terms of having to deal with other shareholders,

    adhering to a new set of rules and regulations and being susceptible to market conditions)

    and increased transparency (including disclosure of beneficial shareholders and increased

    transparency with regard to related party transactions);

    y the potentially significantly increased compliance burden; and

    y exposure to potential scrutiny and activism by public shareholders.

    IS YOUR COMPANY READY FOR AN IPO?

    Once the owners of a private company have determined that the benefits of going public

    outweigh the downsides, the company and its shareholders, together with their respective

    financial, accounting and legal advisers, will need to consider whether it is ready for an IPO or

    whether the company would benefit from remaining a private company, at least for the time

    being.

    The ideal IPO candidate tends to exhibit some or all of the following characteristics:

    y a clearly defined strategy and growth story for the company;

    y a track record of sound financial performance and a solid balance sheet;

    y market leading positions and favorable industry trends / growth prospects;

    y a large potential customer base and products or services that are attractive and accepted by

    the market; and

    y an experienced management team with a proven track record.

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    The companys equity story will need to be considered - investors will need to be provided with

    facts, figures and details as to why they may wish to consider purchasing shares in the company.

    The financial advisers together with the company and its owners will develop the equity story by

    focusing on the position of the company as a growth or income play, its position within its market

    and sector, its strengths, strategy, track record and business plan together with macro data. All of

    this will need to be clearly and convincingly outli