HIGH-profile deals continue to dominate the corporate landscape, with financial and legal advisers winning plaudits for their part in driving the acquisitions through. Behind the scenes, however, sits a team of treasurers whose role is just as vital in ensuring a deal’s success. They take on the cash management, risk management and bank relationship roles for a whole company.
Tying all these aspects together is no mean feat, as many treasurers will remark. As well as building a strong front, middle and back office, legal capabilities are also paramount to the success of the treasury team. Without appropriate and sufficient legal support, major transactions would not close and the wider business would suffer the consequences. For law firms, therefore, the relationship with the treasury client is as valuable as the relationships with major corporates and investment banks.
Edward Evans, a corporate partner at Freshfields Bruckhaus Derringer, has a host of corporate treasury clients, including Xstrata and Invensys. These relationships have grown on the back of Freshfields’ strength in the corporate and M&A markets.
“You find that treasurers want to know their lawyers well and have developed a longstanding relationship with them. Many of the treasurers that I work with I have done for more than 20 years, and I should imagine this is the same for other firms,” he says.
With treasurers having such a wide remit, the range of work relationship partners are instructed on is certainly diverse. Overriding it all, the need to complete accurate documentation within tight deadlines is a must. Being able to respond to the various needs of the treasury function, which ranges from bank syndicates to bond issuance and advice on subsidiary structures, is something that lawyers also deal with on a regular basis.
Slaughter and May, with its extensive corporate client base, is another firm with long-established treasury relationships, acting for the treasurers of around a quarter of the FTSE100. Maintaining this core of clients and helping it perform well is an aspect of the legal business the firm simply cannot afford to neglect, explains corporate partner Andrew Balfour.
“If you have a strong corporate practice, a focus on treasury is vital,” he says. “Our clients include Ladbrokes and Emap, and we worked with Corus for many years. The work we do on the treasury side forms a wide spectrum that covers transactional and nontransactional work. We have to make sure we have the capabilities to fulfil these needs.”
Clearly, the relationship between treasurer and legal adviser tends to be longstanding, although the world of treasury has changed dramatically during the last decade. The treasury function used to be focused on pure cash management. The department was generally separated from the rest of the company, carrying out day-today cash tasks to keep the overall business processes flowing.
The role of giving legal advice to these treasurers has become more complex, and arguably more interesting, as the treasury function itself has grown more sophisticated. Everyday treasury work now incorporates a range of functions, including risk management, foreign exchange and interest rate management, as well as dealing with a range of compliance and regulatory issues.
Nick Mourant, group treasurer at Tesco, instructs Berwin Leighton Paisner (BLP) for the company’s core UK deals and Freshfields for its European and Asian corporate activities.
“We have a longstanding relationship with BLP going back roughly 20 years. We mainly use this firm in the UK because the partners in the various teams know the business very well and this is what counts for us,” says Mourant.
Tax and restructuring work at Tesco is generally led by BLP’s corporate tax head John Overs, with banking partner Marc Palley responsible for capital markets transactions.
“A big aspect of Tesco’s recent transactional work has been the £5bn property sale-and-leaseback, which we instructed BLP to advise on,” Mourant explains. “This firm has a strength in this area and that fits well with what we’re doing at Tesco.”
Large corporates such as Tesco have in-house legal teams, which take responsibility for panel reviews and gather input from the likes of Mourant and other department heads on the firms that they choose to use.
For smaller treasury teams with no in-house legal team, the process is somewhat different.
Chris St Quintin, group treasurer of oil refinery company Hunting, says: “We don’t have an in-house legal team so it’s our decision which law firms we instruct. Legal advice and the relationship with the firms we use is crucial. We need this advice for a number of different reasons and we take it very seriously.”
Although the relationship between adviser and advised is slightly different than is the case with larger corporate treasurers, the nature of these relationships is just as strong. Hunting has used CMS Cameron McKenna for UK-based work for more than 20 years. With operations and subsidiaries in the US and Canada, St Quintin also instructs Jones Day and a local Canadian firm for work in these jurisdictions.
“There are different ways in which we’d use legal advice for different areas,” St Quintin says. “For example, we may instruct a firm to fully complete documentation for a deal, but for another transaction, such as a syndicate, we have a framework previously written that will enable us to complete a deal.”
Each corporate treasury is very different to the next in the sense that some have large front, middle and back offices with team members focusing on specific areas such as foreign exchange, while other teams are much smaller with a more generalist staff covering all of the company’s needs. It is the nuances of each treasury team that makes relationship building and maintenance essential, says Evans.
“You can’t assume that they’ll work in the same way. They’re all very different and have very different challenges depending on the specific corporate, the size of the team and the types of transactions they generally do,” explains Evans.
With treasury teams placing a strong emphasis on the relationships they have with the firms and relationship partners they instruct, the question of maintaining strong ties throughout the years is important.
When relationship partners move on it is pivotal for both firm and treasurer to know that the same dedication to building up a strong relationship and understanding the business will continue with a new partner.
“We always have more than one relationship partner for this kind of work,” says Balfour. “This is partly so clients can be sure to get what they need as quickly as possible, but it’s also a good way of introducing more junior partners who’ll become more prominent in the relationship in the future.”
Slaughters, for example, has a number of partners involved with treasury, work including respective corporate and commercial finance partners Sarah Patterson and Matthew Tobin.
“There are clearly a good number of rising stars and it makes sense to foster relationships with treasury teams early on. This way the relationship is far more likely to continue in the future,” explains Balfour.
For firms that have strong corporate client bases, keeping close links with the treasury function is something that cannot be overlooked by relationship partners. With the wide range of transactions and dayto-day legal queries that arise in this department, partners become a key part of the intricate work of this business function and are therefore well worth keeping happy.