건국대학교 벤쳐전문기술 전략적 제휴와 m&a 연구. hans kim 2 강의 목표와...

건국대학교 벤쳐전문기술

전략적 제휴와 M&A 연구

http://www.konkuk.ac.kr/

2 Hans Kim

강의 목표와 계획

강의 목표

Corporate Finance

Communication with Equity Investor, including overseas investor

Cross border and cultural experience in finance industry

강의 계획

주제의 제시와 토론

평점방법 : 출석 40, 강의참여 20, 중간과제물 20, 기말 과제물 20

중간과제물 :

투자가 자금유치를 전제로 한 사업제안서 작성

기말과제물 :

중간과제물때 제안된 사업내용의 상장 및 인수합병 전략 - Valuation, 인수합병방안 및 대상회사선정 , 자금조달 방안 , 기관투자가를 위한 Exit 방안 , 등등 포함

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주제별 강의 계획

1. 기업금융과 IR

2. 기업금융과 IR

3. 기업의 국내외 상장

4. 초빙강사 1: 엔터테인먼트시장

5. Valuation 1

6. Valuation 2

7. 초빙강사 2: Due Diligence 실무

8. 중간 시험 - 과제물 제출

Note: 강의 내용과 순서가 바뀔 수도 있음

9. M&A 1

10. M&A 2

11. 적대적 M&A

12. Hedge Fund 의 한국금융기관 인수

13. 초빙강사 3 ( 또는 ) Investor-state claim

14. 지배구조펀드에 대한 이해

15. 전략적 제휴와 JV

16. 기말 시험 - 과제물 제출

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IPO

Why IPO ?

IPO 절차와 비용

해외시장 IPO

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IPO

Why IPO ?

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IPO_ Why IPO?_ Motives of IPO

The motives of IPO (Dr. Henry Servaes, 2001)

Company needs new financing

Current sources of financing have been exhausted (Bank Financing, Venture Capital)

Founders want to diversify and cash out partially

The increased liquidity in Company stock increases its value

The liquidity may also make it easier to do further acquisition; acquisition currency

Venture Capitalist wants cash out

In the western market, often Venture Capitalist does not sell out and makes distribution to partners after IPO

What about in Korean market? Golden Bridge 의 대우부품사례

Take advantage of overvaluation in market

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IPO_ Why IPO?_Case of IPO motives

글로비스 (086280)

Case of “acquisition currency” and “overvaluation” in the market after IPO

현대차 물류 전문업체

현대차 그룹의 경영권 상속을 위한 상장이라는 견해?

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IPO_ Why IPO? _Disadvantage of IPO

Why MNCs in Korea tend to go back to Private company after acquiring public company ?

Going public is a costly process

Cost of IPO

North America 7%

Europe 3.59% (931 IPOs 1992 – 1999)

Asia Pacific 3.09% (430 IPOs 1992 – 1999)

Korea ??

Under pricing 예컨대 , 시장시초거래가 117$ 공개가 100$ 증권사 비용 지불 이후 가격 93$ 기타 비용 지불 이후 가격 90$ = 회사가 실제 조달한 몫 = 결국 , 시초가 117$ 보다 27$ 이나 적은 가격

Cost of managing the status of public company

Cost of Human resources for IR activity

Management cost of maintaining the share price properly

Vulnerable to control contests

Increased disclosure

Diversified shareholder structure

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IPO

IPO 절차와 비용

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KOSPI Information

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Lead Manager’s role

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Major listing issues

Listing requirement & issues

Listing requirement and issues

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Listing Requirement & Issues

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무상증자의 의의

Listing Schedule & Cost

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코스닥 _ 주요 업무 일정도

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Listing Schedule & Cost

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IPO_ 코스닥 상장 절차 _ 코스닥위원회 , 심의결정원칙 , 유형별 기준

코스닥 등록의 의의 증권업협회가 비상장법인중 일정한 요건을 구비한 회사에 대하여 증권회사의 신청에 의하여 협회중개시장의 매매 대상물로 승인하는 행위

코스닥 위원회 협회중개시장의 운영기준 , 협회등록 심의 & 취소 , 불성실 공시법인 제재등 심의 의결

1 인 상임위원 + 10 인 비상임 위원 ( 학계대표 등 전문가 5 + 협회임원 1+ 중소기업진흥공단임원 1+ 등록법인중 벤쳐기업대표 1 + 기관투자자 대표 1 + 중개회사임원 1)

심의 결정 원칙 외형요건 ( 협회중개시장 운영규정 제 4 조 1 항 1 호 및 15 호 ) 에 대한 심의결정기준

구분 : 승인 및 기각

질적 요건 ( 운영규정 제 4 조 1 항 16 호 ) 에 대한 심의 결정 기준

구분 : 승인 및 재심의 , 보류 , 기각

심의결정 유형별 기준 승인 협회중개시장 운영규정에서 정하는 협회등록 심사요건을 구비하고 있다고 판단되는 회사

재심의 협회등록 질적 심사요건 중 특정부분에 대한 추가적 검토 & 확인이 필요하다고 판단되는 회사

보류 질적 심사요건 중 미흡한 사유가 있다고 판단되나 단기간에 그 충족여부의 확인이 가능한 회사

기각 외형요건 미비 및 심사요건 중 결격사유 있다고 판단되나 단기간에 그 해소가 불가능한 회사

24 Hans Kim

IPO_ 코스닥상장 심사 요건

코스닥 등록 심사 요건 협회등의 홈페이지 참고 및 별도 참고 자료 검토

등록예비심사 미승인 사례 사업성검증미흡

매출규모 미미

주요제품의 매출 중단 직전 사업 년도 매출 50% 차지하는 사업부문의 매출 중단

주요매출처의 불확실성 직전 사업 년도 매출 77% 차지하는 수요처의 재무내용 부실

직전사업연도에만 매출급증 직전 사업 년도 매출급증 (300%) 이 단일 건에 52% 의지

신규사업에 대한 불확실성 신규사업이 매출의 80% 로 미래 불확실성 존재

수익성 검증 미흡 당해 1/4 분기 주력사업 매출 10 억에 분기손실 2 억 시현

관계회사 위험에 노출 직전 사업 년도 관계사 부채비율 2,600%

재무안정성 미흡 직전 사업 년도 유동비율이 동업계 평균 50% 미만

재무자료 신뢰성 미흡

매출채권 관련 위험 최근 3 년간 매출채권 및 재고자산의 지속적 증가 매출채권이 자기자본의 356%, 재고자산이 자기자본의 466%)

