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12/08/2010 / SPECIAL REPORTS / EQUITY CAPITAL MARKETS
Employee Share Ownership Plans: a multi-skills team dedicated to their success
For more than ten years, Crédit Agricole CIB has accompanied its clients in their employee share ownership plans. These operations require close cooperation between different business lines, both at the Bank and at the client.
Hatem Masmoudi, Head of Corporate Equity Derivatives - Equity Capital Markets, coordinating the operations, presents the interests of these plans and Crédit Agricole CIB expertise in the sector.
Xavier Collot, Head of Corporate Department, Sales Management Department Employee Saving Schemes at Amundi, explains the work between the Crédit Agricole group's entities involved.
In this special report you will also find external analyses. Sami Toutounji and Eric Zeller, specialised lawyers, explain their central role throughout the employee share ownership plan.
Vallourec and GDF Suez, two clients of the Bank, detail their strategy in the field and the support of the Crédit Agricole group.
Hatem Masmoudi: "The Crédit Agricole Group's organisation makes it possible to offer clients an all-inclusive range of services"
Can you please explain the advantages of employee share ownership – for the companies involved and their employees?
The implementation of a leveraged employee share ownership plan provides the issuing companies with the opportunity to communicate their objectives to employees in various countries, in particular at key stages in their development such as IPOInitial Public Offering. Initial listing of a portion of a company's capital on the stock market, with or without a capital increase. This is a favoured exit strategy for private equity investors looking to unlock the value of their investment.s, mergers, etc. The formula makes it possible to pull together employees and involve them more closely with the company. This type of plan also enables the company to build a stable and reliable shareholder base.
The invested capital is guaranteed for the subscriber; the employee is therefore not risking his stake. However if the share price increases, the employee benefits. This investment is very advantageous: the employee benefits from the company’s earnings and from both individual and corporate tax advantages.
What are the criteria for the success of this type of plan?
Several of a company’s departments are mobilised including finance, human resources, communication, legal and tax. Their cohesiveness is essential in meeting the generally inflexible deadlines.
The same applies to us: fluidity of information must be optimal between the different teams involved, namely Equity Capital Markets, trading, legal and asset management. Crédit Agricole CIB benefits from a highly integrated organisation that brings together all of the Group’s players around the project. Such an organisation is a real asset for this type of plan.
In addition the close relationship between Crédit Agricole CIB and its client at all phases in the structuring of the fund is an essential factor for the success of the project.
What distinguishes Crédit Agricole CIB in this area?
Ten years ago, Crédit Agricole CIB was one of the first financial institutions to structure leveraged products, first in France and then abroad. The Bank thus provides true expertise which has been enhanced over time.
The Crédit Agricole Group’s organisation makes it possible to offer clients an all-inclusive range of services. This is essential since such transactions require a relatively long period of time for implementation (from four to six months) and are complex (many business lines are involved both at the Bank and at the issuing company). The client must be able to rely on the know-how of all of the units involved.
Xavier Collot: "There is a high degree of technical complementarity between Amundi and Crédit Agricole CIB"
Please tell us about Amundi.Amundi was formed in December 2009 through the combination of the respective asset management skills of Crédit Agricole Asset Management and Société Générale Asset Management. We provide savings solutions for more than 100 million individual clients around the world and build custom products for our institutional clients. Amundi operates in more than 30 countries.
Its corporate savings division is also the leader in the French market with EUR 29.4 billion in assets under management as of September 30, 2010, i.e. market share of 34%. The company also manages EUR 15 billion in employee share ownership assets.
Several years ago within the corporate savings division we created a unit devoted to the coordination and management of employee share ownership programs. We provide a “turnkey” service enabling us to assist our clients in all phases of their share ownership projects, from design to implementation.
What roles do Amundi and CREELIA play in employee share ownership plans?
On average we manage some 30 employee share ownership plans per year in France and/or abroad. We regularly manage share issuance transactions abroad in 20 to 30 countries.
In partnership with Crédit Agricole CIB, Amundi has several missions:
- assisting the Equity Capital Markets business line in structuring products depending on the French or international regulatory tax framework,
- adapting mutual funds (employee mutual funds in this case) to each product’s specific constraints,
- assisting and advising clients in the implementation of each plan,
- writing and editing legal and commercial documents,
- ensuring very close working relations with France’s Autorité des Marchés Financiers (AMFAMF: Autorité des Marchés Financiers. The financial markets authority is the French securities regulator. It was created by the Financial Security Act of 1 August 2003, which merged the Commission des Opérations de bourse (COB) and the Conseil des Marchés Financiers (CMF).
The AMF is now the sole market regulator. Its remit is to safeguard investments in financial instruments and in all other savings and investment vehicles, ensure that investors receive material information, and maintain orderly financial markets. (Source : FBF)).
Amundi manages employee savings plans and takes part in the supervisory board meetings of the employee share ownership funds (standard practice). These plans benefit from post-structuring after-sales follow-up.
The staff of CREELIA, Amundi’s account-keeping subsidiary, ensures the follow-up with the holders of employee shares throughout the plan’s life. Taking an active role in the unwinding of transactions on the maturing of employee mutual funds, CREELIA staff provides custom responses to all plan correspondents and employees both in France and abroad.
What are the key strengths of this collaboration between Amundi and Crédit Agricole CIB?
Amundi and Crédit Agricole CIB work hand in hand on all aspects of employee share ownership plans, which is essential to providing an overall personalised response to the client’s requirements.
The role of each company is clearly defined:
- Crédit Agricole CIB is responsible for structuring the range of funds,
- Amundi is in charge of assisting the client in the overall management of the savings plan and providing account-keeping services for employee mutual funds.
This well-defined sharing of roles has proven effective with clients, who have continued to place their trust in us. Our respective project management services are also highly complementary.
The Senior Banker, the client’s key contact within the Group, coordinates the work of the various entities involved. There is a high degree of technical complementarity in the daily exchange among the units involved: each of them brings to the table its expertise with a view to providing the best solution.
The Equity Capital Markets team (Hatem Masmoudi on the right)
