Lawyers acting for Invesco in its record-breaking $1.6bn merger with US fund manager AIM Management Group had a week to find a suitable offshore tax haven to issue bonds to help finance the deal.
“We eventually came up with the Isle of Man's new limited liability company legislation,” said Freshfield's lead partner Lois Moore. “We are one of the first to use this sort of company. The accountants rang me up and said they'd never heard of it, and I had to explain that was because it was very new.”
The difficulty was that any company that was set up had to avoid the onerous requirements of both UK and US tax law.
Moore said other offshore havens had been considered but “some of them had an unsavoury image” which was felt to be inappropriate.
The deal was also unique in that Invesco made a “trombone rights issue” in the US: it issued $150m worth of loan stock on the London and New York Stock Exchanges that will be convertible to Invesco shares shortly before completion in February. The idea, said Moore, was that if regulators stopped the merger, the loan stock could be converted to cash.
It is a technique gaining ground in the UK among merging companies, but Moore said she believed it had not been done before in the US. “I had to explain it all to them,” she said, “We scoured the books for previous examples but couldn't find any.”
Moore was assisted by Stephen Hewes and Simon Ramage, and Invesco was advised in the US by Debevoise Plimpton. AIM was advised by a team of 10 lawyers from McKennas, led by corporate finance partner Sean Watson, including corporate lawyers Peter Smith, Gary Green and Simon Vere Nicoll and tax lawyers Kate Kelleher and Richard Croker. In the US, AIM instructed Ballard Spahr Andrews & Ingersoll.
The newly merged management group, to be called Amvesco, will be one of the world's top five independent fund managers, with more than £90bn under management.