경영의 투명성 미흡 임원 부도 , CB 를 대주주에게 저가 매도 , 유증 대금 대주주에 대여

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IPO_ 코스닥상장 심사 요건 _ 통계자료

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IPO_ 유 / 무상 증자 해설

유 / 무상 증자 해설 유상증자

일반 공모 증자

제 3 자 배정 유상증자

무상증자

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유상증자의 의의 유상증자란 주식회사 성립 이후에 자금조달의 목적으로 정관상 발행예정주식총수의

범위내에서 미 발행주식을 발행 하는 것

발행된 신주의 대가가 회사내로 납입됨으로써 회사재산이 증가하며 , 발행 신주가 제 3 자에게 인수되는 경우 회사의 구성원 ( 주주 ) 수도 증가

인수방법에 의한 유상증자의 분류 주주배정방식 신주 인수권을 구주주에게 부여 가장 일반적

주주우선 공모 방식 주주에게 우선 배정하고 실권된 주는 공모하는 방식

일반 공모 증자 방식 제 3 자 배정과 같이 기존주주배제하고 일반 불특정다수인을 대상으로 공개모집방식으로 유상증자실시 IPO 가 이에 해당

제 3 자 배정 정관 또는 주총 특별결의 사항 기존 주주 배제 하고 특정 제 3 자에게 배정방식 외자유치의 일반적 방식 경영권 및 기존주주에 영향

발행가에 의한 유상증자의 분류 액면가 유증 방식 정관에 정한 액면가 기준으로 하는 유상증자

시가발행 방식 증권시장에 형성된 주가에 연계하여 유상증자

액면미달 발행 방식 자본충실원칙 ( 상법 330 조 ) 에 따라 할인발행은 엄격히 금지 회사의 어려운 경영상태로 자금조달이 긴박한 경우에 한해 엄격한 요건아래 허용

유상증자



무상증자

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일반 공모 의의 구주주의 신주 인수권을 배제하고 신주 전량을 일반투자자를 대상으로 공모하는 방식

발행가액 결정

할인율 100/30 이내

결정시점 청약일전 제 5 거래일을 기산일로 결정

계산식 발행가 = 기준주가 X (1- 할인율 )

기준주가 MAX {1 달 거래가중평균종가 , 1 주 거래가중평균종가 , 기산일 종가 }

제 3 자 배정 유상증자 의의 회사 정관에 따른 신주인수권 배제 별도 규정 또는 주총 특별결의 사항 회사 의

합작선등 특별관계에 있는 자에게 신주 인수권 부여 외자유치

경영권 분쟁시 우호세력 확보

발행가액 결정

할인율 100/10 이내

결정시점 유증 이사회 결의일을 기산일로 결정

계산식 발행가 = 기준주가 X (1 – 할인율 )

기준주가 MIN {(1 달 거래가중평균종가 + 1 주 거래가중평균종가 + 기산일 종가 ) /3, 최종일 종가 }


유상증자



무상증자

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회사의 순자산에는 아무런 변화 없이 준비금의 일부 또는 전부를 자본금으로 변하는 대차대조표 상의 항목변경에 불과

자본금으로 변하는 준비금을 액면으로 나눈 수 만큼 신주 발행하는 증자

발행된 신주는 구 주주에게 소유 주식 비율로 비례해서 배분

무상증자의 목적

회사의 자본구성을 시정

사내 유보규모의 적정화

주주에 대한 이익의 환원

주식의 유동성 확보

자본금 증가를 통한 대외 신용도 제고

무상증자의 재원

법정준비금 이익준비금 , 자본준비금 , 재평가적립금 등

결의기관 이사회 결의로 가능 법정준비금이 아닌 임의 적립금을 이익준비금으로 항목 변경하여 무상 증자 할 때는 주총결의 필요


유상증자



무상증자

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IPO

해외시장 IPO

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1Overview

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Overview of Capital Markets

Direct Listing

Overseas

Listing

Domestic

ListingB Share

A Share

Small &

Medium Board

Singapore

Hong Kong

United States

GEM

Main Board Big H Share

Small H Share

Big Red Chip

Small Red Chip

United KingdomIndirect Listing

(Reverse Takeover)

Company

Private Equity

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Key considerations for selecting listing location

Listing requirements /

processing times

What’s the likelihood of a successful IPO? Can it be completed in a relatively short time horizon?

What’s the likelihood of a successful IPO? Can it be completed in a relatively short time horizon?

Valuation / PE / Fund

raised

Is the valuation fair (especially compared to other similarly listed companies)? Is the amount raised enough to fund corporate development needs?

Is the valuation fair (especially compared to other similarly listed companies)? Is the amount raised enough to fund corporate development needs?

