Capital Markets Simon Schenkel, General Associate Baker & McKenzie
Capital markets describe the “markets” or places where companies can go to raise money that can be used for various purposes, such as to buy other companies, pay down their debts, bolster their balance sheets or fund expansion plans. The capital markets are broadly divided into two. Equity capital markets (such as stock exchanges) describe the places where companies raise money by selling partownership of themselves (shares) to individuals and institutions (such as superannuation funds). Debt capital markets describe the various loans, bonds and instruments through which companies borrow money, primarily from banks, and where those debt instruments may sold or traded to third parties. There are a number of different mechanisms that a company can use to raise funds through the equity capital markets. A proprietary (or private) company can convert to a public company through “listing” its securities on a stock exchange, (such as the Australian Securities Exchange or ASX) through a process known as an initial public offering (IPO). The ASX has strict disclosure requirements on companies whose shares are listed on it, which enables the trading of shares in an open marketbased system. An existing listed company can tap its shareholders and new investors for additional funds through various fundraising mechanisms such as rights issues, placements or share purchase plans. As an associate in Baker & McKenzie’s corporate group I have been exposed to highprofile capital markets work. Working closely with Baker & McKenzie’s partners, I have been involved in a number of capital raisings involving ASX-listed entities, including an IPO and a number of other types of capital raisings. We have advised companies from a number of sectors, such as resources and property development. As a seasonal clerk with Baker & McKenzie, I worked on the IPO of an oil exploration company and then was able to work with the same company further down the track
84
in my career when they were a target of what is know as a “hostile” (or unsolicited) takeover bid by another company. From a legal perspective, capital markets work is highly technical and any capital markets lawyer will tell you that to be a successful lawyer in this area you need to have a strong understanding of the Corporations Act, the ASX Listing Rules and a solid background in market practices. At Baker & McKenzie, you get support from senior lawyers so that you can get up to speed with the regulatory framework and are not left alone to mull over interpreting complex legislative provisions. You also get to be intricately involved in capital markets transactions and produce work that you end up seeing released to the client. Equity offers involve a number of parties and Baker & McKenzie’s corporate group has considerable experience in acting for both issuers (the companies raising capital), the banks which “underwrite” the deal (i.e. agree in the first instance to take up any shortfall of shares which are not taken up by the offerees) and the banks who manage or arrange the deal. Quite often, Australian companies “offer” shares on the international equity markets (simply, look for buyers of shares in other countries) and we work closely with our global network of offices to advise companies wishing to raise capital from institutional investors in many international jurisdictions. We also have lawyers in our Australian offices with international experience, and last year, we acted as International Counsel on A$11.1 billion of international offerings by Australian companies, and as US Counsel on A$3.3 billion of equity offerings in the US. As an example, our group worked as US Counsel on Qantas’ $500 million placement and as international counsel on Amcor’s $1.6 billion entitlement offer involving 19 countries. Corporate and capital markets practice is challenging and fast-paced. The work flow