How Fractional General Counsel Can Create and Monetize Value
There is a rising trend for middle-market businesses to use a fractional general counsel to help reach their strategic growth visions, on a project-by-project basis. This is especially true in the private equity industry, where private equity firms are increasingly embedding fractional general counsel into their portfolio entities–as they have been doing for years with COOs and CFOs– to manage their high stakes portfolio company exits and scale their businesses.
In particular, when a middle-market business aims towards a major capital event, such as a public offering, a private placement, or a transformative transaction, a fractional general counsel with significant capital formation experience, can help management of that business efficiently optimize and monetize that value creation. A career dedicated to raising debt and equity in global capital markets, as well as advising on mergers & acquisitions, provides a lawyer with critical technical expertise and invaluable relationships. These kinds of senior lawyers are often prohibitively expensive for a middle market business. But increasingly, a middle market business can afford to hire this kind of lawyer by employing them, on a fractional or part-time basis, as their general counsel.
Below are some of the top reasons a middle market business should consider engaging a fractional general counsel, with capital markets and mergers & acquisitions experience, for their transformative growth plans:
Create value with their expertise: a fractional general counsel with specialized technical know-how, especially with popular capital market structures, innovative capital markets products, and cutting-edge merger techniques can transform a capital formation project into something more significant than originally planned or imagined;
Create value because of their reputation: a fractional general counsel with years of experience and a serious, well-regarded profile on Wall Street and other global markets will elevate a middle-market capital formation project in the right circles, attracting serious investor interest and lead to investor conviction;
Create value because of their relationships: a serious fractional general counsel will have developed invaluable relationships over many years with capital sources from all over the world, as well as with capital market innovators, investment banks, institutional investors, regulators and industry experts, all of which may vastly expand the reach of a middle market business to different sources of capital and new markets;
Provide the advice necessary to monetize value creation: an experienced fractional general counsel can help monetize value creation by providing management with strategic and tactical planning, spotting synergies, spotting and avoiding risks, timing markets, creating realistic capital stacks, developing debt and equity products to satisfy market demands, identifying sources of capital from around the world, and providing a global view of capital markets, all to optimize monetization outcomes;
Manage risk to avoid costly legal delays and pitfalls: an experienced fractional general counsel will provide tactical and strategic counsel on best ways to avoid or mitigate risk, including reputational risk, and to ensure best-practice compliance with all applicable rules, regulations and current market standards so as to avoid lawsuits, injunctions, unnecessarily lengthy negotiations and other costly and embarrassing issues that could delay or frustrate a project;
Create and execute realistic transaction timelines: an experienced fractional general counsel will know the quickest and safest way through all applicable regulatory, contractual and compliance requirements to ensure the creation and execution of a realistic project timeline;
Fee certainty and cost savings: fractional general counsel are embedded into the management of a company for an agreed fee and an agreed completion date, with incentives to ensure successful completion. There are no unpredictable legal fees or fee estimate overruns. Fractional general counsel are engaged on a contract basis, thereby avoiding the increasingly significant expense of hiring a seasoned full-time general counsel with high monthly salary expectations and employee benefits.
More and more middle-market businesses are realizing the value that the right fractional general counsel can bring to their enterprise. Management’s time is not unduly distracted with a special project when that project is in the hands of a competent and experienced fractional general counsel–the right fractional general counsel will work collaboratively within an existing C-suite structure to pursue an ambitious project, allowing management to keep running their business at the same time, without distraction.
Private equity firms and other financial sponsors are also seeing this cost-saving value for their portfolio entities. Moreover, private equity firms are finding that embedding a fractional general counsel into their portfolio entities, as they often do with CFO’s and COO’s, provides a reassuring level of high-quality consistency when managing a high stakes liquidity event. Indeed, embedding a familiar fractional general counsel into a middle-market business that cannot afford an experienced full-time counsel is becoming a best-practice standard in the private equity industry.
About the Author: Michael Smith is an international corporate lawyer known for his expertise in cross-border corporate finance and mergers & acquisitions. Michael has helped companies and other entities raise billions of dollars and has advised on billions of dollars’ worth of mergers & acquisitions. Michael has spent over 35 years practicing law at some of the world’s best law firms in Toronto, London and New York and is uniquely qualified in all three jurisdictions. He has significant experience in the mining, energy and TMT sectors, with a particular focus on cross-border transactions involving the United States, the Middle East and Canada. Michael is a leading pioneer in the provision of fractional general counsel services and is a founder of Hedgerow Advisors.