Even rival firms grudgingly admit that Freehills’ Philippa Stone is one of the leading lights of the profession. She speaks with ALB about equity raisings, M&A and diversity in the Australian market.

ALB: You’ve been described as a leading advisor in not only the equity markets (ECM) space, but also M&A. How do these two areas interact with each other?

PS: They are different skills but there are significant overlaps – for example the disclosure requirements for an equity issue are basically identical to those applying to a scrip merger.  Also, you often get ECM in an M&A context – the need for equity often follows an M&A transaction.  In fact, one of the fun things is structuring financing to maximise efficiency in connection with an acquisition, particularly in a competitive bidding situation. 

I started as an M&A lawyer. Then my practice became predominantly ECM, but I continued to do major M&A throughout that time, and in the past couple of years there has been significantly more M&A than ECM. I think it’s common in the Australian market for people to do both, perhaps more so than overseas. There’s less opportunity for extreme specialisation in Australia. If I was solely an M&A  lawyer I would have had a lean time in 2009. On the other hand, if I’d been solely an ECM lawyer I wouldn’t have had much to do in the last two years, particularly after all the raisings in 2009 – those issuers are now well capitalised, and the recovery of the debt markets has also ensured they don’t need to come back to the equity market.

ALB: A number of  ECM/M& A lawyers have been disappointed with the level of work on offer so far this year. What has been your experience?

PS: It depends on the sector. For example resources, and particularly coal, has been extremely active.  There has been much more M&A than equity markets work, although we have had a spate of hybrid offerings over the last few weeks. The hybrids we have done this year have been interesting because many are designed in the same way as an institutional hybrid we did for Santos about a year and a half ago, which at the time was quite novel and qualified for 100 percent equity credit for ratings purposes. Some of the recent ones also have that feature, but are being sold to retail investors.

We’re still seeing interest from clients in M&A, especially foreign interest in Australian assets and also a cautious resurgence in acquisitions by Australian companies.  I’ve found M&A to be strong over the last couple of years, but with little associated ECM work because the acquirers are mostly from offshore, so any required equity has been raised overseas. 

ALB: Has the arrival of Chi-X in Australia made much impact on the market and the way you advise clients?

PS: There are no companies listed on Chi-X, but Chi-X is trading ASX200 stocks. Because there are no listings on Chi-X, there is no change to compliance with listing rules and those sorts of matters, although issues may arise in terms of the market integrity rules. And Chi-X is also relevant in terms of trading volumes when you are using volume weighted average prices or conversion formulae. When you’re talking about the market, you’re not just talking about the ASX  price – if you want to get a more representative price you have to take Chi-X into account.

ALB: What trends have you seen in the listing of companies?

PS:  There is no doubt that there has been very little listing activity in Australia over the past few years, with the resources sector being one of the only bright spots. We acted  on the Aston Resources IPO, which is one of the larger ones in recent times, and which has been very successful. Even outside this sector most of the IPOs that have been successful have some exposure to resources. Australia offers reasonable multiples for mining companies in the development phase, and in many cases better multiples than foreign markets, although we often find that issuers who are considering an ASX listing may also have considered Toronto or Hong Kong as alternatives. People can also dual list, but the market will always determine which is the most natural market and then liquidity will always go there. Unless there are very specific reasons for the dual listing it is often more trouble than it is worth.

ALB: International firms appear to be arguing that they are better placed to serve Australian corporates because they bring global expertise to the table. What is the counter-argument, from the point of view of an Australian top tier advisor?

PS:  I don’t think that’s right, particularly in the area of regulated M&A or capital markets work, where you really do need specifically Australian expertise. It’s not a case of applying, for example New York law to an Australian situation. We’ve got a very black letter set of takeover laws, as well as a highly specific Takeovers Panel overlay, which now has a deep history of decisions. Australian ECM laws and practice are quite different here too.

ALB: Practice areas such as banking & finance and corporate are sometimes perceived to be male dominated. Is this perception accurate in your view?

PS: There’s no divide of that kind at Freehills. I couldn’t say whether that’s the case at other firms, although perhaps it’s true that on transactions, you’re more likely to have a male on the other side of the table.

ALB:  Do you believe there are any obstacles preventing women from achieving their full potential in corporate law firms?

PS:  More than half of our lawyers at the senior associate and special counsel level and close to half of our recent partner promotions are women. But we really don’t think that way about it, and I think that’s the right way to be. Women succeed at Freehills because they are good, not because there is a quota.
Whether you’re male or female is not an important issue in Freehills.  I’ve never experienced discrimination in all my time at Freehills – it’s not that sort of place. To give you an example, I am on one of the floors where there are a number of partners specialising in regulated M&A and ECM work.  Walking around the floor from my office, the next partners’ offices that you would come to would be Nicola Yeomans, Rebecca  Maslen-Stannage and Fiona Gardiner-Hill, with Rebecca and Fiona being among our most senior M&A partners, along with others like Tony Damian and Andrew Pike.

ALB: Top tier lawyers are well known for working long hours. Realistically, is this likely to change in the foreseeable future?

 PS: We love what we do, but it can be high pressure and the hours are part of that. However, we do manage some flexibility and we don’t work hard all the time. We have some lawyers who work part time, and also everyone has times when they need to be home at four in the afternoon, or they need to work from home. We try to make sure we always have a team on each matter that provides coverage and instant response to the client, but still allows people in the team to have some flexibility – it’s a balance. We never get it exactly right, but we try.

ALB: It appears that some clients are requiring law firms to demonstrate some kind of diversity policy before they engage that firm. Have you seen much of this in your practice area?

PS: I haven’t seen a great deal of it, however it does come up with government work and occasionally on formal panel processes.