Cost of listing Cost of raising equity (underwriting fee, listing fees, lawyers, auditors, evaluation, PR, printing costs), and cost of maintaining a listing, including internal controls, financial reporting and satisfying local regulations

Cost of raising equity (underwriting fee, listing fees, lawyers, auditors, evaluation, PR, printing costs), and cost of maintaining a listing, including internal controls, financial reporting and satisfying local regulations

Follow on offerings

Growth strategy /

reputation

In selecting a listing location, companies should consider corporate strategy and how the listing location would impact corporate image

In selecting a listing location, companies should consider corporate strategy and how the listing location would impact corporate image

How easy is it to access the capital markets through a follow-on offering and the usual amount of a follow-on offering

How easy is it to access the capital markets through a follow-on offering and the usual amount of a follow-on offering

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International markets comparison

Source: PwC, BDA researchData as of December 2005

AIM HK Main Board GEMSingapore Stock

ExchangeNASDAQ

Financial requirements None High Low Medium High

Operational requirements None High High Medium High

Time required to list

3mth – 6mth 6mth – 9mth 6mth – 9mth 6mth 12mth

Listing cost (ex-commission)

US$0.45m (GBP0.25m)

US$1.2m (HK$10m) US$1.2m (HK$10m) US$0.75m (S$1.25m) US$0.6m

Monthly liquidity (Turnover / market

capitalization) in 20047% 77% 3% 14% 24%

Minimum market capitalization

None US$24m (HK$200m)

(8 IPOs, 7 reverse takeovers)

Number of Chinese companies listed

173 45 88

US$5.9m US$8m free float

24

None

15

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2Hong Kong Listing

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Hong Kong listing (Main Board) – listing requirements

Financial capability Candidate must fulfill one of the three tests in order to satisfy the financial attributes requirement:

Ownership and management continuity Maintain a trading record period of not less than 3 financial years; AND Demonstrate management continuity during the 3-financial-year trading record; AND Demonstrate ownership continuity and control for at least the most recent financial year of the trading record

* Listing applicant under the market capitalization / revenue test (above 2nd one) is not subject to the management and ownership continuity requirement

Maintenance requirements

Minimum market capitalization of: US$24m (HK$200m)

Minimum public float: 15% - for market capitalization between US$513m (HK$4bn) and US$1.3bn (HK$10bn)

25% or US$12.8m (HK$50m), whichever higher - for market capitalization below US$513m (HK$4bn)

Minimum number of shareholders: 300; 1,000 – for applicant under market capitalization / revenue test (above 2nd one)

Profit test

Market

capitalization /

revenue test

Market

capitalization /

revenue / cash flow

test

Profit: Not less than US$2.6m (HK$20m) for the most recent year; AND Profit: Not less than US$3.8m (HK$30m) in aggregate for the 2 preceding years

Market cap: Not less than US$513m (HK$4bn) at the time of listing; AND Revenue: Not less than US$64m (HK$500m) revenue from principal activities for the most recent financial

year; AND

Market cap: Not less than US$256m (HK$2bn) at the time of listing; AND Revenue: Not less than US$64m (HK$500m) revenue from principal activities for the most recent financial

year; AND Cash flow: Not less than US$13m (HK$100m) inflow from operating activities in aggregate for the 3

preceding financial years

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Hong Kong listing (Main Board) – pros and cons

Geographical proximity, common language and common culture

Traditional fund raising platform for China

Since Qingdao Brewery listed in Hong Kong tock Exchange in 1993, Hong Kong Stock Market has become the most important offshore listing platform for Chinese companies. There are now over 170 Chinese companies (H share and red chip) listed in Hong Kong

Chinese companies are now a major part of the Hong Kong Main board. In 2005, Chinese companies contributed 30% of market capitalization and 40% of market turnover respectively

Experience and market size attracts good broker coverage. Concentration of institutional investors and fund houses also ease fund raising

Good liquidity and strong post IPO fund raising capability

Market liquidity makes secondary listings possible and reduces the need for dual listings

In 2004, turnover / market capitalization ratio was 77%, compared with 7% for AIM and 9% for SESDAQ (Singapore Stock Exchange)

Between 2001 and 2005, over 54% of fund raised by red chips was from secondary offerings

Geographical proximity, common language and common culture

Traditional fund raising platform for China

Since Qingdao Brewery listed in Hong Kong tock Exchange in 1993, Hong Kong Stock Market has become the most important offshore listing platform for Chinese companies. There are now over 170 Chinese companies (H share and red chip) listed in Hong Kong

Chinese companies are now a major part of the Hong Kong Main board. In 2005, Chinese companies contributed 30% of market capitalization and 40% of market turnover respectively

Experience and market size attracts good broker coverage. Concentration of institutional investors and fund houses also ease fund raising

Good liquidity and strong post IPO fund raising capability

Market liquidity makes secondary listings possible and reduces the need for dual listings

In 2004, turnover / market capitalization ratio was 77%, compared with 7% for AIM and 9% for SESDAQ (Singapore Stock Exchange)

Between 2001 and 2005, over 54% of fund raised by red chips was from secondary offerings

Pros

High listing cost

The average IPO cost (ex-commission) is about US$1.2m (HK$10m). It is expensive relative to other stock exchange, such as US$750,000 for Singapore Stock Exchange and US$450,000 for AIM

Buying exiting listed company is another way of listing. Average “shell” price is approximately US$6m (HK$50m), which is also expensive relative to other markets

Relatively high entry barrier

Listing on the Main Board requires fulfillment of certain financial thresholds not required in other stock listings

Relatively long listing procedures

In light of the recent corporate scandals, Hong Kong Stock Exchange has toughened the approval process for IPOs

Listing procedures now takes about 6-9 months to complete, compared to 3-6 months for AIM

High listing cost

The average IPO cost (ex-commission) is about US$1.2m (HK$10m). It is expensive relative to other stock exchange, such as US$750,000 for Singapore Stock Exchange and US$450,000 for AIM

