Doran Doeh Managing Partner of SNR Denton

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

2. How the City Works Graham Price, CAS Editor of Newsletter Ben Doeh, CAS Head of Events

3. The Basics • Entering the City • Your First Deal! • Basic overview of different areas of City finance and how lawyers are involved.

4. What We’ll Cover • 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

5. Public v Private Companies • A public company allows members of the public to buy its shares. • A small but significant minority (BP, Vodafone, Marks & Spencer) arelisted, allowing their shares to be publicly traded on stock exchanges. • A private company is any company that is not a public company.

7. Only two types of money • Equity • Shares (capital growth / loss) • Dividends (discretionary share of profit) • Debt • Loan / Bond (return of principal) • Interest (set rate)

8. Equity • 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.

9. Initial Public Offerings or IPOs • ‘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.

10. The Old London Stock Exchange

12. Mergers & Acquisitions • 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

13. Hostile Takeover • 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

14. Private Equity • 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.

15. Debt • 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.

16. Commercial Banks v Investment Banks • 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.

17. Sovereign Debt • 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.

18. Bonds • 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.

19. Derivatives • 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.

20. Project Finance • 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.

22. Asset Finance • 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.

23. Our Role • 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.

24. The End!