How we work · the outcome
Execution-readiness.
Execution-readiness is a state with named conditions rather than a judgement about how a transaction feels. A transaction reaches it when the manager, its counsel, its administrator and every other appointed counterparty can each be told what they are being asked to do.
Seven conditions define the state. All seven are written below with the test that decides each one, so that a manager can read down the list against a live transaction and establish which of them is true today.
01 · The state
How we workReadiness is a state with conditions. It is not a view about a transaction.
Three uncertainties stand between a decided economic intention and a transaction that can be instructed. They are different uncertainties, they are closed by different work, and closing one of them does nothing to the other two.
How should this be built? The exposure is decided and the route to it is not. Direct holding, a special-purpose vehicle, a holding chain, an instrument rather than an equity interest, a participation beside the fund: several of these usually reach the same economic place, and they reach it through different law, different governance and different exits.
Will the structure hold? A structure that can be drawn is not the same as a structure that survives contact with the tier the vehicle is established at, the security package a lender will actually take, the mandate the administrator works inside, and the residence and treaty position of every layer in the chain. Feasibility is tested against those, one at a time, before a route is preferred.
Can this be taken into execution? Whether the parties who have to act can be told what they are being asked to do, in what order, against which dependencies, and with which decisions already settled. This is the uncertainty that survives longest, because it is the only one that cannot be closed by thinking harder about the structure.
Structural uncertainty becomes execution-readiness. That is the whole of the movement, and it has a definite end.
02 · The seven conditions
How an engagement runsAll seven, or the state is not reached. Six is not most of the way there.
Seven conditions. Each is followed by the test that decides it, and the tests are written to fail cleanly: where the answer does not arrive in a sentence, the condition is not met and the work is not finished.
Read them against a live transaction rather than in the abstract. The list is useful only in the second reading.
- 01 · The structure is understood
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Understood means somebody inside your own house can draw the chain from the fund to the asset without opening an adviser's file: fund, general partner, holding vehicle, intermediate company, operating company, asset. Every link in that chain is either a legal person incorporated somewhere under a law, or a contract governed by one, and which of the two it is decides what happens to it in an insolvency, at an exit, and under examination.
Understanding also runs sideways. Where the general partner sits, which entity holds the permission the vehicle is managed under, and which of the appointments the constitution binds rather than merely names.
Not true if the chain exists only in a structure paper and nobody in the house can reproduce it on a whiteboard.
- 02 · Alternatives have been evaluated
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There is more than one way to hold almost anything. A route taken without alternatives is a route nobody can defend when an investment committee, an anchor investor or a lender's credit function asks why this one, and the honest answer in most transactions is that it was the first shape anybody drew.
Evaluated means the alternatives were drawn, compared against the stated objective and the known constraints, and that every route set aside stays on the file with the constraint that removed it.
Not true if nobody can name the second-best route and say what taking this one cost you.
- 03 · The principal constraints are known
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A constraint is not a risk. A risk is something that might happen; a constraint is a rule, a term or a fact that closes a route today. The tier the vehicle is established at and what it fixes about who may subscribe and what the document must say. A borrowing limitation in the constitution. A transfer restriction in the shareholders agreement beneath the asset. A side letter already signed that the new structure would breach. A treaty position that turns on where a holding vehicle is managed rather than where it is registered.
Known means read to the instrument and the article that creates it, on a stated date, with the note of which of your own documents were drafted against an earlier version of the same text.
Not true if a constraint is described as market practice rather than cited to a document.
- 04 · The professional questions have been identified
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The questions that need a signed answer, written as questions, each attributed to the party who can close it. Counsel is not asked whether the structure is sensible. Counsel is asked whether a named step, taken in a named jurisdiction, in a named order, produces a named consequence.
That distinction is what makes the downstream work efficient and what makes the answers usable. A question that arrives already framed comes back as an answer. A file that arrives with no question attached comes back as a memorandum about the law in general.
Not true if your advisers were sent the file and asked to look at it rather than asked a question.
- 05 · Dependencies are mapped
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Which decisions foreclose which others, and in which direction. Domicile constrains the tier. The tier constrains who may subscribe, what the offer document must contain and how much of the regulator sits in the room. The identity of the investors constrains the route by which each of them may lawfully be approached, territory by territory. The financing constrains the ownership chain, because a lender takes security over shares in a company against which it can enforce, in a court whose timetable it has already priced.