Buying exiting listed company is another way of listing. Average “shell” price is approximately US$6m (HK$50m), which is also expensive relative to other markets

Relatively high entry barrier

Listing on the Main Board requires fulfillment of certain financial thresholds not required in other stock listings




Cons

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Hong Kong listing (GEM) – listing requirements

Length of business operation Candidate must fulfill either period of active business operations:

Exemptions may be granted for mining companies and newly formed project companies, such as major infrastructure projects, which can have shorter trade records

Ownership and management continuity Must be under substantially the same management and ownership over the period of active business operations


Minimum of market capitalization: US$5.9m

Minimum public float: 20% or US$128m (HK$1bn), whichever higher - for market capitalization exceeding US$513m (HK$4bn)

25% or US$3.8m (HK$30m), whichever higher - for market capitalization less than US$513m (HK$4bn)

Minimum number of shareholders 300 – for market capitalization exceeding US$513m (HK$4bn)

100 – for market capitalization less than US$513m (HK$4bn)

Financial reporting Quarterly

24 months

12 months

No minimum financial requirement

Revenue: Not less than US$64m (HK$500m) in the last 12 months; OR Assets: Not Less than US$64m (HK$500m) in the last financial period; OR Market cap: Not less than US$64m (HK$500m) with not less than US$19m (HK$150m) held by the public

39 Hans Kim

Hong Kong listing (GEM) – pros and cons

Geographical proximity, common language and culture

Relatively low entry barrier

GEM does not have specific financial requirement for listing candidates; the same is true for other growth markets such as AIM and SESDAQ

Stepping stone to Hong Kong Main Board

Good GEM listed companies usually swap to Main Board after accumulating 3-year profit record post GEM listing

The first, second and sixth largest GEM listed companies swapped to the Main Board. Altogether there are over 10 GEM listed companies that have swapped to the Main Board


Relatively low entry barrier

GEM does not have specific financial requirement for listing candidates; the same is true for other growth markets such as AIM and SESDAQ

Stepping stone to Hong Kong Main Board

Good GEM listed companies usually swap to Main Board after accumulating 3-year profit record post GEM listing

The first, second and sixth largest GEM listed companies swapped to the Main Board. Altogether there are over 10 GEM listed companies that have swapped to the Main Board

Pros

High listing cost

Similar to Hong Kong Main Board, listing expense is relatively expensive, approximately US$1.2m in total

As market capitalization of GEM listed companies are relatively small, listing cost can comprise up to 20% of total fund raised

Poor liquidity

Liquidity of GEM is very poor, and deteriorating. Turnover / market capitalization ratio dropped from 6% in 2002 to 3% in 2004 compared to 7% for AIM and 9% for SESDAQ

Poor liquidity results in difficulty of post IPO fund raising. Since 1999, post IPO only raised US$129m for Chinese companies




High listing cost

Similar to Hong Kong Main Board, listing expense is relatively expensive, approximately US$1.2m in total

As market capitalization of GEM listed companies are relatively small, listing cost can comprise up to 20% of total fund raised

Poor liquidity

Liquidity of GEM is very poor, and deteriorating. Turnover / market capitalization ratio dropped from 6% in 2002 to 3% in 2004 compared to 7% for AIM and 9% for SESDAQ

Poor liquidity results in difficulty of post IPO fund raising. Since 1999, post IPO only raised US$129m for Chinese companies




Cons

40 Hans Kim

3Other listing options

41 Hans Kim

Singapore listing – listing requirements

Financial capability

Candidate must fulfill one of the three tests in order to satisfy the financial attributes requirement:

Trading moratorium

Promoters’ entire shareholding at the point of listing for first 6 months after listing (above 1st and 2nd options)

Promoters’ entire shareholding at point of listing for first 6 months after listing; and at least 50% for the next 6 moths (above 3rd option)

Other listing requirements

Minimum public float: 12% - for market capitalization larger than US$595m (S$1bn)

15% - for market capitalization between US$238m (S$400m) and US$595m (S1bn0

20% - for market capitalization between US$178m ($S300m) and 238m (S$400m)

25% - for market capitalization less than US$178m (S$300m)

Minimum number of shareholders: 1,000 - primary listing

2,000 - secondary listing

Financial position No shortfall in working capital

All debts owing by directors, substantial shareholders and companies controlled by directors and substantial shareholders must be settled

Profit test (1)

Market

capitalization test

Profit: Cumulative pre-tax profit of at least US$4.5m (S$7.5m) for the last 3 years; AND Profit: Pre-tax profit not less than US$0.6m (S$1m) in each of these 3 years

Profit: Cumulative pre-tax profit of at least US$6m (S$10m) for the latest 1 or 2 years

Market cap: At least US$48m (S$80m) at the time of the IPO, based on the issue price and post invitation issued share price

Profit test (2)

42 Hans Kim

Singapore listing – pros and cons


Relatively low entry barrier compared with HK Main Board

Singapore requires lower profit or market capitalization for listing

Popular with companies that don’t want to list on growth markets like AIM or GEM, but are barred from Hong Kong Main Board due to its high financial requirements

Ease of secondary offering procedures

Secondary offerings are usually completed in 2-4 weeks


Relatively low entry barrier compared with HK Main Board

Singapore requires lower profit or market capitalization for listing

Popular with companies that don’t want to list on growth markets like AIM or GEM, but are barred from Hong Kong Main Board due to its high financial requirements

Ease of secondary offering procedures

Secondary offerings are usually completed in 2-4 weeks

Pros

Deteriorating market reputation

While Hong Kong and NASDAQ have increased scrutiny of IPOs following corporate scandals, Singapore has become more lax to attract Chinese companies leading to increased corporate scandals and loss of market confidence

A notorious example is China Aviation Oil, which went bankrupt due to crude oil future speculation. It was once held up by SESDEQ as a model of corporate governance.

