TCLA Vacation Scheme Applications Discussion Thread 2024-25

[cwhite233]

Could someone please explain the difference between debt finance and equity finance and what the relative advantages and disadvantages are of each type of financing (in the context of PE), but in a way that would be digestible to a lay person. Why would one be chosen over the other? I’m trying to get my head around it and my brain is simply not willing to co-operate with me at all. Please help. 🥲🥲

@Andrei Radu @Amma Usman @Ram Sabaratnam​

I am neither of these people but I do have an understanding of this! On a basic level: debt finance = you, as a company, are raising money by borrowing (e.g. a loan, such as from a bank, a group of banks or credit fund). equity finance = you, as a company, are raising money by issuing shares (aka equity) to either existing or new shareholders of the company (could be other companies or individuals acting as shareholders). These entities or individuals will pay you money for those shares. Very basic pros and cons: if you give equity in your company, that means you are relinquishing/diluting control of the company as equity in a company often gives you voting rights (or if not voting rights, economic rights). You may have a founder who owns 60% of the equity in the company who does not want to lose their controlling stake for example. You may not want to go for debt if interest rates are high, meaning the payments you make on the loan will be higher. If the company already is struggling slightly, further debt could bring in a risk of insolvency. Moreover, depending on the type of company you are, you might not be able to get a loan to begin with (if you're a really small company, the bank would want to secure it against the personal assets of the founders/owners) OR the loan you can get isn't large enough to cover the amount of capital you need to raise.

If you're concerned with debt finance (aka leverage) in a PE context, I suggest researching why leverage is so commonly used in this industry. The short answer is that it boosts returns far more than if you used equity (the committed capital in a PE fund) to finance acquisitions of targets. That's why you'll see ratios of like 70/30 or 60/40 debt to equity ratio. The return on equity is just SO much higher in PE if you use leverage. Part of this is tied to the fact that using debt (and some equity) to finance acquisitions means that a single PE fund can make far more investments using leverage than just using the committed capital of that fund. This is also a reason why PE can be controversial - the debt doesn't sit with the fund or the PE manager or GP....

Hope that helps Definitely more pros and cons than those listed but I wouldn't expect you to need to know more for interview.

 

[desperateTCseeker1998]

Do you think Paul Weiss will send out a third round of invites ? As few received today should I just loose hope for PW? My scores were 21/36 and my answers were above average.

I think they might… I’ve only seen one person get an invite today as well so fingers crossed

 

[desperateTCseeker1998]

Paul, Weiss Interview! Got it at 5:39pm. My SJT scores weren’t that great so guys, don’t loose hope lol!

Congeats!!! To those of us still waiting, this is good news!!

 

[Legallywhatever]

Will the next cycle start in autumn? And will it be for a 2028 intake?

 

[Chris Brown]

The basic distinction is that with debt financing a company will borrow money from a lender and will in return make a promise to return the initial borrowed sum + an agreed upon interest. With equity financing, the company gets money from an investor but never has to pay the investor back in return. Instead, in exchange for the money the investor gets equity in the company, which is just another term for shares in the company/a percentage of the ownership of the company. Equity financing always takes place when a private company goes public, in that the company issues shares to the public through an IPO and in exchange gets capital which can be used for further growth. However, equity company can also be used by a private company in a private transaction, when existing shareholders agree to sell a part of their shares or issue new shares to a particular investor/group of investors.

To look in more detail at debt financing, the main two methods to obtain it are loans (normally taken from a bank) and bonds (which can be issued to any investors). The difference is that loans normally have to be repaid on a monthly period (the borrower pays a proportional part of the total borrowed sum + interest) while with bonds, the issuer (ie the company that borrowed the money) only has to make the interest payments on a regular basis - the initial borrowed sum (or "the principal") is paid all at once at the end of the agreed upon repayment period (the "maturity date"). While there are a number of other differences that are relevant in assessing the pros/cons of using loans or bonds, for the sake of comparison with equity financing I will look at only advantages and disadvantages that equally apply to both. It should be noted however that in PE generally and for buyouts in particular PE firms normally use highly leveraged loans. Essentially, to minimize the amount of investor capital spent on any transaction (and thus to maximize the total number of profitable transactions a given fund can enter into), a PE firm will normally finance around 75-80% of the cost of a buyout by getting a loan from a bank and then offering as security the assets of the target company itself.

Now, to list some of the main advantages of debt financing I can think of:

• Allows the company (and the controlling PE firm) to keep compete control of the target company. This is particularly important for the PE firm to be able to implement its growth/efficiency improvement plans and its desired exit strategy.
• Allows the PE firm to keep all the dividends and profits from selling the company later on.
• It is often makes for a simpler and more standard negotiation process both for the financing deal and for the actual buyout. For an industry like PE where deals tend to be very fast paced and where targets normally have a number of suitors, this is also a benefit that should not be understated.
• Interest payments are tax-deductible.

