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New attitudes to issuing equity make lawyers' windfall

New attitudes to issuing equity make lawyers' windfall

A changing perception around issuing equity is providing Australia's top firms with a gamut of work in the downturn.

A changing perception around issuing equity is providing Australia’s top firms with a gamut of work in the downturn. 

For years, issuing equity was a “real no-no”, according to Mallesons Stephen Jaques mergers and acquisitions partner, Craig Semple. But recent economic events have spurred vast numbers of major corporations to go tin cups in hand, forcing issuers to reevaluate capital raisings.

Semple said the statistics on what has been raised this year “is quite phenomenal”. But this is a real turn around from 10 years ago, when it was considered “a diabolical thing” to issue equity. 

“We’re seeing that issuers are getting their heads around issuing equity, without it being through an acquisition or something,” he said. 

The increase is encouraging other issuers to take the same steps, decreasing uncertainty around it, said Semple. 

“There are a lot of issuers looking to go to market,” he said. “I think as people and boards get their minds around the new world we’re in, that raising equity for the sake of having some funds isn’t necessarily such a bad thing, I think we’re seeing more issuers coming around to the idea that they should do one of these.”

Mallesons has seen a recent influx of work coming from Macquarie Group Limited and UBS AG, who have each been involved in some large and high profile capital raisings. The firm acted for Macquarie Capital Advisers Limited and UBS, the underwriters, on the recent Alumina Limited $1,022 million capital raising. 

Corporations are making the most of it whatever opportunities there are to raise capital. “The world is so uncertain. If you can go out there now and get some equity capital, who know if you’re going to be able to in the next year, or the next few months, or even the next day sometimes,” Mallesons’ Semple said. 

The work is keeping law firms afloat as IPOs and other traditionally busy areas are facing a slowdown in work. As The New Lawyer reported recently, capital raisings work is proving to be the major fundraiser for firms, as well as their clients. 

At Allens Arthur Robinson, which has a combined M&A and capital markets practice, as does Mallesons, those lawyers who were busy on M&A work in recent years are now spending more time on capital raisings. 

“Lawyers who would normally be doing M&A have been helping us out,” said Alex Ding, capital markets partner at Allens. “The split of work has changed,” he said. 

While he denies the practice is keeping the firm afloat, Ding says there has been a “very large pick up in work in this space for the past six months”. 

“When the fury of the credit crunch really hit in September last year there was a bit of time when the market was a bit shell shocked and not doing too much. But since that time it has been extremely busy for us,” Ding said. 

Another boon for the firms is the short turnover time in which the deals are undertaken. Capital raisings typically come in quickly and are over in a matter of weeks.  

Mallesons’ Semple said that because capital raisings are dependent on market conditions, when it’s “live”, the issuers need to be able to move quickly. 

This means firms are suddenly handed a mass of work that has to be turned around quickly. Both firms say having M&A partners and lawyers on hand to help, during their more slow period in recent months, has been of great use in such instances. 

“But what you do see though is a lot of preparation beforehand, both in making the decision to raise equity, and also for the examination of the various ways it can be done, and the pros and cons of those,” said Semple. 

“It’s like that saying: It took me 20 years to become an overnight success.”

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