Life Sciences Outlook 2012 Dutch biotech companies ... - NautaDutilh

The technical IPO or even a hybrid alternative: a publicly listed company under the continued
control of VC investors.
• Technical IPO. While for many companies an IPO may not be an exit option in the current environment,
it may be a means of financing that is preferable to a new VC financing round. In this context, a technical
IPO refers to a secondary listing of shares held by the VCs and management. This will normally be
coupled with a new financing round by the existing VCs and perhaps the addition of one or more new
investors through newly issued listed shares. Obviously, a technical IPO does not give the existing VCs
a real cash exit immediately (although based on their funds’ terms they may be able to treat the listed
shares as liquid and therefore as an exit). VCs may also lose their special investor’s rights and majority
board representation after the IPO. The benefits of a technical IPO are that it gives the company a
listing through which it can attract new capital markets financing, also in the future if and when the
circumstances are right. The benefits for management could be to postpone the decision on the
company’s destiny and keep alive the possibility of a stand-alone future with the potential to develop
into a more robust company.
• VC-controlled listed company. As a more innovative structure which builds on the technical listing
referred to above, VCs may retain more control and influence after the IPO than usual. Investors, life
sciences specialty investors, general institutional investors or even public investors, may be interested in
the opportunity to invest in listed shares in a VC-driven biotech company. By doing this they can piggyback
on the experience, resources and talent of VCs and management which are normally out of reach.
Accordingly, a tailor-made governance model with continued VC control of the board and veto and
other rights based on a shareholders’ / investment agreement, or a relationship agreement, could even
be imagined. To the extent those arrangements deviate from the typical listed company’s governance
contemplated by the Dutch Corporate Governance Code they would of course have to be adequately
explained. The controlling VCs would in principle also have to comply with the mandatory offer rules,
but they may be able to benefit from the exception from those rules which applies to an existing group
of controlling shareholders in an IPO. Such a structure was to some extent the approach taken in the
Ziggo IPO, as shown in inter alia a shareholders’ agreement between the pre-IPO owners of Ziggo.
In that agreement, concert arrangements on governance, sell downs (after lock-up periods and subject
to certain orderly market arrangements as set out in co-investor agreements and a shareholders’
agreement) and tag-along rights were put in place for after the IPO.
Life Sciences Outlook 2012 Dutch biotech companies: from start-up to exit
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