Whereas the main advantages of equity financing are:

• It does not add any financial burdens on the target company. This means it should have more capital which can go towards investments in growth rather than repayment of debt. It also decreases risks of insolvency.
• It often means working with institutional investors or huge corporates with significant resources and expertise, which can make them invaluable partners for growing a business. A very successful example of such a relationship is that between Open AI and Microsoft.

Thank you so much @Andrei Radu this was so useful. I have been trying to wrap my head around this topic for a couple of days and had virtually no luck at all. This makes it seem somewhat less complicated than I perhaps initially thought it was (the big words probably threw me off). I didn’t realise there was a link between debt finance and insolvency. I might be able to draw on some knowledge I have of insolvency since I did it as an undergraduate module. Once again thank you, you’re literally a life saver. The GOAT has come in clutch. 🐐​

 

[Chris Brown]

Will the next cycle start in autumn? And will it be for a 2028 intake?

Some firms would probably be recruiting for a 2027 start but most would be 2028/29 I think.

The next cycle starts around August / September time for WVS applications.​

 

[mariistm]

aren't there also verbal & numerical reasoning scores?

yep, i got 2/3 (middle) for verbal and for numerical i got 3/3 (right), not sure how much they take them into consideration

 

[i-want-a-tc]

They sent me an AC email 5 minutes ago, so no

When did you do your VI?

 

[Jessica Booker]

@Jessica Booker Hi Jessica, just wanted some advice if possible. Do law firms care at all about what you do prior to starting the SQE/TC? I am scheduled to do the SQE February 2026 and start the TC the February after. Now I just have this massive year long gap between now and studying the SQE. Many people have advised that I should travel/enjoy this amount of time since I'll never have this much free time again and I'll be stuck in an office doing silly hours for my legal career, but travelling for that long period of time is not feasible for me. I've currently been working in an admin role unrelated to law since October, but it is stressful and uninteresting. I would like to leave to improve my mental health, and I'm fortunate enough to not have to rely on this role. If I do this, and if I don't go in any sort of employment between now and next Feb, would this be detrimental going forward in your experience?

In the vast majority of cases, no one is going to care. They are going to look at your training contract much more closely.

If the difference is between working in your current role and not, I don't think this is going to be a big issue. If you were saying you wanted to go into a very competitive area of law like international arbitration as a qualified lawyer and you were working in international arbitration now, then I might be saying something slightly different as that type of direct experience could 1) help you get an international arbitration seat as a trainee and 2) help your qualification chances into that area as you would have more experience in the field.

But given this is an admin role unrelated to law, I really don't think this is an issue. Plus you could find other forms of employment instead or even fill your time with things like travelling, volunteering. I think it is important to do something with any long period of time out (like a year) but that does not have to be work and that does not have to be one thing either.

Ultimately your mental health is not worth risking. The SQE will be a tough period anyway and going into that mentally fresh and not exhausted/stressed is probably a good idea anyway.

 

[LegallyStressedOut]

Did anyone else get this email from JD? any insights?

 

[Wannabe_Lawyer]

Hi Jessica (and anyone else who wants to chip in),

Just wanted to piggyback on your point about international arbitration being a really competitive area (sorry, for the completely unrelated topic!). Would you say that is the case at the majority of London-based firms? Would it be different at firms with strong int'l arb practices like Debevoise, King & Spalding and the likes? As these firms are also prioritising the growth of their transactional practices, would that mean that int'l arb is a competitive area to get into even in such firms?

Thanks!

In the vast majority of cases, no one is going to care. They are going to look at your training contract much more closely.

If the difference is between working in your current role and not, I don't think this is going to be a big issue. If you were saying you wanted to go into a very competitive area of law like international arbitration as a qualified lawyer and you were working in international arbitration now, then I might be saying something slightly different as that type of direct experience could 1) help you get an international arbitration seat as a trainee and 2) help your qualification chances into that area as you would have more experience in the field.

But given this is an admin role unrelated to law, I really don't think this is an issue. Plus you could find other forms of employment instead or even fill your time with things like travelling, volunteering. I think it is important to do something with any long period of time out (like a year) but that does not have to be work and that does not have to be one thing either.

Ultimately your mental health is not worth risking. The SQE will be a tough period anyway and going into that mentally fresh and not exhausted/stressed is probably a good idea anyway.

 

[Jessica Booker]

Hi Jessica (and anyone else who wants to chip in),

Just wanted to piggyback on your point about international arbitration being a really competitive area (sorry, for the completely unrelated topic!). Would you say that is the case at the majority of London-based firms? Would it be different at firms with strong int'l arb practices like Debevoise, King & Spalding and the likes? As these firms are also prioritising the growth of their transactional practices, would that mean that int'l arb is a competitive area to get into even in such firms?

Thanks!

I can't say for certain having not worked in those firms, but I suspect it would be the case at any firm. Its typically one of the most popular areas for people to qualify into and firms with strong IA practices are naturally going to attract more people wanting to sit/qualify in those areas.

