Commercial Awareness Discussion Thread

Jessica Booker

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Hi, Jessica. Hope you are doing well. I was going through all the interview questions that I could find on TCLA that are asked during the Links AC and this question wasn't there even for a single candidate. However, could you please tell me if we should still prepare for some of these basic questions regardless of whether they have been asked earlier or not?

Thanks.
To me this is a question you would prepare more broadly for interview preparation more generally (can also be good preparation for applications) rather than for a specific firm.
 

jan28

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Hi, Jessica. Hope you are doing well. I was going through all the interview questions that I could find on TCLA that are asked during the Links AC and this question wasn't there even for a single candidate. However, could you please tell me if we should still prepare for some of these basic questions regardless of whether they have been asked earlier or not?

Thanks.
Hey, just to give you an example from my latest interview (not Links) - I wasn't specifically asked to tell them a commercial news story as such but was asked (after a discussion of why commercial law) how I get my commercial news and how I keep up to date with them. Luckily, I read through the FT website that morning and read an article that interested me which was also linked to the firm's key practice areas. So I just said 'I frequently read the business press like the FT and actually, this morning I read ...' and we got into a discussion of the article which I'd say both the partners and myself found really interesting!

In that way, I think commercial awareness can be tested quite subtly rather than straight-up questions like 'what commercial story do you know?'. I say that because previously, I was rejected from an interview for lack of commercial awareness but I didn't even realise I was being tested on it during the interview. I basically failed to pick up the cues to show my commercial awareness!

So I'd personally say whilst it's definitely a good idea to prepare a couple of news stories as a backup, you should also be prepared more generally to show your knowledge throughout the interview (if appropriate obviously) and be able to hold a conversation on a topic.

Good luck!!
 
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futuretraineesolicitor

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Hey, just to give you an example from my latest interview (not Links) - I wasn't specifically asked to tell them a commercial news story as such but was asked (after a discussion of why commercial law) how I get my commercial news and how I keep up to date with them. Luckily, I read through the FT website that morning and read an article that interested me which was also linked to the firm's key practice areas. So I just said 'I frequently read the business press like the FT and actually, this morning I read ...' and we got into a discussion of the article which I'd say both the partners and myself found really interesting!

In that way, I think commercial awareness can be tested quite subtly rather than straight-up questions like 'what commercial story do you know?'. I say that because previously, I was rejected from an interview for lack of commercial awareness but I didn't even realise I was being tested on it during the interview. I basically failed to pick up the cues to show my commercial awareness!

So I'd personally say whilst it's definitely a good idea to prepare a couple of news stories as a backup, you should also be prepared more generally to show your knowledge throughout the interview (if appropriate obviously) and be able to hold a conversation on a topic.

Good luck!!
Thank you so much for this piece of advice.
 

futuretraineesolicitor

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Hello @Jessica Booker hope you are doing well. For the question "Why do you want to work in the city of London?", can we give the same answer to "Why do you want to work for an International law firm?", or are these questions different? Also, I had read about a similar question in the TCLA Premium material which was something like "Why do you think London is an international financial hub?" I'm just not able to understand, how is it that these questions differ?

Thanks
 

Jessica Booker

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Hello @Jessica Booker hope you are doing well. For the question "Why do you want to work in the city of London?", can we give the same answer to "Why do you want to work for an International law firm?", or are these questions different? Also, I had read about a similar question in the TCLA Premium material which was something like "Why do you think London is an international financial hub?" I'm just not able to understand, how is it that these questions differ?

Thanks
They are slightly different questions, although there is cross over. You could be an international lawyer in India, China, America, Australia etc, so the answer needs to be more focused on why specifically London.

The question about London being an international hub isn’t asking about your motivations. It is asking for you to show you understand the market/industry.
 

futuretraineesolicitor

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Hello @Dwight. I have a question regarding Equity financing in M&A transactions. From what I've understood, equity financing means two things. First is, selling shares of your company for money and then use that money to acquire another company, with the money that you just earned by selling your shares. Secondy, equity financing means that instead of selling your shares for money and using that money to acquire the other company, you directly give the shares worth the relevant amount to the shareholders of the target company.
This was the financing part.

