The following is an excerpt from Practice Perspectives: Vault's Guide to Legal Practice Areas.
Marcus Dougherty and Lauren Hanrahan, Partners—Leveraged Finance
Marcus J. Dougherty is a partner in the New York office and a member of the firm’s Leveraged Finance group. Mr. Dougherty’s practice focuses on representing banks and other financial institutions in senior lending transactions. He has extensive experience in representing lenders in acquisition financings, including leveraged buyouts, tender offers and other going-private transactions, recapitalizations, bridge and mezzanine financings, and DIP and exit facility financings. He has a broad range of financing experience in both U.S. and international transactions and has been admitted to practice in England & Wales, Hong Kong, and New York.
Lauren Hanrahan is a partner in the New York office and a member of the firm’s Leveraged Finance group. Ms. Hanrahan’s practice centers on representing banks and other financial institutions in debt financing transactions. Recognized as a leading lawyer for bank lending and finance in Legal 500, IFLR, and Chambers USA, she has significant experience in representing lenders in acquisition financings, recapitalizations, bridge and mezzanine financings, debtor-in-possession, exit facilities, special situation financings, and other complex secured lending transactions. She has a broad range of financing experience in both U.S. and international transactions. She also devotes a portion of her practice to acting as agent’s counsel or lead investor’s counsel in connection with amending and restructuring troubled loans and negotiating workouts.
Describe your practice area and what it entails.
Lauren: We work in leveraged finance, and we specifically focus on leveraged loans. The quintessential example of a leveraged financing deal is an acquisition financing. When a private equity sponsor or a company wants to buy another company, they often finance a large portion of the acquisition with some form of debt, and we focus on the loan portion of that financing. Our colleagues in our Capital Markets group will deal with any associated high-yield bonds. Our deals often have an international component, and we frequently work on complicated cross-border financings with lawyers in our London office and our other offices around the world.
What types of clients do you represent?
We represent both lenders and borrowers. We regularly work with world-class investment and commercial banks, such as Goldman Sachs, Credit Suisse, and others. We also frequently work with direct lenders, which are the funds whose business is to make/invest in loans. That category includes clients like PSP, Owl Rock Investing, and others. Much of our work includes roles as lenders’ counsel, designated by private equity firms, such as Carlyle, KKR, and others.
What types of cases/deals do you work on?
The types of deals we work on are generally acquisition financings. We handle the debt commitment letters, which are signed in conjunction with the signing of the acquisition agreement, and the loan agreement, which will close and fund concurrently with the acquisition closing. We also do all sorts of related transactions, including dividend recaps and restructurings. We do deals that are all over the place in terms of the capital structure, including first lien and second lien loans, unsecured loans, unitranche, and subordinated debt, as well as bridge loans and recapitalizations, restructurings, and complicated workouts and amendments. We also do a lot of work with general corporate lending for public companies.
How did you choose this practice area?
Marcus: My background is somewhat atypical. I went to school in London, which is one of the capital markets centers of the world. I was attracted to finance because it allowed me to travel and work internationally. I started my career in London, later worked in Hong Kong, and then returned to London. I moved to the U.S. in the late ’90s and continue to work on significant cross-border financings.
Lauren: As a summer associate and later as a first-year associate, I rotated through different practice groups, including M&A and Leveraged Finance. The finance work I did appealed to me, and the team that I worked with, which included Marcus as a senior associate, really took the time to train me and made me feel like I was part of a real team. I also started my first year as an associate in September 2001. The historical events of that month had a significant impact on the flow of different types of deals, but the financing team was still very busy.
What is a typical day like and/or what are some common tasks you perform?
Marcus: Much of my time is spent with clients. A typical day for me often involves meeting with clients over breakfast, lunch, or dinner. I balance these commitments with sourcing and managing the day-to-day deal flow from wherever I am traveling and coordinating with clients, opposing counsel, and collaborative teams of Milbank lawyers across different global offices and other practice groups (including capital markets, tax, environmental, real estate, IP, IT, and regulatory).
