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.
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.