Zimmerman Adams International

Pre - IPO Financing

For
Russian, Eastern European, and
Central Asian Companies
2006
Zimmerman Adams International Limited
Registered in England and Wales No. 5136014; Registered Office: One Threadneedle Street, London EC2R 8AW
AUTHORISED AND REGULATED BY THE FINANCIAL SERVICES AUTHORITY
MEMBER OF THE LONDON STOCK EXCHANGE

Table of Contents

About Pre-IPO Financing

Rationale and Basics of Pre-IPO Financing

Financial Phases of a Growth Company

Typical Practices and Additional Benefits of PreIPO Financing

Introducing the ZAI FMC Pre-IPO Financing JV

FMC - briefly

Pre-IPO Financing

ZAI - briefly

Pre-IPO financing: the Rambler Case Study

Zimmerman Adams

IPO

Rationale for Pre-IPO Financing

In emerging markets, successful and dynamic firms

look to international financial markets as a source
of investment. In turn, companies from emerging
markets become attractive for international
investors.
Private Equity Placements and Initial Public Offerings (IPO) are
popular instruments to raise capital for emerging market
companies;
Raising capital, and especially conducting an IPO, is expensive,
time consuming, and not without risk;
In these circumstances, Pre-IPO financing is an

interesting option

Zimmerman Adams

Basics of Pre-IPO Financing

Pre-IPO financing is a hybrid instrument. It
combines features of both Private Equity and IPO
financing. In technical terms, it is a Private Equity
Placement that can be used to accelerate an IPO.
In a pre-IPO deal, an Investor acquires a stake in a Company that is
considering an IPO, but lacks expertise and/or resources for its
preparation. The Company and the Investor work together to prepare the
IPO;
The critical advantages of Pre-IPO deals for the Company and the Investor
are as follows:
The Investors expertise translates into significant savings of time and
cost for the Company preparing the IPO;
Higher probability for the Company to raise the targeted amount of
capital in the IPO;
Ability to propose a smaller percentage of shares at IPO - lower
dilution to existing shareholders;
Provides a budget to offset the high up-front costs of an IPO.

Pre-IPO financing is a useful option for Russian

companies with growth potential.

Zimmerman Adams

Company Size

Typical Growth Company - Financing

Phases
Ta
rg
et
Ru s dev
ss tag el
ia n e o p
co for men
m
t
pa
nie
s

Convertible
Bond

High Yield
Bond

Secondary issues

IPO
P.E.
2nd round

M&A

Private
Equity
Venture
Capital

Pre-IPO sweet spot

Zimmerman Adams

Pre-IPO Financing Typical Practices

Investment between 24 months and 12 months prior
to IPO;
Usual stake does not represent more than 20% of the
company, and can be a little as 5%;
Investments are in cash, in return for equity, with an
agreed security package as a fall-back plan, should
the IPO fail;
Investor will seek an agreed Use of Proceeds. A
reliable business plan is a must of Pre-IPO financing.

Control of the Company is not one of the Investors

objectives; but confidence in a Company going in the
right direction is absolutely needed.

Zimmerman Adams

Pre-IPO financing Additional

Benefits
In addition to the obvious benefits to the Company
and the Founders of suffering less dilution, the
Company will also benefit from the following
advantages :
Additional cash to meet the fairly large up-front costs of
professional advisers necessary to prepare an IPO
more time to complete international accounting standard audits.
expert assistance in developing acceptable corporate governance
practices

Experience in managing the complex IPO process

Additional media and exposure from the IPO press
Contacts in the IPO investors community, from the pre-IPO fund
Experience in putting the best Broking syndicate together

Zimmerman Adams

ZAI-FMC JV for Pre-IPO Financing

of Russian Companies
Zimmerman Adams International Ltd (London) and
First Mercantile Capital (Moscow) have formed a joint
venture to provide Pre-IPO Financing for Russian and
CIS companies:
Arranging Pre-IPO financing for Russian and CIS companies;
The JV has both extensive emerging markets, specifically
Russian experience, and extensive experience handling IPOs
on the Alternative Investment Market, of the London Stock
Exchange the most dynamic stock marketplace in the
world.

Zimmerman Adams

The ZAI FMC JV: FMC

First Mercantile Capital, or FMC are a
Moscow based, Western-oriented Investor
Group:

FMC is the Lead Investing Partner in the JV

5 Funds AUM of +/- $ 300m

Extensive working experience in the CIS environment, mainly in

Russia (over 10 years)

One of the highest deal closing rates amongst the CIS-oriented

investment banks

Practical experience in resolving the problems facing Russian

companies wishing to do a western IPO

The Team that successfully developed Rambler pre-IPO and managed

the entire IPO process. Ramblers major shareholder today.

______________________________________________

Zimmerman Adams

The ZAI FMC JV:

ZAI
Zimmerman Adams International, or ZAI are
a London-based, independent, internationally
focussed investment banking firm, offering a
full range of corporate finance, broking and
advisory services:

ZAI are the project management and corporate finance advisory

partners in the JV

Members of the London Stock Exchange

A licensed Nominated Adviser, or NOMAD for the dynamic AIM

market

Experienced international management team

International clientele, with companies from the USA, Russia, China,

Israel, Argentina, etc.

Acted as the co-ordinating Financial Adviser for the Rambler IPO

_____________________________________________________
See the attached ZAI brochure for further details

Zimmerman Adams

Pre-IPO Financing: Rambler Case

FMC made their initial investment in Rambler in 2002.
When the initial investment strategy faltered, the FMC
management team took charge of strategic and
operational management;
Over 3 years, FMC Funds invested a several million US
dollars in the companies that now collectively comprise
Rambler Media Group;
The FMC management team began grooming Rambler for
a Public Market (IPO) at an early stage:
Ramblers accounts were audited to western standards
Rambler adopted Western standard corporate governance
practices

In July of 2004, Rambler hired the ZAI team to prepare an

IPO;
In June of 2005, Rambler did an IPO of their shares on the
AIM market of the London Stock Exchange.

Zimmerman Adams

IPO: Rambler Case

In June of 2005, Rambler did an IPO of their shares on
the AIM market of the London Stock Exchange:
Rambler offered its shares at a price of $10.25 in the IPO, which was
oversubscribed;
Rambler raised nearly $40 mln. to invest into a several media
projects of critical importance for the Company;
The Value of Rambler at IPO was set at approximately $170 million;
After the IPO, the FMC group of investors retained 52% of the
Company;
Ramblers shares currently trade at over $20 per share, having more
than doubled since IPO;
The Market Value of Rambler (as of 15 Feb 2006) is above $340
million;

Zimmerman Adams

Contact Details
LONDON:
Zimmerman Adams International Ltd
New Broad Street House
35 New Broad Street
London EC2M 1NH
United Kingdom
Ray Zimmerman
Ph:
+44 (0)20 7060 1760
Fax:
+44 (0)20 7060 1761
E-mail:
rayz@zimmint.com
Dominique Doussot
Ph:
+44 (0)20 7060 1760
Fax:
+44 (0)20 7060 1761
E-mail:
dominiqued@zimmint.com
Website:

Zimmerman Adams

www.zimmint.com

Contact Details

MOSCOW:

"-- "
, 10
115280
Jim Mullins /
Ph:
+7 (495) 721 92 00
Fax:
+7 (495) 721 92 01
E-mail:
jim@fmcg.ru
Sergei Shilovtsev /
Ph:
+7 (495) 721 92 00
Fax:
+7 (495) 721 92 01
E-mail:
shilovcev@rambler-co.ru
Website:

Zimmerman Adams

www.first-mercantile.org
www.ramblermedia.com