 Doran Doeh  Managing Partner of SNR Denton  Manages the Moscow Office and coordinates the CIS Practice  25 th November  How he developed commercial awareness over his career.

Graham Price, CAS Editor of Newsletter Ben Doeh, CAS Head of Events

 Entering the City  Your First Deal!  Basic overview of different areas of City finance and how lawyers are involved.

 Initial Public Offerings or IPOs  Equity Finance, and Debt Finance  Investment Banks’ role in Equity Finance  Sovereign Debt, and Bonds  Derivatives  Asset Finance  Mergers and Acquisitions  Private Equity

 A public company allows members of the public to buy its shares.  A small but significant minority (BP, Vodafone, Marks & Spencer) are listed, allowing their shares to be publicly traded on stock exchanges.  A private company is any company that is not a public company.

 Equity ◦ Shares (capital growth / loss) ◦ Dividends (discretionary share of profit)  Debt ◦ Loan / Bond (return of principal) ◦ Interest (set rate)

 Raising money through the issuing of shares  Equity is risk capital. ◦ If the company goes bust, investors lose what they put in.  Additional equity can be raised through a further rights issue.  A rights issue is often underwritten by an investment bank.  The first offering of shares to the public is called an IPO.

 ‘Going Public’, ‘Floating’, ‘Doing a flotation’, ‘Listing’ ‘Doing an IPO’ ◦ Terms for when a private company decides to list on a stock exchange.  A stock exchange is a market where companies list shares to be bought and sold.  In an Initial Public Offering, companies issue new shares to raise money on a stock exchange.

 The bread and butter of corporate work!  A company can grow by taking over another company. This is called an acquisition. ◦ SAB Miller is acquiring Foster’s. ◦ Microsoft has acquiring Skype.  The company (the bidder) will make an offer for the target company, persuading the target shareholders to sell their shares.  When two firms decide to merge, obviously that’s called a merger. ◦ E.g British Airways & Iberia = IAG

 If the Company (the Board) does not want to be taken over, the bid is hostile (contested).  Offer put directly to shareholders  The takeover will be judged by the City Takeover Panel.  Companies often perform rights issues to raise money for a takeover. ◦ E.g. Kraft and Cadbury

 Private Equity is a deal where the bidder is not a company but a fund.  This money is put together by an investment bank or specialist private equity house.  Private equity houses can buy shares in a public company, causing it to become private again.  These are public-to-private deals, done by private equity lawyers.

 The traditional way of raising finance!  Debt finance is usually taking out an overdraft or a loan.  Often, companies get a bi-lateral loan from the bank. The bank is lending the company money (bi-lateral between one bank and the company).  Bond transactions can also be made to raise debt finance (see later).  Often where companies are highly leveraged, it’s for tax purposes.

 The banks that underwrite share issues are called investment banks (although they don’t actually invest themselves).  Commercial banks lend money.  Banking lawyers advise on loans.

 Governments also use debt finance.  They can’t issue shares so they can’t raise equity finance.  Tax and borrowing is how they raise money.  Sovereigns borrow from international capital markets.

 Governments also raise money by issuing bonds (a debt instrument).  A bond might be for say £1 billion, repayable in 20 years, paying 4% interest.  Bonds are broken into small tradable amounts.  Capital markets lawyers work in this area.

 Derivatives are financial instruments (swaps, options, futures) derived from equity and debt.  Options (shares) and bond futures (debt) can be traded.  Don’t panic – we’ll explain this in more detail later in the year.  Derivatives lawyers deal with this.

 Project finance uses debt to fund infrastructure projects  E.g. In energy, health, transport and education.  Building pipelines, hospitals, railways and schools.  Many of these deals are PPPs (public-private partnership) or PFIs (private finance initiatives) because they are public sector projects funded in the private sector.

 Asset Finance is when banks buy something and lease it to a company.  E.g. A big ship of aircraft.  It’s cheaper than borrowing by a loan as the bank owns the asset so it feels more secure.

 Advising and assisting the company e.g.  Due Diligence. Due diligence is making sure that statements a company makes about itself are true.  Advising on underwriting agreements.  This work is carried out by Corporate Finance lawyers.

 Trade Finance is funding by big banks of exports through letters of credit.  These allow sellers to know they will get paid by buyers when goods arrive.

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