Managing Capital Market Transactions – The View from In-House Counsel

by J. Ammon Smartt, Vice President and Assistant General Counsel, Willis Towers Watson

Over the past several months, the treasury department at Willis Towers Watson has been very busy executing a capital management strategy that resulted from the business combination of two large and well respected financial services firms:  Willis and Towers Watson.  The planning for the new capital structure of the combined companies began over a year ago.  In recent months, the treasury team, together with many other internal and external stakeholders, have achieved some significant milestones.  

In March of this year, we closed a $1bn US bond offering.  In May of this year, we also closed our first ever €540m Eurobond.   Along the way, we affirmed many of the lessons learned from prior deals and further refined our approach to capital market transactions. 

Capital market transactions can be very complex and affect a number of internal and external constituencies—especially in large organisations.  Legal, tax, compliance, treasury, accounting, auditors, secretariat, banks, rating agencies, regulators, stock exchanges, investor relations, directors, and executive management all play a role.  To ensure a successful transaction, we have learned there are a few things you can do to help move things in the right direction at the right time.

Be proactive, not reactive     

In planning deals, try to see the end from the beginning.  For example, know the intended use of proceeds for any offering well in advance of launching the deal.  Doing so can help you plan around other critical questions that should be addressed early in the process to ensure a successful launch.  

It is impossible to plan for every contingency, but you should include all of the necessary internal and external stakeholders in the planning phase to improve your chances.  People appreciate being informed and consulted in advance, especially when they are able to voice their opinion and feel that their contribution is valued.   Effectively co-ordinated teams can help provide a clear picture of what is required to reach your goals and highlight potential problems in advance.  With your team’s input, set realistic goals that will drive you toward your desired result.   

Take ownership

With a clear vision in mind, actively manage the documentation of the transaction.  Managing documentation is an exercise in communication, not necessarily a formal review of the technical legal aspects of the documentation.  Leave the legal review to the lawyers, but be aware of the process and the participants to ensure quality and timely input from appropriate stakeholders.  You should, however, provide commercial input on the documentation to ensure it accurately reflects the business needs and commercial reality.     

Communication and accountability are critical to the success of any capital market transaction.  As you move through the different phases of the transaction, make sure you know who is responsible for specific action items and that those individuals are truly engaged.  No one appreciates unwelcome surprises, especially those that result from a lack of ownership in the process.  Once assignments are made, actively and regularly communicate progress.  Hold assigned individuals accountable for their work product. 

Listen and ask questions

Timely advice from legal counsel and other advisors can keep you from exploring alternatives that waste time, energy, and money.  Inevitably you will encounter obstacles that could not be anticipated in the planning stages.  If you maintain open lines of communication throughout the process with all appropriate stakeholders, you can spot these issues earlier and fashion effective solutions quicker. 

You should expect your legal counsel and other advisors to provide clear guidance.  Ask questions to make sure you understand the issues and can reconcile them with your objectives.  You should also recognise that for some issues clear legal precedent may be nonexistent, particularly where legislation is new.  That is why it is critical that legal counsel be involved from the beginning so they can help you reach your business objective despite legal ambiguities.   [[[PAGE]]]

Keep an open mind

In sophisticated transactions you sometimes encounter obstacles that appear insurmountable.  Within a multijurisdictional practice, things can get complex very fast, especially if commercial realities require adjusting the transaction structure along the way.  When properly managed through close collaboration and communication, these issues can usually be resolved.   

Flexibility in thinking and management is required to effectively deal with unexpected issues.  The key is to expect that occasionally the unexpected will happen.  Work together with your legal counsel and other advisors to solve issues as they arise.  Recognise that it is not productive to blame legal counsel for the status of the law in the same way as your banks are not to blame for the state of financial markets.  Likewise, your legal counsel should recognise that it is their job to guide you through productive ways to structure a transaction that complies with the law.  Effective legal counsel will advise rather than simply comment and explain legal technicalities.

Conclusion

As you work closely with your legal counsel and other advisors, you will find that they can save you a lot of time and money.  Legal counsel can also add value by advising on standard market practice that, in the context of sophisticated transactions, may seem unusual to internal stakeholders unfamiliar with the transaction.  For certain critical management decisions, this added intelligence can be invaluable.  

As you work together and foster a team atmosphere by actively managing your capital market transactions, you will find they run much more smoothly.  You can never anticipate and plan for every contingency, but with open lines of communication between legal, treasury, and other stakeholders you will be much better equipped to deal with them when they arise.