capital raising via assob

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1. Australian Small Scale Offerings Board Outline of capital raising processApril 09 2. Equity raising alternatives Locate a strategic business partner / investor Time consuming and high risk process Bargaining power on equity pricing strongly in favour of investor Cap in hand approach to investors No certainty in the process Raise capital through a public offer via a prospectus or Offer Information Statement (OIS) Expensive: $100K to $200K up front to prepare a prospectus Slow: At least six months audited accounts required for the preparation of a disclosure document Time consuming: Six months lead time in setting the business up for a disclosure document Raise up to $5 million in a small scale offer through the Australian Small Scale Offering Board (ASSOB)Minimal up front costs Quick access to capital raised (77% of all ASSOB matters raise capital within three months) Access to distribution network: 7,500 professional investors on ASSOB data base will receive notification of the opportunity (as well as the Tauro Capital and Bourse Communications network of 2,500+)Ability to raise additional rounds of capital every 12 months Sets the business up for a subsequent capital raising via a disclosure document by establishing audit and governance disciplines1 3. Why use Tauro for an ASSOB capital raising? Access to Tauro Capital and Bourse Communications network of 2,500 professional and sophisticated investors Back office corporate advisory support Financial modelling and forecasting Equity valuation and peer benchmarking (using Capital IQ database) Industry specific focus IT software and services Facilities management & waste management Environmental and facilities services Industrial project management & construction management Recruitment & labor hire Agribusiness 2 4. Equity raising compliance regime The ASSOB capital raising process is sanctioned in Corporations Personal offers. 20/12 rule. Section 708 Act 2001under its own ASIC class order (C O02/273) Affordable & quick but limited to $2m & 20 investors per year ASSOB capital raisings are not made under disclosure. They are Requires expertise/experience personal offers made to no more than 20 investors for amounts not exceeding $5 million (ASIC have granted ASSOB anOffers made under disclosure extension to the $2 million limit placed on the general public). (Offer Information Statement or Prospectus) The 20 investor limit does not apply to overseas or sophisticated Requires lawyers, accountants and advisors. investorsIs far more expensive. Usually $110k or more.Because no disclosure document is required, the process is A personal offer excludes any offer made to the relatively inexpensive and quick to execute. public via an advertisement Companies executing an ASSOB capital raising are required to The compliant way to market an ASSOB offeradopt high standards of corporate governance and reporting: involves: Issuers must be unlisted public companies that prepare Informing people the issuer is undertaking anannual audited accounts ASSOB capital raising. This can be done Issuers must have a minimum of three company directors through the media, at a public event with the majority non-executive directors Directing interested parties to the ASSOB Issuers must present investors with a proper business plan issuer page. This can be done via a link from and report regularly on the achievement of performance the issuers website or through the ASSOB milestones member responsible for project managing the process (Tauro) Directors and senior managers are subject to bankruptcy Running investor meetings with interested and police checks to ensure only quality professionals parties. Attendees execute a qualifying are entrusted with shareholders funds statement at the beginning of the meeting This approach is fully sanctioned by ASIC3 5. Equity raising compliance regime Section 708 : You must get it right There are specific regulations relating to raising fundswithout a disclosure document. Most lawyers and accountants dont fully understand thisarea of the law. ASSOB specialises in assisting companies under this areaof the Corporations Act and can provide certainexemptions, through the Class Order, that allow you to dothings that you cant do without ASSOB. Many businesses attempt to use s708 of the CorporationsAct to fund the needs of their business. Most get it wrongor fail. 4 6. Raising capital on the Australian Small Scale Offerings Board Who is the Australian Small Offering Board? ASSOB is an exclusive membership based platform for growing businesses to raise capital from professional investors Companies can raise up to $5 million per annum on ASSOB without incurring the time and financial cost of preparing a disclosure document Investors and founders can sell their shares on a secondary market run by ASSOB Matches high quality investment opportunities with high net