The loss of reputation has directly impacted the liquidity of the market. Its liquidity is only about one-fifth of the Hong Kong Main Board

Deteriorating market reputation

While Hong Kong and NASDAQ have increased scrutiny of IPOs following corporate scandals, Singapore has become more lax to attract Chinese companies leading to increased corporate scandals and loss of market confidence

A notorious example is China Aviation Oil, which went bankrupt due to crude oil future speculation. It was once held up by SESDEQ as a model of corporate governance.

The loss of reputation has directly impacted the liquidity of the market. Its liquidity is only about one-fifth of the Hong Kong Main Board

Cons

43 Hans Kim

NASDAQ Listing – listing requirements

Financial capability

Candidate must fulfill one of the three tests in order to satisfy the financial attributes requirement:

Ownership and management continuity

2 years operating history is required for listing by fulfilling Marketplace Rule 4420(b)

1 year operating history is required for listing on the NASDAQ Small Cap Market. It can be waived if the market cap is greater than US$50m


Continuing listing requirements: Equity > US$10m + publicly held share value > US$5m + min US1 share price;

OR

Market cap/assets/revenue > US$50m + publicly held share value > US15m + min US$1 share price

Market maker: 3 market makers are required

Marketplace Rule 4420(c): 4 market makers are required

Minimum number of shareholders: 400 each holding 100 or more shares

NASDAQ Small Cap Market: 300 each holding 100 or more share

Sarbanes-Oxley Act: Substantial requirements for corporate governance

Marketplace Rule

4420(a)

Marketplace Rule

4420(c)

Market cap: At least US$8m for public shares; AND Equity: At least US$15m; AND Profit: At least US$1m pre-tax income

Market cap: At least US$18m for public shares; AND Equity: At least US$30m

Market cap: At least US$20m for public shares; AND Assets: At least US$75m; OR Revenue: At least US$75m; OR Market cap: At least US$75m

Marketplace Rule

4420(b)

Market cap: At least US$5m for public share; AND

Equity: At least US$5m; OR Market cap: At least US$50m; OR Profit: At least US$750,000 from

continuing operations, in last fiscal year or 2 of the last 3 fiscal years

Alternative – NASDAQ Small

Cap Market

44 Hans Kim

NASDAQ Listing – pros and cons

The largest growth market with good liquidity

NASDAQ is the largest growth market in the world. Its capitalization reached US$3,153bn in 2004, which is 70x AIM and 346x GEM

In 2004, monthly turnover / market capitalization ratio was 24%, compared to 7% for AIM and 9% for SESDAQ

These market characteristics favor large scale fund-raising

Friendly to high-tech concept stocks

Of the 23 Chinese listed NASDAQ companies, many are tech-concept stocks, including: Baidu, Netease, Sohu, Sina, Asia Info, UT Starcom, China.com and Kongzhong.com

While Asian stock markets are less keen on tech concept stocks, NASDAQ provides a platform and relatively higher PE for these companies

The largest growth market with good liquidity

NASDAQ is the largest growth market in the world. Its capitalization reached US$3,153bn in 2004, which is 70x AIM and 346x GEM

In 2004, monthly turnover / market capitalization ratio was 24%, compared to 7% for AIM and 9% for SESDAQ

These market characteristics favor large scale fund-raising

Friendly to high-tech concept stocks

Of the 23 Chinese listed NASDAQ companies, many are tech-concept stocks, including: Baidu, Netease, Sohu, Sina, Asia Info, UT Starcom, China.com and Kongzhong.com

While Asian stock markets are less keen on tech concept stocks, NASDAQ provides a platform and relatively higher PE for these companies

Pros

Heavy compliance cost

Sarbanes Oxley (SOX) has placed a heavy burden on US listed companies

According to research by AeA, for a company with revenue less than US$100m, SOX compliance can cost more than 2.5% of revenues

High litigation risk

Out of 23 Chinese listed companies, 7 have been sued

Litigation costs and compensation/fine can pose a severe threat to the financials of the listing company

Relatively high continuing listing requirement

The continuing listing requirement is clearly far stricter than other growth markets, especially the minimum market cap and share price

The number of companies listed on NASDAQ have decreased due to strict continuing listing requirements

From 1995 to 2002 there were 5,143 NASDAQ delistings compared to 1,497 NYSE delistings and 712 AMEX delistings

Long listing procedures

Listing on NASDAQ normally takes 1 year to complete, which is more than twice the time required for AIM listings

Heavy compliance cost

Sarbanes Oxley (SOX) has placed a heavy burden on US listed companies

According to research by AeA, for a company with revenue less than US$100m, SOX compliance can cost more than 2.5% of revenues

High litigation risk

Out of 23 Chinese listed companies, 7 have been sued

Litigation costs and compensation/fine can pose a severe threat to the financials of the listing company

Relatively high continuing listing requirement

The continuing listing requirement is clearly far stricter than other growth markets, especially the minimum market cap and share price

The number of companies listed on NASDAQ have decreased due to strict continuing listing requirements

From 1995 to 2002 there were 5,143 NASDAQ delistings compared to 1,497 NYSE delistings and 712 AMEX delistings

Long listing procedures

Listing on NASDAQ normally takes 1 year to complete, which is more than twice the time required for AIM listings

Cons

45 Hans Kim

AIM – listing requirements

AIM has neither financial nor operational requirements for listing candidates

Advisors required to list on AIM

NOMAD (Nominated advisor)