A dependency map is what stops the same decision being taken twice, in two places, by two people who each believed the point was still open.
Not true if changing one item on the file requires a meeting to work out what else moves.
- 06 · The implementation sequence is understood
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The order the steps run in, with the steps that cannot be taken a second time marked. Some steps are reversible at the cost of the work already done. Some are reversible only with a document somebody outside your house has to sign again. A few create a legal fact a third party may rely on, and everything after one of those is built on top of it.
Understood means the sequence is written down, owned step by step by role rather than by name, and built backwards from whichever date actually binds.
Not true if the plan is a list of workstreams rather than an order. The one-way doors, in sequence.
- 07 · The appropriate execution parties can be instructed
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This is the condition the other six serve. Your counsel, the administrator, the depositary, the lender, the party who may lawfully make an approach in each territory, and the centre with its regulator can each be told what they are being asked to do, on what structure, in what order, and what each of them owns.
Instruction is a test of the whole file at once, because an instruction that cannot be written is an instruction that has found a gap somewhere behind it. Section 04 sets out which decisions belong to which party.
Not true if two parties each believe the other one is deciding something.
Six of seven is not readiness with one item outstanding. It is a transaction whose seventh condition will be settled by an event rather than by a decision.
03 · Where readiness is usually incomplete
Where structures breakMost transactions fail one condition, and it is rarely the one being watched.
Each of the seven conditions above fails in a way its own test catches. Two partial states do not, because in both of them every test above returns true and the structure itself is sound. What is missing sits between the structure and the people who have to act on it.
The whole of it is held by one person, and nothing about it is wrong. It has no second reader, no written form and no way of surviving a change of role. A structure nobody else can carry is a structure that is only ready while one diary is free, and none of the seven tests asks how many people can draw it.
The vehicle sits in one centre, the assets in a second country and the investors write from a third. Every leg has an owner and every leg has been read. The junctions between them have neither, and a junction is not an item on anybody's engagement letter.
Neither is an error in the structure, which is why neither is caught by rereading the structure. Each is a gap between the structure and the parties who have to act on it, and readiness is a statement about that gap rather than about the drawing.
04 · Who can be instructed
Our roleEvery decision has exactly one owner. A decision with two owners is an open question wearing a plan.
Eight decisions stand between an intention and a first drawdown. They are the subset of the thirteen set out at our role that has to be settled before anybody can be instructed, and the plane below is the shortest form of the seventh condition: nobody can be instructed while a row is contested.
| Decision · owner | The manager | This firm | Appointed counsel | Regulated counterparties | Administrators |
|---|---|---|---|---|---|
| Which economic exposure the fund acquires | The manager | ||||
| Which of the drawn routes is taken | The manager | ||||
| Whether the transaction proceeds, and on what date | The manager | ||||
| The structural alternatives, and where each one breaks | This firm | ||||
| The order of the steps, and which of them foreclose | This firm | ||||
| The drafting, the opinions, and every position that is signed | Appointed counsel | ||||
| Whether a regulated activity is performed, and by whom | Regulated counterparties | ||||
| Operating the vehicle once it exists | Administrators |
Read across a row and it names the party who decides. Read down a column and it names what that party can be instructed to do. Two of the eight sit with this firm, and both of them are analysis: what the alternatives are, and what order the steps have to run in. The manager decides which route is taken and on what date.
The routes, drawn, with the constraint that shapes each one and the point at which each one fails. A choice made against alternatives is a choice that can be explained to an investment committee, to an anchor investor and, later, to whoever asks why the structure looks like this.
A structure to validate rather than a brief to interpret, the routes rejected with the reasons, and the questions written as questions. Where counsel's view and the analysis differ, the file improves rather than stalls, because the disagreement lands on a recorded reason.
The activity, the territory and the party proposing to perform it, stated plainly, before anybody speaks to anybody. Every regulated activity inside the transaction is theirs, in every jurisdiction the transaction touches.
The vehicle structure, the ownership chain, the subscription route, the valuation mechanism and the cash-flow architecture. An administrator asked to operate a structure decides how to do so inside its own mandate. An administrator asked to invent one is being asked the wrong question by the wrong party.
05 · What the state is worth
When to involve usThe cost of a structural assumption is the number of people who have relied on it.
Readiness is the point at which a wrong turn is still cheap to take back, and finding a structural problem while it is still structural is most of what a manager comes to us for.
