Calling the shots

You are the one to whom everyone will turn to keep them out of trouble; but at the end of it all you may be the sole survivor. A bit oversimplified, but those were two of the points to come out of Robert Armour’s keynote address to the In-house Lawyers Group’s annual symposium last month.

“Crisis management” was his theme, and if anyone can speak from experience on the subject it is Armour. The former general counsel of British Energy, the nuclear power generator, he arrived in the hot seat through takeovers of his previous employers, was there in 2002 when the company had to be taken over by the Government to prevent it collapsing, saw it through a re-flotation, and was still in post four years later when it in turn was bought up, by which time its value had trebled. On top of that, of course, nuclear power plants, though a “huge area for the UK economy” in Armour’s words, are not everyone’s idea of nice friendly businesses to run.

“Crises are each different”, he commented. “They make life intensely interesting; they raise the blood pressure; they give you something to look back on. You have to plan and give shape to your company’s response; there is a huge variety of different interests and influences; but you have only limited influence.”

For British Energy, the real crisis point arose about seven years ago, at a time when the power generation industry as a whole was in difficulties. Electricity prices were as low as a third of present rates – and forecast to remain low for a decade! – and the company, which had a history of underinvestment in its plant, was “decried” in the market.

Sole protection

Without going into all the messy details of how British Energy was turned round, some points stand out for in-house advisers from Armour’s experiences. First of all, you, the board and the employees are all in uncharted territory – but everyone is going to turn to you, the “gatekeeper”, for advice to keep them right; and “you may be the only person between the directors and jail”.

Keep yourself as an honest broker; and be fair and equitable, or it will backfire on you. Oh, and while you’re at it, they’ll probably expect you to manage the business as well.

You may also, as a lawyer, be the only one who thinks and sees things differently from the directors: most boards know each other and they are probably all from the same mould.

The one rule is, you pay for everything. All the fees, that is. You will need help from your external legal advisers; but you also have to control what is spent on them (“or you will get real grief”) – no easy matter when you have no bargaining power and they will probably demand to be paid weekly.

They will become your friends – but they also have fees to earn and reputations to protect.

Don’t get yourself into “a paralysis of non-risk taking”. It’s important to be prudent; hindsight will be the test; but don’t be over-pessimistic. Armour was not helped by advice from his external legal firm that said “maybe” in the 48 hours before a key decision on refinancing was required.

When the finger points

Although an adviser, you may well find yourself in the spotlight. Think how your photo will look in the press. Watch what you say. The press will judge you and politicians will look for a scapegoat. Don’t expect fair treatment.

You may also find yourself being quizzed by the FSA or other investigators, and having to answer questions like “Didn’t you see it coming?” Hindsight is a wonderful thing.

How prepared were you? “Corporate crises overwhelm companies.” The old world has gone and you meet an entirely new group of people. There is a “complete underworld” of lawyers and accountants who deal with distressed companies. They are “much pushier and more self assured” than the people you are used to dealing with. But in Armour’s case they didn’t understand how a Government-sponsored restructuring worked.

Your board will probably go, but you can’t afford to be sentimental. Your duty now is to the creditors, and also to the business.

Twists and turns

Be imaginative; and be prepared for unexpected turns of events. As the energy market changed while his company was undergoing restructuring, Armour found some parties to agreements reached seeking to renegotiate them when they thought they were going to be disadvantaged, while others of course were equally keen to see them carried through. He even faced a general meeting when shareholders who had lodged a motion then argued against it being passed. At one point, to counter a group who were buying up shares in order to “derail” a meeting, he went to court in New York in order to have the company delisted – a tactic that has since been outlawed.

Keep a focus on getting through. If you have a deal in your hand, take it. “There might be a better one round the corner, but the chances of landing the fish are remote.” Whichever route you take will have drawbacks and pitfalls. The board will be looking to you to keep the right balancing act and to keep them out of jail.

They may also rely on you to read and advise on documents even if they are the ones who have to sign them. Summarise everything for them, and keep them informed about what you are doing.

And yes, there is light at the end of the tunnel, even if it is a very different company that emerges. You may end up as the sole survivor; but the company “needs a history, a connection with the past, and to avoid making the same mistakes again”.

You may think life will be extremely dull once it’s all over; but strangely, new challenges are just as likely to come your way! Now British Energy faces a whole new world of climate change, insecurity of energy supply, and (UK) Government policy once again for investing in nuclear power. Compare that to 2002, when it was seen as a company just caretaking its way to the end of its life.

“If you do well,” Armour concluded, “you get a huge amount of satisfaction that you have probably played a pivotal role in keeping the ship afloat, saving jobs and shareholder value, and improving prospects for the future.”

Though no longer in post as general counsel, Armour is still working as a consultant to EDF, the company that ultimately bought British Energy. However he is pondering his next move and looking to see what opportunities will arise. Surely life will be just a little quieter?