NOMAD warrants to the Exchange that the candidate is appropriate for joining AIM

NOMAD has to be retained throughout the company’s life in the market

Broker

A securities house and member of the LSE

It is the broker’s responsibility to gauge the level of interest in the company’s shares and advise on pricing, and place them with investors

Accountant

Review and audit the candidate’s finances

Corporate lawyer

Draw up all agreements surrounding the flotation. They are also responsible for the due diligence process – verifying statements in the prospectus and other documents

Financial PR company

Responsible for promoting the company, helping creating the analyst presentation, afterwards advising on investor relations strategy

Documents required to list on AIM

Prospectus

Due diligence report

Analyst presentation

10 day announcement – the form is completed by the NOMAD and sent to the AIM, at least 10 clear business days prior to admission of the new company. AIM then disseminates this over the Regulatory News Services, the LSE’s official news outlet, and checks for any material objection for the listing

Declaration by NOMAD

Application form signed by the company

46 Hans Kim

AIM – pros and cons

Very low entry barrier

AIM has no financial or operational requirements for listing

Simple listing procedures and short listing process

LSE relies on the NOMAD to warrant the listing company, thus simplifying the listing procedures. Admission documents are only pre-vetted by the NOMAD

After appointment of the NOMAD, it normally takes only 3-6 months to get listed on AIM

Low listing cost

Listing costs on AIM is about US$450,000 (GBP0.25m, ex-listing commission), compared to (US$1.2m) listing in Hong Kong and (US$750,000) in Singapore

Relatively strong liquidity among growing markets

Monthly turnover / market capitalization ratio for AIM was 7% in 2004, improving from 3% in 2002. AIM index was up by 20.4% in 2004

It is far more attractive than 3% of GEM and approaching 9% of SESDAQ

Flexible trading

No minimum public shareholdings

In most cases, no prior shareholder approval is required for transactions

Very low entry barrier

AIM has no financial or operational requirements for listing

Simple listing procedures and short listing process

LSE relies on the NOMAD to warrant the listing company, thus simplifying the listing procedures. Admission documents are only pre-vetted by the NOMAD

After appointment of the NOMAD, it normally takes only 3-6 months to get listed on AIM

Low listing cost

Listing costs on AIM is about US$450,000 (GBP0.25m, ex-listing commission), compared to (US$1.2m) listing in Hong Kong and (US$750,000) in Singapore

Relatively strong liquidity among growing markets

Monthly turnover / market capitalization ratio for AIM was 7% in 2004, improving from 3% in 2002. AIM index was up by 20.4% in 2004

It is far more attractive than 3% of GEM and approaching 9% of SESDAQ

Flexible trading

No minimum public shareholdings

In most cases, no prior shareholder approval is required for transactions

Pros

Geographical disadvantage

London is geographically far from China. Culture unfamiliarity may affect popularity of shares

NOMAD are mostly western corporate finance companies. Language and cultural differences may lead to difficulty, and result in the need for additional advisors

Lack of popularity in Greater China area

AIM was set up in 1995, but there are now only 17 Chinese companies listed there; Chinese listings only started in October 2004

Lack of popularity in China has reduced some of the advantages of being listed, such as reputation enhancement, however this is improving as AIM hosts road shows etc to raise its profile

Geographical disadvantage

London is geographically far from China. Culture unfamiliarity may affect popularity of shares

NOMAD are mostly western corporate finance companies. Language and cultural differences may lead to difficulty, and result in the need for additional advisors

Lack of popularity in Greater China area

AIM was set up in 1995, but there are now only 17 Chinese companies listed there; Chinese listings only started in October 2004

Lack of popularity in China has reduced some of the advantages of being listed, such as reputation enhancement, however this is improving as AIM hosts road shows etc to raise its profile

Cons

AIM is a new market for Chinese companies with the first listing in October 2004, but is rising in popularity

47 Hans Kim

Chinese enterprises listed on AIM

Name Ticker Sector Listing dateCurrent market cap

(GBP in m)Listing market cap

(GBP in m)Listing method

Sinosoft Technology SFT Software 06 March 2006 58.8 NA IPO

Bodisen Biotech BODI Agricultural Biotech 06 February 2006 158.9 NA IPO

China Shoto PLC CHNS Batteries/Battery Sys 06 December 2005 38.0 26.0 IPO

Mandarin Merchant Capital PLC 620534Z Investment Companies 16 September 2005 NA NA IPO

EBT Mobile China EBT Cellular Telecom 08 September 2005 51.8 26.5 RTO

Asian Citrus Holdings Limited ACHL Agricultural Operations 03 August 2005 141.7 68.0 IPO

Jarlway Holdings PLC JWY Machinery-Constr&Mining 18 July 2005 3.8 6.0 IPO

South China Resources PLC SCR Metal-Diversified 18 April 2005 38.5 4.0 IPO

Sweet China PLC SWC Capital Pools 31 March 2005 NA NA RTO

Central China Goldfields PLC GGG Gold Mining 30 March 2005 12.5 NA RTO

Ming Resources PLC MTA Investment Companies 29 March 2005 2.3 NA RTO

SovGEM Limited SOV Investment Companies 23 November 2004 4.3 11.4 IPO

China Wonder Limited CWO Diversified Operations 01 October 2004 3.8 2.5 IPO

GruppeM Investments PLC GRP Investment Companies 18 February 2004 NA NA RTO

Hemisphere Properties PLC HPE Real Estate Oper/Develop 05 August 2003 0.8 2.5 RTO

CYC Holdings PLC CYC Investment Companies 08 April 2003 2.8 NA RTO

Churchill China CHN Consumer Products-Misc 26 October 1994 NA NA IPO

Source: Bloomberg, BDA researchData as of 10h May 2006

48 Hans Kim

Key Advantage of LSE AIM

- Normally 3 year trading record required

- Minimum 25% shares in public hands

- Prior shareholder approval required for substantial acquisitions and disposals

- Minimum market capitalization

- No trading record requirement

- No minimum market cap.

