1. What Do I Do Now? - Going Public vs. Selling Out
Applying Concepts from Finance to the Public Equity and M&A Markets
November 14, 2002
Mark Satisky 1

2. Agenda Equity Investment Alternatives Mechanics of Equity Offerings
Mechanics of Mergers and Acquisitions
Internship Opportunities
Q&A 2

3. Equity Market Alternatives
Late Stage
Private/Public Company
Mature Stage
Private/Public Company
Growth Stage
Private/Public Company
Convertible Debt
Mezzanine Stage
Private
Company
IPO
Public/Private Debt
Follow-on Offerings
Venture Stage
Private
Company
Traditional Bank Loans
Private Equity
High Yield Debt & Equity
Venture Capital Funding 3

4. Equity Investment Alternatives
Venture Capital
Early stage companies
Highest risk
Mezzanine Investments
Shorter term investment
Often pre-IPO financing
Initial Public Offering (“IPO”)
Sale of equity securities through the public capital markets, subject to SEC rules and registration requirements
Secondary Equity Offering
Similar to IPO but for existing public companies
Less cumbersome requirements 4

5. Equity Investment Alternatives
Private Investment in Public Equity (“PIPE”)
Direct sale of securities by a public company to sophisticated investors, primarily private equity firms
Recent phenomenon based on decline in stock market, liquidity shortfalls, and unfunded business plans
Leveraged buyouts (“LBO”)/Management buyouts (“MBO”)
Later stage, mature companies
Hostile takeovers from 1980’s have been generally replaced by management led takeovers 5

6. IPO Process “Dog and Pony Show”
Underwriter selected (Goldman Sachs, Morgan Stanley)
Accounting, legal, and financial due diligence and SEC regulations
Registration statement (S-1) filed with SEC
Series of comment letters
Roadshow
Stock trading begins
Public company requirements 6

7. Mergers & Acquisitions - Types
Cash acquisition
Provides easiest liquidity to investors
Generally lower price
Lower upside
Stock acquisition
Larger pool of potential acquirers
Generally higher price
Greater potential upside
Merger
Two generally equal size companies merge to form one larger new company (e.g. ExxonMobil) 7

8. Mergers & Acquisitions - Valuation
Discounted cash flow (“DCF”) analysis
Sum of discounted future cash flows plus terminal value
DCF = S (CF/1+r)t + TV
Difficulty determining discount rate (r)
Comparable companies analysis
Comparable acquisitions analysis 8

9. Mergers and Acquisitions - Process
Hire investment bank
Solicit bids
Due diligence by accountants, lawyers, bankers, other specialists
Auction process – 1-3 rounds
Structuring considerations (tax, financial)
Handshake 9

10. Mergers and Acquisitions - Considerations
Using cash vs. stock
Purchasing assets vs. stock
Access to debt financing
Dilution of shareholders
High P/E buys low P/E accretive
Tax and financial structuring
Vesting of stock options
Liabilities 10

11. Internship Opportunities
Investment Banking
Industry specific group (e.g. Energy, Telecom)
Product specific group (e.g. M&A)
Corporate Finance
Pre-IPO companies (e.g. LipoScience)
Consolidating industry (e.g. AT&T Wireless)
Acquisitive company (e.g. GE)
Asset Management
Private equity/venture capital
Mutual funds (e.g. Fidelity)
Hedge funds
Due Diligence/Valuation
Consulting firms (e.g. Bain, McKinsey)
Big 4 accounting firms (e.g. PwC, E&Y)
Law School??? 11

12. Q&A
Questions? 12