Now, the payment part depends on what the shareholders of the target company would like. If they want cash, then they will get paid in cash but if they think that the shares of the acquirer will grow in value in future, they would prefer shares over cash. Have I interpreted "equity financing" in M&A correctly or is there something wrong here?
 

Dwight

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Hello @Dwight. I have a question regarding Equity financing in M&A transactions. From what I've understood, equity financing means two things. First is, selling shares of your company for money and then use that money to acquire another company, with the money that you just earned by selling your shares. Secondy, equity financing means that instead of selling your shares for money and using that money to acquire the other company, you directly give the shares worth the relevant amount to the shareholders of the target company.
This was the financing part.

Now, the payment part depends on what the shareholders of the target company would like. If they want cash, then they will get paid in cash but if they think that the shares of the acquirer will grow in value in future, they would prefer shares over cash. Have I interpreted "equity financing" in M&A correctly or is there something wrong here?
Thanks for posting this on the public forum, @futuretraineesolicitor. This way, everyone can benefit.

That sounds about right. One thing I would add here is: when a company decides to use equity financing to acquire a target company, it issues news shares. Therefore, a special resolution, a 75% vote of that class of members (just another word for a shareholder), is required. This is pursuant to The Company Act 2006.

Furthermore, this may be a long shot, but consider the duties of directors. The directors of a company have, for example, the duty to promote the success of the company. Is the issuance of new shares in the circumstances sufficient?

I am no expert, but I would say to always think of the legal angle in your analysis. Ultimately, we are all applying to LAW firms.

Also, another way to raise capital (for M&A activity) is an initial public offering (IPO). If you don’t already know about this, you can read more about it here: https://www.investopedia.com/terms/i/ipo.asp. Apologies if I have insulted your intelligence here; I am just trying to give the most comprehensive overview possible.

Finally, a great site that explores equity and debt financing: https://www.fe.training/free-resources/ma/ma-financing/.

Hope this helps! @Jaysen @Jacob Miller @Dheepa @Neville Birdi - you are all more experienced than me, so perhaps you can add more/correct me.
 

futuretraineesolicitor

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Thanks for posting this on the public forum, @futuretraineesolicitor. This way, everyone can benefit.

That sounds about right. One thing I would add here is: when a company decides to use equity financing to acquire a target company, it issues news shares. Therefore, a special resolution, a 75% vote of that class of members (just another word for a shareholder), is required. This is pursuant to The Company Act 2006.

Furthermore, this may be a long shot, but consider the duties of directors. The directors of a company have, for example, the duty to promote the success of the company. Is the issuance of new shares in the circumstances sufficient?

I am no expert, but I would say to always think of the legal angle in your analysis. Ultimately, we are all applying to LAW firms.

Also, another way to raise capital (for M&A activity) is an initial public offering (IPO). If you don’t already know about this, you can read more about it here: https://www.investopedia.com/terms/i/ipo.asp. Apologies if I have insulted your intelligence here; I am just trying to give the most comprehensive overview possible.

Finally, a great site that explores equity and debt financing: https://www.fe.training/free-resources/ma/ma-financing/.

Hope this helps! @Jaysen @Jacob Miller @Dheepa @Neville Birdi - you are all more experienced than me, so perhaps you can add more/correct me.
Thank you so much for this answer.
 
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Dheepa

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  • Jan 20, 2019
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    Hello @Dwight. I have a question regarding Equity financing in M&A transactions. From what I've understood, equity financing means two things. First is, selling shares of your company for money and then use that money to acquire another company, with the money that you just earned by selling your shares. Secondy, equity financing means that instead of selling your shares for money and using that money to acquire the other company, you directly give the shares worth the relevant amount to the shareholders of the target company.
    This was the financing part.

