Intrigued by the thought of becoming a capital markets lawyer and want to know more? Cahill's pros in the area are on hand to shed light on their intricate and complex practice.
What is capital markets law?
Jennifer Ezring, partner: Capital markets, or securities, lawyers work on transactions where a company uses equity securities (stock, or other ownership shares of the business) or debt securities (representing an initial borrowing of money, with a specific amount to be repaid over time) to meet its financing needs. A capital markets attorney works either with a company (the “issuer” of a security) or with an investment bank (the “underwriter” of the offering), but the goal on both sides of these collaborative transactions will be to ensure the issuer and the underwriters are in compliance with the securities regulations governing the capital markets, and to provide the company with adequate financing by structuring a security on terms that are palatable to investors.
What kind of work can associates expect in this area?
Nikolas Rodriguez, associate: Junior associates work on a variety of assignments including, but not limited to, drafting offering documents, conducting due diligence, and coordinating transaction execution. Junior associates are given the opportunity to draft a variety of ancillary transaction documents, such as closing certificates and representation letters to the Issuer’s auditors. In addition, junior associates typically take a leading role in conducting and coordinating the due diligence process. Due diligence is the process of understanding and investigating an Issuer and its business to ensure proper disclosure in an offering document. Due diligence involves reviewing corporate documents, public filings, and material contracts, along with speaking directly to management of the Issuer. At times, junior associates are asked to visit an Issuer’s headquarters to review documentation on-site, which provides them with an opportunity to travel. Lastly, junior associates are tasked with coordinating transaction execution. This includes ensuring that documentation is properly executed, filings are submitted and all formalities to finalize an offering are completed.
Mid-level associates oversee junior associates and also work on drafting and negotiating key transaction documents. For example, mid-level associates typically draft the underwriting/purchase agreement, which is the principal contract between an issuer and the investment banks relating to underwriting a securities offering.
Finally, senior associates oversee the transaction and serve as the primary contact with clients and opposing counsel. They also negotiate more technical aspects of the transaction, including the covenants, which are restrictions on the issuer’s activities (i.e., the incurrence of debt or the disposition of assets).
Alexa Kaminsky, associate: Capital markets transactions are perfectly built for lawyers with a variety of experience to divvy up tasks. There is plenty of work to go around, from diligence to drafting to determining the structure of the deal. The offering document itself, which is usually a couple hundred pages, is always an all-hands-on-deck task as well.
What do partners do in this area?
JE: Capital markets partners work with the issuer and the underwriters to decide what type of securities will best suit the company’s needs, to understand the company’s financial situation, to set the terms of those securities in order to ensure they will be saleable to the market at the time, and to structure the timing and mechanics of the actual offering to comply with all securities laws and regulations. The partners will work with the associates to negotiate final disclosure and offering documentation and the operative issuance documents.
What are the highs and lows of the practice?
AK: While closing the deal and watching all of the “Congrats!” emails go around is always a great feeling, as an associate, a high of the practice is seeing how much you can grow in such a short time. Given the number of deals you’ll encounter at Cahill, you’ll quickly be able to see your work product progress and improve. Seeing how far you can come in your drafting skills and your comprehension of the more high-level deal points so quickly is an on-going high point.
The low point is the drive-by bond deals! With all of the diligence and front-loading that goes into a bond deal, hearing you only have a few days to get everything done is never easy.
“Practicing capital markets exposes you to information about diverse domestic and international markets.”
NR: There are numerous highs but some of my favorite are (i) understanding the technical aspects of the practice, including covenants and securities regulation, (ii) learning about different companies and industries and (iii) closing a deal and celebrating with your deal team. Many new associates do not have a background in finance, so it is very rewarding once you begin to understand and master the more complex issues facing capital markets attorneys. Additionally, one of the best parts of our practice is getting to learn about different issuers and their industries. By not being tied to a specific industry-specific practice at Cahill, I’ve had the opportunity to learn about issuers from a variety of industries, from Telecommunications to Retail to Aerospace. Finally, closing a deal is a very rewarding part of the practice. You and your team members get to see all of your hard work turn into a successful outcome for the issuer.
JE: On each new transaction we learn about a company from the inside out, working together with management, investment bankers, and often private equity sponsors, so the practice is always interesting and “fresh.” The players are generally sophisticated and often have worked with each other before (including the “opposing” lawyers), which tends to bring a sense of camaraderie and collegiality. Because market forces are at work dictating when a certain security should be offered for sale, timing can be fast and pressure can be high when a transaction is in full swing, which makes the deal an exciting ride.
How does your work interact with other practices?
AK: We often work on larger acquisition-based financings that are partially funded with a capital markets transaction and partially funded by loans, so we’re constantly watching the puzzle fit together to form the best deal for the client. On a large transaction, between Cahill and the other firms involved, you may see lawyers from M&A, bankruptcy, capital markets, leveraged finance, real estate – and then you’ll work with bankers across all of those similar groupings as well.
JE: Capital markets associates act as the 'hub' of the transaction wheel, coordinating with attorneys in many other areas relevant to the transaction, including corporate attorneys who are focused on the issuer’s overall practice and regulation, and verifying that the financing transaction will work within the framework of the company’s other commitments and its organizational structure. A capital markets associate will confer with bankruptcy attorneys where there are questions of enforcement or protection in a 'worst-case' scenario; tax attorneys, who are involved in structuring the issuance on a cost-efficient basis; real estate and environmental attorneys where real property will be taken as collateral; and litigators, who evaluate various risks existing at an issuer or potentially created by a financing.
