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IPO and the choice ofstrategic partners

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Table of Content

IPO I. IPO Definition

II. Conditions for

privatization

III. Normalschedule for an

IPO

IV. Valuation

method to find thefirms equity value

V. Underwriting

VI. Price of IPO

Strategic Partners VII. Definition of

strategic partners

VIII. The role of

strategic partners IX. Selecting

strategic partner

Case Study

Recommendation

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IPO Definition

The first sale of stock by a privatecompany to the public.

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II. Conditions for privatization

Paid-up charter capital >= 10 billionsVND

Two recent years: profitable

Have a plan for capital utilization

Especially, for state-owned company,they must fulfill 2 more conditions:

Being excluded from 100% state-owned

After being evaluated firms equityvalue, the firm must remain a portionof state capital

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III. Normal schedule for an

IPO3-part transformation

process

The pre-IPO

transformationphase: restructuring

phase

The IPO

transaction

phase: achieving

goals

increase

valuation of the firm

The post-IPO

transaction phase:

execution of thepromises and

business strategies

in the preceding

stages

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IV. Valuation method to find

the firms equity value

Weighted Average Cost of

Capital (WACC)

Weighted Average Cost ofEquity (WACE)

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V. Underwriting

Underwriting:investment bankersraise investment

capital frominvestors on behalfof corporations andgovernments thatare issuing

securities (bothequity and debt) Firm commitment

Best effortsagreement

Investment banks tend

to form a syndicate of

underwriters

Types of Underwriting

Automated

Underwriting

Negotiated

Underwriting

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VI. Price of IPO

Auction price: each participants

successful auction price

Advantageous price: = 60% averagesuccessful auction price; offering to

firms staff

Negotiated/Underwritten price:

offering to investors; >= average

successful auction price

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VII. Definition of strategic

partnersParty with which a long-term agreement is

reached for sharing of physical and/orintellectual resources in achievement of

defined common objectives

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VIII. The role of strategic

partners

"If we are together nothing is

impossible.

If we are divided all will fail."

Winston Churchill

- Raise funds

- Renew human resources

- Provide technical assistance- Develop new products or services

(innovation)

- Reduce costs in supply chains

(smartsourcing)

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IX. Selecting strategic partner

Criteria:Financial capacity

Technological

standard

Managerialexperience

Reputation

Price: purchasing

stocks at the price>= average bid

price

Duration: Strategicpartners can not

transfer bought stocks

in 3 year-period from

the date of business

registration

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Case Study: VINACONEX

Background:

27/09/1988: Foreign Service and ConstructionCompany established.

24/11/2006: renamed: Vinaconex Corporation.

Area of operations: construction, labour export and

import- export.11/1995: regarded as state company.

2006: started to be equitization.

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Case Study: VINACONEX

Strategic partnersBank for Investment and Development of Vietnam(BIDV)

Saigon Securities Inc (SSI)

Vietnam Partners LLC

Savico GroupTechnological and Commercial Bank(Techcombank)

Hanoi Building Commercial Bank Joint Stock Bank(Habubank).

Major informationFace value: 10,000 VND

Beginning price: 11,000 VND

Average price: 26,029 VND

Strategic shareholders: 6.67% of chartered capital

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Case Study: VINACONEX

Evaluation of StrategicP

artnersSavico: real estate company GOOD

4 banks GOOD & BAD

Lack of Strategic Partners working in the

same industry BAD

Lack foreign investors BAD

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Recommendation

To companies

Carefully select strategic partners

(capital, technology, experiences)

To investors

Prudentially consider investing in

IPOs

(profitability, growth trends,

strategies)

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References

All materials on FMT website

http://en.wikipedia.org/wiki/IPO

http://i.investopedia.com/inv/pdf/tutorials/ip

o.pdf

http://www.investopedia.com/terms/u/under

writing.asp

http://www.saga.vn/dictview.aspx?id=660http://www.saga.vn/dictview.aspx?id=1589

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Thanks for your

attention ^^

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Q&A session