Lauren: Like a lot of lawyers, I don’t have a “typical day.” A day in the life of a first year is quite different from a day in the life of a partner, but I am actively working with associates all day long. I review commitment letters and credit agreements prepared by junior associates. I liaise with clients and instruct and train my associates to do the same. Our deals are generally staffed in such a way that I am working with associates from all seniority levels. I also spend a significant amount of time overseeing the first-year transactional rotation program. Marcus and I, along with our other partners, work to make sure that the first-year associates rotating through Leveraged Finance are being exposed to real, substantive work, including exposure to clients via conference calls and opportunities to work on meaningful deal documents. As a member of the firm’s Recruiting Committee, I am a summer program mentor to our summer associates and am very involved with our summer program and recruiting season. I also spend a considerable amount of time meeting students on campus and in the office during the interviewing process.
What training, classes, experience, or skills development would you recommend to someone who wishes to enter your practice area?
Lauren: The true way you develop skills in leveraged finance is to work on deals over time. Our deals are often very short, so you can get a tremendous amount of exposure in a very short amount of time. A lot of what we do in in our practice isn’t taught in law school. That said, it is helpful to take the building block courses that are important to how we structure deals, like tax and bankruptcy. Most of the loans that we do are secured loans, so it’s an added benefit to take a secured transactions class. It’s a uniform code across the country, and—as an additional bonus—it’s a topic on the bar exam! A lot of law schools now are also offering workshops on topics like drafting and M&A, and those are definitely helpful to take.
What is the most challenging aspect of practicing in this area?
Lauren: Our practice group is notorious for having a quick pace. Our deals will often take roughly two months from start to finish for typical transactions and are sometimes even shorter. We’re frequently called upon to produce commitment letters in conjunction with an acquisition that needs to be signed within weeks or less. And because our deals are a lot shorter than those of other practice groups, we’re often working on multiple deals at the same time, which requires the ability to multitask, prioritize, and juggle the different matters at the same time.
What is unique about your practice area at your firm?
Marcus: What’s unique about acquisition finance is that we are product specialists (debt) and not industry specific, hence the sector and nature of the target being acquired varies, which allows you to get a glimpse into the management of various industries. One week, the target could be a retailer, the next, an industrial company or a service company. You get to see what makes each business tick in a way that you wouldn’t be exposed to in other practice areas. It’s terrific fodder for cocktail party conversation. We work on sponsor-designated acquisition financings, credit facilities with direct lenders, etc. It can be cross-border, and the deal terms change between geographic centers like London or New York, or the structure can change between bank and bond. Our work is able to change and evolve as the transaction evolves.
What kinds of experience can summer associates gain in this practice area at your firm?
At Milbank, each summer associate is given the option to rotate through three practice groups over the 10-week summer program. When they’re in Leveraged Finance, the summer associates are fully immersed in our work and culture. They’re assigned an associate and a partner mentor within the group. They are staffed on our deals but also regularly attend (very frequent!) coffees, lunches, and other social events. In terms of actual assignments, we try to staff them on deals. We include them on all emails and conference calls for the deal, and they assist with due diligence and edits to documents and will prepare the smaller documents needed for a closing. If they’re lucky enough to have a closing occurring during their rotation, the summers are part of the closing team and assist with everything from execution to documents to ensuring that all the deliverables have been produced.
What are some typical career paths for lawyers in this practice area?
We’ve had associates who have stayed and made partner, of course, but we’ve had many others who have left our practice to do everything from going into journalism to starting their own business or law practice to going back to school to become a law school professor. Some of our former associates are now our clients at banks and private equity firms and major public companies. The skills that you’re able to hone in our group are easily transferable and utilizable in other fields, and the foundation that leveraged finance provides in business allows our lawyers to easily and successfully move into other areas.