Capital markets

What does capital markets cover?

For example, a company which is just about to expand may need some extra money to achieve its objectives. The directors or promoters may want to go outside the existing shareholders to raise the money, and do not necessarily want to raise it form a traditional finance provider, such as a bank. Before going outside the existing (and probably very private) shareholder base, the company is likely to have to consider its existing structure, future control, shareholder rights and what sort of exit strategy it intends to offer those investors who accept an invitation to become shareholders.

Money can be raised by businesses in many ways, including—

• through an issue of ordinary shares or some other form of share, such as a preference share
• through a debenture program, which is an issue of debt, or
• through a form of hybrid security such as a converting note, which starts life as a debt instrument but later converts into equity.

Why is a corporate structure popular?

However, there are some fund managers who do use a corporate structure rather than a managed investment scheme in which to conduct a funds management business. These vehicles are called “investment companies” and are mostly used in situations where the underlying investments are active in nature (e.g., property development or trading businesses such as hotels).

Another context in which a corporate structure is used occurs in the funds management industry where the management is said to be “internal”. This means the manager not only offers investment in the fund which will hold the assets of the project, but also that the manager offers shares in itself. This structure is designed to allow the investors to benefit not only from investing in the underlying assets of the fund, but also to benefit from the management fees generated by the fund manager.

What other structures can be used?

Our clients raising capital for private equity and venture capital investments generally do so using a fund structure.

Publications on capital markets and corporate advisory

• Raising Capital—your guide to capital raising and debt financing for listed and unlisted offers (e-newsletter).

Putting together a capital markets project

We are specialists in this area, and as such can deliver extra value to you for these reasons:

• Agreements between initial shareholders are critical when establishing a new venture. Often, the constitution of the vehicle being used is not enough.
• The most efficient structure for the promoters and investors will involve our working knowledge of the investment market, putting in place contracts between key participants and giving you an appreciation of what it means to open up your vehicle to outside parties.
• Whenever raising capital there is a risk you may lose control of your business. We are aware of what can happen and can advise you on how to approach the risks.
• Our knowledge bank and systems mean we are able to work to very tight deadlines as timing is almost always critical when planning fund raising activities.
• There may be no need for you to comply with all of the technicalities of the fund raising provisions in the law. There are many legitimate exemptions which may be available to you, and if so, then the time and cost savings available to you could be significant.
• Planning the establishment and launch of the capital raising is vital and to ensure you know what steps are required in the order in which they need to be taken, we will provide you with a project management chart detailing the key delivery dates for those important steps.

Promoter's checklist

If you would like to talk to us about undertaking capital raising, then use the following checklist to gather the information we will need to commence work:

1. Provide us with a written brief of the business you are in, and what you objectives are for the business.
2. Include in the brief why you would like to raise the money and how much you would like to raise.
3. Advise us of your target date for raising the money you require.
4. Explain to us the current business structure you have in place and provide us with the relevant documents you had which governed that structure.
5. List the other consultants you have contacted so far and the progress they have made.
6. If you have a marketing plan for how to raise the capital, then please let us have the details.
7. Provide details of the offer you are making to investors in terms of the returns or other benefits you are providing and other terms of the offer you believe are important.
8. Nominate the key people involved in the venture and the person who will be our point of contact.

• Acting in the establishment of successive debenture programs for a fund manager which is rolled over every twelve months.
• Acted in the establishment of an investment company which was formed to invest in foreign derivatives trading.
• Prepared and negotiated merger and shareholder agreements for the merger of two funds management companies and a subsequent restructure of the two groups.
• Advising on the restructure of a managed investment scheme into a company structure to facilitate the ultimate listing of the company on the Australian Stock Exchange.

Click here for a list of recent projects in which McMahon Clarke has written or reviewed the offer document.

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