Almost all businesses need to raise finance at some stage. This can be done by either borrowing money, known as debt finance, or selling a stake in the business to an outside party, known as equity finance.
Fast growth can be achieved by privately owned businesses by converting itself into a public company in order to sell shares on the stock exchange. This is known as an Initial Public Offering (IPO) and the company then becomes a public limited company (PLC).
Equity finance includes Private Equity (PE), which is when private investment houses take a substantial stake in part or all of a business directly.
All the complex financial transactions mentioned, require many complex documents to be compiled and agreed by lawyers, acting for all sides raising any form of equity finance.
What does an equity finance lawyer do?
Lawyers working on IPOs and other equity finance transactions ensure that the process is legally valid and compliant with regulations, while protecting the interests of their clients. In the case of an IPO, details of the share offer must be produced for scrutiny by potential investors – this is called a prospectus. It is vitally important that the prospectus is factually accurate.
Trainees are likely to be involved in the more routine aspects of the process, such as verification of the facts in the prospectus. Large volumes of information provided by the vendor will need to be scrutinised for anything which might affect the sale value, such as liabilities or outstanding debts.
With experience, associates become more involved with the overall structure of the deal, as well as maintaining good relations between the client, the counterparty and their lawyers, as well as other professionals like investment bankers.
IPOs, Private Equity investments and takeovers are highly confidential until made public as they are often high profile, so there is great pressure as deadlines approach. While the pressure can be part of the attraction for many working in this area, it is important that lawyers keep calm and be prepared to work long, hard hours. Given the global nature of business, lawyers may need to work unsociable hours in order to stay in contact with colleagues in other time zones.
There is a need to work in close-knit teams as deals are often large and technically demanding and several lawyers will usually work in any one firm on a major IPO. Productive working relationships need to be formed with a range of other professionals, from the lawyers working for the other side to the investment banks, accountants and other professionals advising on the deal. This way of working can be highly stimulating but requires high levels of stamina, self-confidence and strong powers of recall.
It is vital to uphold commercial confidentiality and ensure that each party only gains access to the information to which they are entitled. The client’s interests must always be upheld, but the law and regulations must always be observed.
What skills are required?
This practice area requires strong analytical skills, including the ability to confidently handle large volumes of quantitative data.
Self-confidence and the ability to project a professional image are essential at all times as lawyers in the practice area are constantly networking with other driven professionals.
The work can get stressful as a deal builds to a climax, so as well as high energy levels, lawyers need the capacity to stay calm under intense pressure.
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