NR: Many transactions are consummated in connection with larger acquisition-based financings. As such, we interact with a variety of different practices (e.g., bankruptcy, M&A and tax) when structuring the deal. In addition, as part of our due diligence process, we engage attorneys from a number of different practices, including IP, environmental, regulatory, and litigation, to investigate an issuer. Furthermore, when a capital markets transaction is secured, we engage our real estate and UCC attorneys to assist with reviewing and negotiating transaction documents.
How has this area changed since the recession?
NR: The government issued a number of new securities regulations after the recession that have become key aspects of our practice. In addition, a market changing event like the recession led to our clients becoming increasingly concerned about risk in the structure of a transaction, along with the business of an issuer. For example, our clients are very focused on an issuer’s compliance with sanctions laws and the FCPA.
JE: Any market disruption will affect securities work significantly. While the recession was a major market swing, even a smaller political event can cause rates to rise or fall rapidly, making one type of financing more or less palatable to issuers or investors. Given the amount of market sensitivity around an event as large as the recession, it has become increasingly important to be facile with all types of financing alternatives, and to be able to think creatively about what an issuer may be able to offer to investors.
“Private markets are the new public markets.”
What are the latest trends and developments in capital markets?
NR: One of the latest trends we’ve seen is environmental, social, and corporate governance (“ESG”)-linked instruments. For example, sustainability-linked bonds permit an issuer to benefit from more favorable terms if they achieve certain key performance indicators (“KPIs”) (e.g., processing waste sustainably or recycling/reusing waste). Issuers are incentivized to improve their ESG profile by meeting the predetermined KPIs in order to obtain lower pricing or other beneficial terms.
AK: It seems like there’s been an uptick in secured bonds (rather than unsecured). We’re also starting to hear more and more about SPACs (special purpose acquisition companies) and I expect we’re going to see more of them.
What personal qualities make a good capital markets lawyer?
JE: My top two answers to that question would be creativity and team play. Creativity is essential because each new transaction holds a puzzle that needs to be solved in a way that is mutually beneficial for all parties involved. Being able to work as part of a team is critical, because on each transaction you will find individuals with varied skill sets working together to create a product that meets a common goal – unlike some other areas of law, all parties need to embrace the result, even those technically “adverse” to each other.
NR: A good capital markets lawyer is collegial and eager to learn. Each transaction has a team of Cahill lawyers working together to get it to closing. As such, a collegial attitude is crucial for the team dynamic. In addition, there are always new issues presented when structuring a transaction, so a good capital markets lawyer is eager to learn as much as they can in order to find a creative solution for their client.
“Creativity is essential because each new transaction holds a puzzle that needs to be solved in a way that is mutually beneficial for all parties involved.”
AK: Two important qualities for a good capital markets lawyer are being efficient and inquisitive. There are a lot of moving parts to capital markets transactions so it’s very important to be efficient and effective at getting work done, while looking at things with an inquisitive eye to make sure that everything makes sense for the details of the specific transaction, complies with the applicable securities laws and provides the clients with the best potential outcome for the transaction.
How can students brush up on their capital markets knowledge?
JE: While there are no prerequisites to becoming a capital markets attorney, students may find it helpful to have taken a basic accounting or finance course, preferably at the business school affiliated with their law school. The US securities laws, including SEC rules and guidelines and general disclosure issues, are central to the work we do, so courses in securities regulation and drafting will prove helpful after law school graduation. It definitely doesn’t hurt to start reading some financial news on a regular basis as well.
NR: Many law schools have courses in securities regulation and corporate finance, which were very helpful. They give students a basic foundation that will benefit them as they begin their career as a capital markets attorney. If available, students should consider take a basic accounting or finance course at the business school affiliated with their law school as well.
AK: Outside of reaching out to people you know who are already working in the practice area or taking some specific classes in law school (Securities Regulation is always a popular choice), I’d recommend keeping up with financial news. The majority of the capital markets transactions we do are public, so you can read about them as they happen – learn the lingo, get apprised with high-level details and see the cyclicality of the market.
What opportunities in the area are unique to Cahill?
NR: As a market-leader in capital markets, Cahill associates have the opportunity to get substantive experience early on in their career. From drafting transaction documents to interacting with clients, associates are key members of the deal team right away. In addition, Cahill’s generalist philosophy allows associates to work on a variety of different types of transactions with issuers from all different types of industries. This means that Cahill associates can advise their clients on all aspects of a transaction, whether it be a notes offering or a secured lending transaction. If you want to make an immediate impact, Cahill is the right place for you.
AK: The biggest opportunity is the amount of experience you get and the vast experience of the partners and associates that you’ll work with. Since Cahill plays such a strong role in the capital markets world, you’ll see exponentially more deals than other competitors which inevitably introduces you to more issues, more types of securities and more things to learn. With the high number of deals and the fast-paced market, we experience the evolution of the market as it’s happening, and get to play a role in shaping it.
JE: Cahill’s market share and breadth of client base puts us in an excellent position to see and understand the latest technology and market terms at any given time. Because the capital markets are subject to significant fluctuation based on a number of factors, including everything from recent case law involving financings, collateral security and bankruptcies, to the global political and regulatory environment – the 'best' answer for a client in a given scenario can change rapidly. Our associates are exposed to a broader segment of the market than those at our peer firms, which allows our attorneys to develop market knowledge right from the start of their careers and be seen by clients as a ‘counselor’ with valuable insight at an earlier stage.