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University of Cambridge Corporate Workshop

An introduction to company law The dual-track public listing/ private sale of

Introduction Companies Buying, selling and listing companies The proposed initial public offering (IPO) or sale of Role of the trainee solicitor Questions


Companies the body corporate

Separate legal entity Owned by shareholders Limited liability Managed by the board of directors Private companies Public and listed companies


Companies constitution and law

Shares and shareholder rights voting dividends control Directors powers and duties appointed by shareholders delegated power to run the company must act in the companys best interests must exercise skill and care Memorandum and articles of association Corporate law (e.g. The Companies Act 1985)
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Selling a private company

Preparation and vendor due diligence The auction process Principal documents Share purchase agreement sale mechanics warranties/ disclosure non-compete Tax indemnity Other documents Exchange of contracts and completion


Initial public offerings (IPOs)

AKA listing, flotation, coming to market Preparation and due diligence Advisers involved Why go public? Principal document - the prospectus Process prior to the IPO Launching the IPO


The dual track IPO or private sale of


Parties ownership group



75% 11%



Overview started as a call-centre operation (1997) and then added an online channel (1999), selling rail tickets on behalf of Virgin Rail Group Sells tickets on behalf of most rail companies, and also operates National Rail Enquiries Dual track process formally started March 2006 client preparation from late 2005 Shareholders (especially the majority shareholder, Virgin Group) wanted to raise cash for other business ideas


Why the dual track?

Creates competitive tension between the IPO and private sale: the bidders in the auction process know that the sellers have another option On the private sale side, price tension created amongst a number of potential purchasers Information memorandum sent to 21 potential bidders, both within the industry, and financial buyers (private equity) But, more professional fees




Summer/ Autumn 2005: internal planning by clients March 2006: Herbert Smith appointed March-June: IPO and private sale preparations May: stock market falls sharply June: to be revealed



Some factors affecting the decision

IPO: Results in a wider shareholder base institution-only or include the general public in the offer? Increased scrutiny of affairs (public reporting, regulation etc.) Perception of a listed company as being of substance Fluid market for shares post-IPO Access to capital markets for further funds Uncertain valuation until immediately prior to launch Private sale: Known valuation Company remains private less public scrutiny Smaller shareholder base/ sole owner
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The Herbert Smith Team

Corporate IT/ IP Competition Tax Finance Employment / Pensions Share schemes Real Estate
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The role of the trainee solicitor

Legal research Legal due diligence Draft documentation Involvement in the disclosure process against warranties in SPA Liaising with other internal/external professional teams/ co-ordination and project management Attendance at meetings