In the vast majority of your seats, you’ll find that your work revolves around particular deals. So what does a deal really mean, beyond the handshake? We spoke to Alan Bainbridge, partner in Financial Institutions, and Jessica Lambert, fourth-seat trainee, about a deal they worked on together.
Barclays are an international bank of renowned long-standing, operating internationally for around 100 years.
One of Barclays’ signature international deals was back in 2006, when they went into South Africa for the first time and bought a majority stake in ABSA (one of the leading banks in South Africa at the time).
In 2013, we acted for the bank on what was the biggest M&A (mergers and acquisitions) deal in the Financial Institutions sector in Africa that year. It effectively consolidated Barclays other African bank subsidiaries under ABSA, allowing Barclays to increase its controlling shareholder status in ABSA to approx 63%.
However, by 2016, it was acknowledged that the regulatory capital requirements in the UK, worked against having a controlling shareholding due to the imbalance between the amount of capital Barclays required to hold against the underlying risks and the proportion of dividends it would receive.
With that imbalance in mind and with other changes coming up in the regulatory world, Barclays wanted to reduce their holding.
The deal begins
I was asked to provide a structure memorandum of how a sell down might be structured in the context of the UK listing rules and other applicable considerations, which we sent to Barclays late on New Years Eve. Next, we developed the structure with Barclays over the following weeks and announced the deal: an initial sell down of about 12% by way of accelerated bookbuild, which would be followed by a further sell down constituting a Class 1 deal for Barclays. To tell you a little more about that initial sale, an overnight accelerated book build is a way to help promote listed stock to the market, confidentially and quickly. After the market closes in the evening, the calls start happening to allocate and secure sales. By doing it while the markets aren’t open for trading, you avoid any improper trading issues. Then you close the book usually in the early hours and announce the completed sale to the market the next morning.
For a Class 1 deal – effectively a major transaction for a listed company in the UK – you have to schedule a separate meeting of the shareholders, which we fortunately managed to time to take place on the same day as the upcoming Annual General Meeting of Barclays. The shareholders gave us their approval to sell, meaning we could now proceed to sell below the 51% level.
ABSA is one of the biggest banks in South Africa, so naturally, we also needed the approval of the applicable South African bank regulators. They had to be confident that the separation plans between the two banking groups would allow ABSA to continue to operate effectively following Barclays ceasing to be a controller.
Now, this is where things get really interesting. It’s very rare for a client as big as Barclays to call and ask for a trainee. But when we had to put together a plan for the regulators, that’s exactly what happened. Our client specifically asked for Jess to help lead coordination of the package we’d submit.
Entering the fray
This was my first seat, so my first task – and I think, an incredibly useful one – was to summarise the terms of the draft documents that we had so far. Alan asked me to do a high-level summary, partly to check I knew what was going on and partly to very quickly immerse me in the deal’s details. In fact, my summary then became the first draft of a document that eventually went to the board.
Then, like Alan mentioned, Barclays asked me to hold the pen on the regulatory package submission. Holding the pen, by the way, is when you become the central point of contact for feedback on a legal document. It means you have control of how it develops: you’re on top of all the different drafts and you make sure that this constantly-changing document flows and makes sense, even as feedback bounces back and forth.
Being asked to do that was a really big moment for me. It meant taking calls and going to meetings with key senior members of the bank, working closely with them to summarise and develop the final submission. One of the most important things is to keep everyone abreast of and engaged in the process. The board want to make sure they know exactly how the document operates, even down to the minutiae.
I wouldn’t say it was intimidating, because actually as clients, the team at Barclays were very approachable. That said, the thing you do realise immediately is that they’re all incredibly sharp. As someone so junior, you’re very aware of the fact that many of them are lawyers themselves; quick minds who wouldn’t miss even a full stop out of place. They were so supportive of me though and they would always give me the time of day.
The same is true of the team at Norton Rose Fulbright. I couldn’t really have done it without their support. Cynthia, an associate who’s now in our Hong Kong office, was heavily involved, as was Ilya, one of our senior associates. Between them and Alan, I always felt supported. If I had a question, I could ask it. They wanted me to learn why we were doing things; not just how to do them. At every step, they made sure I always felt challenged but not out of my depth, working with the team as an equal member.
A record breaker
What Jess was doing essentially became the story to the regulators for the whole structure. Trying to keep up with it and redraft it became a very demanding job. But I had every confidence in her: as soon as I could see that she could do certain things, I would give her something more testing. This was no different.
We started the project at the beginning of 2016 and it ran through until 2017, when the regulatory submission package was finally sent off and the regulators cleared our plans.
We thought we’d have to do this in several steps. In fact, the demand was so high that we cleared 30% - making it the biggest book build in South African history. And of course, Jess played a central role in that.
Onwards and upwards
A deal like this is phenomenal exposure, really. It definitely changes you as a trainee: I became a lot more confident in the rest of my seat with Alan, especially when it came to transactional work. It’s the simple things that worry you sometimes, but even that hurdle of sending an email to lots of people you don’t know – that fear is gone now. I think the responsibility I was given made me work harder for more opportunities too.
Researching under pressurised conditions is definitely easier now too. When there’s a time pressure, you can feel too panicked to find the answer, but I’ve found my way to deal with the pressure, thanks to the support I had in this deal – and in all the ones that followed.
Looking back, the only thing I’d do differently is that I’d ask more questions, particularly early in the deal. Your training contract is that opportunity to ask as many questions as you need to, however silly, so that your team can help you understand.
What I discovered is that while you’ve learned a lot on your law degree or your law conversion course, no-one expects you to know everything. When you work on a big deal like this, you realise it’s going so much beyond the realm of the legal facts you learned on paper. This is living, breathing real-life law – and you’ve got to keep learning, so you can be on top of your game.