worth investors Platform has proved to be extremely successful in raising capital since its inception in 1997 Companies can only can only access the platform through a accredited ASSOB member The ASSOB capital raising process is sanctioned in Corporations Act 2001under its own ASIC class order (C O02/273) 5 7. Current ASSOB clients a snapshot The graphic below is a screen grab from ASSOBs primary issue page, which can be seen by all ASSOB members and new interested parties directed to the ASSOB websiteASSOB matters are listed on the web, all 7,500 investors on the database can track the status of each capital raising...Competitive tension is generated by conducting the raising in rounds at different prices. Shares are issued at adiscount in earlier rounds giving early participants a better deal creating an incentive for investors to get on board earlyInterestedinvestors canmove to adedicated issuerpage by clickinghere. From thatpage they candownload theoffer document. The red squares indicate that a parcel of shares has been purchased by an ASSOB investor. Each investment round has its own row. 6 8. Company profile Investors follow a link from the primary issue page (as shown on the previous slide) and are then taken to a corporate profile page containing a summary of the opportunity, a download icon for the offer document and a short movie introducing the opportunity ASSOB have found from past experience that short mpeg movies that profile the business and the directors result in higher investor uptake of the opportunity The investment fundamentals (exit strategy, estimated future earnings, available investment parcels) are highlighted to giver educated, professional investors access to fundamentals driving their investment decision Investor enquiries are entered here and sent directly to the ASSOB member running the process7 9. The ASSOB Secondary Market All ASSOB investors (as well as the original founding shareholders) can offer their shares for sale on a secondary market. This provides investors with an early exit mechanism if they do not wish to wait for a major liquidity event. The ability to trade in and out of shares on a secondary market is extremely attractive to investors in early stage andgrowing enterprises. Investors in unlisted businesses rarely get this opportunity but the ASSOB platform makes it possible.It is also possible for founding shareholders to release equity through this mechanism (although not during a capitalraising) The ASSOB member (in this case Tauro Capital) is responsible for managing all secondary market transactions. The status of each secondary offer is listed here. Its interesting to see that nearly all secondary offers listed on the Board have been sold! 8 10. Outline of proposed processPrepare for the capital raising process Prepare ASSOB compliant information memorandum Prepare triple bottom line financial model and forecasts to be used in IM Prepare capital raising structure and equity raising plan satisfactory to the client and ASSOB Develop short form business plan supporting financial model Set up appropriate audit and corporate governance arrangements in the business to ensure the business is compliant with ASIC and ASSOB capital raising requirements Map out the capital raising by a staged process aimed at creating competitive tension with investors in a summary document the Strategic Growth Plan (SGP) Execute the capital raising Submit application to raise equity capital to ASSOB (capital raising structure and strategic growth plan included) ASSOB approve strategic growth plan and information memorandum Pre-marketing of the opportunity to sophisticated investors Matter goes live on ASSOB primary issue board All in bound calls from interested parties handled by Tauro Capital Applications for share subscriptions received by Tauro Capital ASSOB issue share certificates and release funds to the client Periodic review of progress of capital raising with the client every two weeks Remain on ASSOB for future capital raisings or move to disclosure document 9 11. Capital raising pre-requisites In order to complete any restructure or capital raising you will need:A compelling growth story No-one invests in a company unless it is growing, even if the buy-in valuation is low How does existing management intend to grow the business? Development plan to include key performance milestones Well considered and reasonable exit timeline and mechanism Suggest 3-5 year exit timeline (typical preference for expansionary equity capital providers) Exit strategy to be trade sale (if maintainable EBIT > $3M but less than $6M or IPO (if maintainable EBIT > $6M)) A quality offer documentation supported by thorough analysis Overview business plan and financial model Offer document Investor presentation Transaction documents The appropriate investment vehicle Listed or unlisted public company which publishes audited accounts Ideally a secondary market for investors shares