- No minimum shares to be in public hands

- No prior shareholder approval for transactions

- Nominated adviser required at all times

- SME Business 에 적합

49 Hans Kim

Key Advantage of LSE AIM

-KOSDAQ 이나 NASDAQ 에 비해 상대적으로 등록 Regulation 이 중소기업에 유리한 조건을 가지고 있어 , 상장조건이 수월하며 매년 상장되는 기업의 수가 많다 . (UK 외 International 기업의 상장기회가 많다 .)

- 등록 및 유지 비용이 NASDAQ 보다 훨씬 저렴하고 , KOSDAQ 보다는 다소 비싸다 .

- Pound화의 변동추이가 원화보다 작다 .

- KOSDAQ 에 비해 PER 가 높다 . -> 회사가치 대비 보다 정확하고 효율적인 Valuation 이 가능하다 .

- Open-end Fund Raising 이 활발하고 , 1 차보다 2 차의 Raising 규모가 크다 . -> 회사의 지속적인 성장이 가능하다 .

- 유럽에서 기업의 Name Value 가 높아져 시장 진출이 용이하다 .

- Market 에서 지정한 전문적인 Underwriter 들 (Nomad) 이 있다 . 어드미션이나 IPO 후 , 회사의 가치를부양해주며 , 경영에 도움을 줄 수 있다 .

- IPO 시 대주주의 지분이 Dilution 되는 정도를 조절할 수 있다 . : 보통 코스닥 상장시 대주주 지분이 40% 정도 Dilution 되는 것이 일반적이지만 , AIM 은 5% 정도로 조절하는것이 가능하며 , Equity 뿐 아니라 싼 이 자의 Debt 로도 Funding 을 받을 수 있다 .

- M&A 고려시 코스닥보다 AIM 에 상장되어 있는것이 여러측면에서 유리하다 .

- AIM 시장은 기관투자가들이 메인이 되는 시장으로 , Fluctuation 이 심하지 않고 , 지속적으로 꾸준한 성장 이 가능하다 .

50 Hans Kim

KOSDAQ & AIM – 상장조건 비교

구분 Kosdaq ( 벤처기업 기준 ) AIM

자기자본 15 억원이상 규정 없음

자기자본이익률 (ROE) * 5% or 순이익 10 억이상 규정 없음

주식의 분산요건소액주주 500 인 이상 ,

발생주식총수의 30% 이상규정 없음

소유주 비율 변동 청구일전 1 년 이내 변동 없어야 함 규정 없음

심사자 Kosdaq 위원회 Nominated Advisor

등록 주관주체 증권회사 Nominated Advisor & Broker

51 Hans Kim

AIM, NASDAQ, KOSDAQ – 상장및 유지 비용

증권거래소 IPO Broker 시 비용 주식거래비용 기타

수수료 $8,000 연간 수수료 $8,000

Nomad/ / 회계 법률등 비용 $900,000 Nomad/ 회계등 연간비용 $145,000

총계 $908,000 총계 $153,000

수수료 $125,000 연간 수수료 $34,500

/ 회계 법률등 비용 $2,000,000 / 회계 법률등 연간비용 $1,000,000

총계 $2,125,000 총계 $1,034,500

수수료 $10,000 연간 수수료 $500

/ 회계 법률등 비용 $100,000 / 회계 법률등 연간비용 $50,000

총계 $110,000 총계 $50,500

: 0.3%거래세: 0.05~0.2%수수료

40M share기준

자문비용추정치사용

(Sarbanes- Oxley 법)고려

40M share기준

: 0.5%거래세:$7~$100수수료

+ 소득세

:수수료$6~$15/trade

+ 소득세

KOSDAQ

공모규모의3%~6%

공모규모의~7%

공모규모의2.5% ~ 4%

등록비 등록 유지비

LSE AIM

NASDAQ

52 Hans Kim

Market 비교

증권거래소 등록 기업수( )누적

Market Cap( )누적 거래규모 Total IPO 금액 Second Raising Ave. Fund Raising 신규등록기업수

LSE AIM 1399 (1179/220) $113B $84B $13B $5B $34.7M 519 (399/120)

NASDAQ 3164 $3603B $10000B $12.2B NA $87.8M 139

KOSDAQ 918 $70B $437B $3.7B $2.2B $53.6M 69

2005 년 기준

증권거래소 등록 기업수( )누적

Market Cap( )누적 거래규모 Total IPO 금액 Second Raising Ave. Fund Raising 신규등록기업수

LSE AIM 1590 (1307/208) $150B $88B $12.6B $8B $62.4M 330 (244/86)

NASDAQ 3206 $3,670 $8777B 42

KOSDAQ 954 $68B $351B 37

2006 년 10월 25 일 기준

53 Hans Kim

AIM _ New Touch Guideline for AIM Nomads_Feb 19, 2007

From The Times

February 19, 2007

LSE draws up new tough guideline for AIM nomads

Elizabeth Colman

The London Stock Exchange is expected to publish strict guide-lines this week for advisers bringing companies to AIM, the junior London market.

In an attempt to make the industry more accountable, the first tangible rulebook for nominated advisers, or nomads, will demand that more thorough due diligence be carried out on AIM applicants.

Proposed rules include the demand for strict background checks on all directors and site visits to the headquarters of nonUK companies. Failure to comply with the rules could lead to a nomad being banned from AIM. The crackdown follows a string of profit warnings involving AIM-listed companies and criticism from the US about so-called lax standards.