    Now, the payment part depends on what the shareholders of the target company would like. If they want cash, then they will get paid in cash but if they think that the shares of the acquirer will grow in value in future, they would prefer shares over cash. Have I interpreted "equity financing" in M&A correctly or is there something wrong here?

    Nope you’re understanding of this is spot on. I’d just caution against mentioning the companies act or directors duties etc at interview as I think the focus should always be on the commercial side of things first
     

    futuretraineesolicitor

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    Thank you Dheepa.
    Hello, @Dheepa. I was revisiting this answer of mine since I'm preparing for the question "How is an M&A deal financed?" As I understand, other than the equity financing method that I've explained above, there are two more methods to financing an acquisition. One is using cash from the company's cash reserves which can be accumulated from not paying out dividends to your shareholders or paying very little in the name of dividends whilst being highly profitable or even paying adequate dividends but being extremely profitable (for example Apple or Google). This is the second method.

    The third and the last method is by using debt - basically just borrowing money from lenders because IPOing just for an acquisition doesn't make sense.

    My question to you is, is there anything that I can add to the "cash" and the "debt" part of this answer to make this more comprehensive? To me, these methods sound fairly obvious and with a question like this one, I want to go into as much detail as I possibly can. Am I missing any details that can support my answer further?

    Thanks a lot.
     

    Daniel Boden

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    Hello, @Dheepa. I was revisiting this answer of mine since I'm preparing for the question "How is an M&A deal financed?" As I understand, other than the equity financing method that I've explained above, there are two more methods to financing an acquisition. One is using cash from the company's cash reserves which can be accumulated from not paying out dividends to your shareholders or paying very little in the name of dividends whilst being highly profitable or even paying adequate dividends but being extremely profitable (for example Apple or Google). This is the second method.

    The third and the last method is by using debt - basically just borrowing money from lenders because IPOing just for an acquisition doesn't make sense.

    My question to you is, is there anything that I can add to the "cash" and the "debt" part of this answer to make this more comprehensive? To me, these methods sound fairly obvious and with a question like this one, I want to go into as much detail as I possibly can. Am I missing any details that can support my answer further?

    Thanks a lot.
    For an interview answer that's basically all you would need to say tbh as those are the three main ways of financing an acquisition, existing cash reserves (though this would be very rare as not many companies would have a stockpile of cash sufficient to fund an entire acquisition and it would make sense to just use a bit of cash and more debt since interest rates are so low and it would allow the company to have a sufficient capital reserve for any unforeseen circumstances in the future), equity finance (i.e. issuing shares) and debt finance
     

    futuretraineesolicitor

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    For an interview answer that's basically all you would need to say tbh as those are the three main ways of financing an acquisition, existing cash reserves (though this would be very rare as not many companies would have a stockpile of cash sufficient to fund an entire acquisition and it would make sense to just use a bit of cash and more debt since interest rates are so low and it would allow the company to have a sufficient capital reserve for any unforeseen circumstances in the future), equity finance (i.e. issuing shares) and debt finance
    Thank you, Daniel.
     
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    rogerd123

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  • Dec 7, 2021
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    Hi guys! What are the long/short term effects of law firms pulling out of Russia, and who is affected other than Russia?

    Would really appreciate any insight into this!
    I'm looking at this now and my initial thoughts:

    Short term effect - If the Russian office has any open/ongoing work, what happens to it? Employment issues - contracts w/Russian employees (does the firm need to pay them/should they pay them something?), Real Estate issues - what about the office lease?

    Long term effect - Will this affect the firm's profits in the future (depends on how profitable the Russian office was I guess), is this a signal of a wider-trend of reverse globalism (e.g. will firms pull out of HK/China next? - probably not but worth thinking about)

    Stakeholders - Russian clients who were using the firm, employees of the Russia office, Intl clients who had business in Russia and thus wanted legal advice in Russia, the firm itself (loss of profit from this?)

    Open to your thoughts :)
     
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