An assumption that looks harmless in the first week becomes a legal problem, then a regulatory problem, then an operational problem, then a delay, then a restructuring, and occasionally a transaction that does not happen. That order is an ascending statement of what it costs to change your mind, and the ladder below is the same ascent read one moment at a time.
- 01 Assumed It sits in somebody's head. Nothing has been drafted around it and nothing depends on it yet. Changing it costs a conversation, and this is the only moment on the ladder at which that is true.
- 02 Drawn It is in the structure. Changing it means redrawing the structure and rereading the constraints against the new shape, because a constraint read against one chain is not a reading of another. Changing it costs the work done since it entered.
- 03 Documented It is in a draft that somebody outside your house has now read. Changing it means reopening a document under negotiation, and the other side learns something about the state of your thinking when you do. Changing it costs a negotiating position as well as a document.
- 04 Relied upon A third party has acted on it. An investor has been told, a lender has taken it through credit, an administrator has been appointed on the strength of it, a regulator has been notified of it. Changing it now requires their consent, and consent is priced by a party that has just discovered it holds one.
- 05 Performed Capital has moved, a register has changed, an investor has been admitted. The assumption is now a fact about the world, and the only remaining instrument is a restructuring, carried out in front of everybody who relied on the original.
Nothing on that ladder is a failure of diligence. Every rung is somebody doing their own job properly on top of an assumption that nobody was asked to test, which is exactly why the test has to be a condition of the state rather than a hope about the process.
A wrong turn found at the first rung costs a conversation. The same wrong turn found at the fifth costs a restructuring, in front of everybody who relied on the original.
06 · What changes downstream
The blueprintCounsel drafts faster from a structure than from a question.
The clearest external measure of readiness is the first sentence your advisers hear. Two instructions, on the same transaction, with the same facts.
Without it · the instruction that opens with a question
The instruction reads: can you look at this and tell us how we might do it. The structuring work then happens inside a legal engagement, by a party appointed to state the law rather than to design the architecture. It builds its own picture of the fund, forms a view about the vehicle, and returns a document that is careful about the law and silent about the alternatives, because it was never shown any. The transaction has bought a legal opinion on the first structure anybody drew.
With it · the instruction that opens with a structure
The instruction reads: here is the proposed structural architecture, the routes we rejected and why, the constraints we read and the date we read them. Please validate the legal position, document the structure, and answer the questions attached. Counsel is now doing the work only counsel can do, on a shape somebody else has already tested. The administrator is not inventing a subscription route; it is deciding how to operate one inside its own mandate. Questions arrive as questions, and answers come back as answers.
Three parties feel the difference immediately, and each of them feels it as time rather than as quality.
Receives a structure to validate and a numbered set of questions to close, rather than a transaction to reconstruct first. Counsel is not being asked to prefer one commercial route over another, which is a request counsel is right to decline and slow to decline politely.
Receives the vehicle structure, the ownership chain, the subscription route, the valuation mechanism and the cash-flow architecture, and determines how to operationalise them within its mandate. Getting the architecture right before operationalisation begins is the whole of the saving.
Receives an ownership chain its security package can attach to, with the enforcement question answered before credit approval rather than after it. A pledge over shares in a company nobody has asked a court about is a document, not security.
The architecture is the product. The document is the evidence that the architecture exists.
07 · Readiness with a question open
Open questionsA question that is open and named does not stop a transaction. A question that is open and unnamed does.
Readiness does not mean that every question is answered. Some cannot be closed from outside: what a regulator will do with a particular application, how a court in a third country will construe a security document, whether a counterparty will accept a term it has not yet seen.
What the state requires is that each of those is written as a question, attributed to the party who can close it, dated, and carried in the sequence with the time it needs. Where the instruments do not settle a point, the point stays open and the file says so. An open question carried openly is a working condition of the transaction. An open question carried quietly is the one that returns at the close, in front of everybody.
The implementation sequence is the sixth condition, and it is written out in full at the one-way doors: sixteen steps between a mandate and a first drawdown, with the steps that cannot be taken a second time marked, and with the questions that are cheapest to answer before each door identified.
We take transactions through structural design and execution-readiness. Execution remains with the manager and its appointed counterparties.
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Complex transactions fail at the interfaces between otherwise workable components. We resolve the structural complexity between investment intent and transaction execution.
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