Under the present AIM structure, nomads are not subject to hard-and-fast rules. “This is an attempt to show the world that the AIM is taking a tougher approach,” one nomad said.

However, many larger nomads said they already complied with the “best practice” standard set out in the rulebook. The rules are expected to weed out smaller nomads which “rubber-stamp” applicants’ admission documents and neglect to stay in touch with the company after listing.

The wording of a key declaration to be published on the front page of admission documents, assigning to nomads the responsibility for the “appropriateness” of AIM applicants, is expected to be tempered.

Richard Baty, a nominated adviser and assistant director of corporate finance at Hanson Westhouse, said: “We don’t expect the new rules to be too prescriptive. The whole point of AIM is that it is regulated by the nomads. The spirit of the rulebook is that the nomad uses their judgment.”

Although AIM applicants are required at present to show legal and accounting diligence, the rulebook will require nomads to prove to AIM regulators a knowledge of the company and its directors. This will present a particular challenge in emerging markets such as China and India, and the crackdown is expected to provide a boon to business intelligence services.

Russ Corn, a consultant at Diligence, an intelligence gathering and risk management firm, has noticed an increase in business. He said: “There is a feeling among the nomads and the brokers that they will be required to look at every single director that they’re bringing to market and that they validate and check the directors’ declarations and the essential information that they’re given. Up until now the nomad could get away with taking it at face value. Now they’re going to have to do reputation and integrity profiling.”

Several nomads welcome the rules, saying they will provide an impetus to tell clients that they must do background checks, in circumstances where it may have caused offence. Previously, many nomads carried out such checks without the applicants’ knowledge.

54 Hans Kim

4Private placement

55 Hans Kim

Private placement – overview

Overview

Private placement is a broad term that refers to any type of equity investment in an asset in which the equity is not freely tradable on a public stock market

There are two types of private placement investors; financial and strategic

Financial investors, including venture capital, are an important source of funding, especially for younger companies that do not have access to the public financial markets

Strategic investors provide management and technology know-how and capital

Private placement

Financial investors (private equity) Strategic investors (strategic stake)

Venture capital

Buyout funds

Funds of funds, etc.

Good financial returns on their equity investment and typically exit around 5 years

Strategic partners (foreign or domestic)

Upstream, downstream or otherwise related companies

Companies looking to diversify

Gain access to new markets

Ensure steady supply or off-take or other benefits from equity ownership

Diversify earnings, participate in other industries

Who they are

What they want

56 Hans Kim

Financial investors – overview

Three stages of private equity

Seed/initial stage: Investors investing in companies during this stage are investing in

an idea. A company at this stage usually has a concept or a prototype or has just

started operating, but operating practices and company structure have not been

determined. Investing in companies at this stage is relatively risky and is usually

funded by venture capital. Typical investment amount range from US$1m to US$5m.

Growth stage: A company in this stage has usually operated for a period of time, has

a basic sales team, production capabilities and has in place a basic company

structure. A company in this stage needs capital to expand operations and grow

market share. Typical investment amount range from US$5m to US$40m

Mature/mezzanine stage: A company in this phase is mature and is getting ready for

a public offering in 9-12 months time. Finding a strong and reputable private equity

investor in this stage will add credibility to the public offering. Investment at this range

widely, anywhere from US$40m to US$300m

Buyout – LBO/MBO: There are many different circumstances or events that may

facilitate the initiation of a management buyout (MBO), a form of leveraged buyout

(LBO), including: divestitures of corporate divisions, public-to-private transactions,

SOE restructurings, and other means of transferring ownership of a company. MBO

transactions usually rely on debt instruments to finance a significant portion of the

purchase price, consequently, the majority of these types of deals occur in stable,

mature companies that have an established track record of generating strong and

sustainable cash flows.

These categories are not absolute, but are a useful guide in helping to target the

appropriate kind of investor

Source: Almeida Capital, BDA

Sources of private equity (by number of funds)

Sources of private equity (by amount)

Source: Almeida Capital, BDA

Venture Capital32.4%

Buyout44.7%

Secondary market4.5%

Mezzanine6.5%

Fund of Fund6.8%

Others5.2%

Venture Capital37.3%

Buyout36.4%

Secondary market5.1%

Mezzanine6.4%

Fund of Fund9.5%

Others5.3%

57 Hans Kim

Private equity – pros and cons

Management should carefully review all its options and considerations before committing to raising capital through private placement

Pros Cons

Financial Investors

Strategic Investors

“Smart money”: Private equity can often bring better management practices and connections within the industry to improve the business

Lots of new PE funds looking at China

Flexible fundraising channel: compared to a public offering, the private placement process is less time consuming and more flexible. It also avoids the registration, regulation and control process and offers more confidentiality against competitors

Eliminates marketing and road show costs

Private placement is more accessible than the public markets with a higher likelihood of success

Legitimacy: Investment by a reputable private equity fund or company can often provide encouragement to would-be future investors as it implies that the company’s financials and its business model have passed rigorous evaluation by highly qualified people. It can also raise the profile of a company waiting to list publicly and increase its valuation and enhance its performance in the secondary markets

Strategic partners can use capital support to solidify the business partnership

Strategic investors can bring technology, market access and best business practices to the Company

The public market will often give a more generous valuation than a private placement investor

Loss of control: Contract stipulations, board member requirements, and other issues that arise out of the investment process could lead to loss of control by management

Unlike a listed company, shares owned by employees can’t be freely traded

It is harder for a private company to use un-issued shares in an acquisition given the unconfirmed value of the shares

Financial investors will typically want to exit their investment in 3-5 years

Working with another company will require careful relationship management to align expectations and have a fruitful relationship

58 Hans Kim

IPO

End of Week 3