There are weird and unexpected trends though that mean popularity of different practice areas ebbs and flows at different times though. It also comes down to a bit of pot luck as to who else you have in your intake who is really interested in the areas you are. I have seen seat rotations and qualification processes where popular areas are no longer popular, and conversely typically hard to fill practice areas all of a sudden being popular and too many people wanting to sit/qualify there. It doesn't take much for a couple of people who thought they wanted to be corporate lawyers end up loving being litigators (or vice versa) and dynamics shift quite quickly.

 

[Wannabe_Lawyer]

I can't say for certain having not worked in those firms, but I suspect it would be the case at any firm. Its typically one of the most popular areas for people to qualify into and firms with strong IA practices are naturally going to attract people wanting to sit/qualify in those areas.

There are weird and unexpected trends though that mean popularity of different practice areas ebbs and flows at different times though. It also comes down to a bit of pot luck as to who else you have in your intake who is really interested in the areas you are. I have seen seat rotations and qualification processes where popular areas are no longer popular, and conversely typically hard to fill practice areas all of a sudden being popular and too many people wanting to sit/qualify there. It doesn't take much for a couple of people who thought they wanted to be corporate lawyers end up loving being litigators (or vice versa) and dynamics shift quite quickly.

That is a good point re: all the aspiring int'l arbitrators targetting such firms. I guess there really is no way of predicting these things. But good food for thought. Thanks!

 

[Chris Brown]

Hi Jessica (and anyone else who wants to chip in),

Just wanted to piggyback on your point about international arbitration being a really competitive area (sorry, for the completely unrelated topic!). Would you say that is the case at the majority of London-based firms? Would it be different at firms with strong int'l arb practices like Debevoise, King & Spalding and the likes? As these firms are also prioritising the growth of their transactional practices, would that mean that int'l arb is a competitive area to get into even in such firms?

Thanks!

I would think it depends on the size of the firm and in relation to its graduate recruitment, how many trainees the firm takes on. For example, a firm like Debevoise & Plimpton takes on around 10 trainees. For a firm like this, I would imagine it’s less competitive to enter international arbitration than say Freshfields, which recruits 90-100 trainees annually, all of whom might be super interested in international arbitration as a training contract seat and an area they’d like to qualify into.

I think for firms that are prioritising the growth of their transactional practices, this might also reduce the competition around international arbitration. For example, private equity is now increasingly popular and is a known strength of US firms. I imagine this is a very competitive area to enter and qualify into now compared to international arbitration. However, I don’t know for sure. 🤷🏾‍♂️

I think ultimately it would come down to luck, in that it depends on the interests of the trainees and NQ’s at the time. I imagine these vary every year. For example, one year competition law might be super popular and then the next year it isn’t, and instead intellectual property is the most competitive area to enter. I am very interested in dispute resolution, but I could start a TC or near becoming an NQ and decide I want to become a tax associate (very unlikely for me but never say never). 😂​

 

[kuuks_]

Paul, Weiss Interview! Got it at 5:39pm. My SJT scores weren’t that great so guys, don’t loose hope lol!

Congratulations!!

Did you apply for spring or summer?

 

[billyonthespeeddial]

I would think it depends on the size of the firm and in relation to its graduate recruitment, how many trainees the firm takes on. For example, a firm like Debevoise & Plimpton takes on around 10 trainees. For a firm like this, I would imagine it’s less competitive to enter international arbitration than say Freshfields, which recruits 90-100 trainees annually, all of whom might be super interested in international arbitration as a training contract seat and an area they’d like to qualify into.

I'm not sure if this is really accurate. Most firms will have certain number of NQ position openings in certain departments. While I don't think Freshfields will have ten times the IA places Debevoise will have, they'll also have so many other contentious options that people will gravitate towards.

 

[OliverTwist]

Received an invite to complete the Mishcon VI yesterday. Does anybody have any insight on what it involves?

 

[Wannabe_Lawyer]

I would think it depends on the size of the firm and in relation to its graduate recruitment, how many trainees the firm takes on. For example, a firm like Debevoise & Plimpton takes on around 10 trainees. For a firm like this, I would imagine it’s less competitive to enter international arbitration than say Freshfields, which recruits 90-100 trainees annually, all of whom might be super interested in international arbitration as a training contract seat and an area they’d like to qualify into.

I think for firms that are prioritising the growth of their transactional practices, this might also reduce the competition around international arbitration. For example, private equity is now increasingly popular and is a known strength of US firms. I imagine this is a very competitive area to enter and qualify into now compared to international arbitration. However, I don’t know for sure. 🤷🏾‍♂️

I think ultimately it would come down to luck, in that it depends on the interests of the trainees and NQ’s at the time. I imagine these vary every year. For example, one year competition law might be super popular and then the next year it isn’t, and instead intellectual property is the most competitive area to enter. I am very interested in dispute resolution, but I could start a TC or near becoming an NQ and decide I want to become a tax associate (very unlikely for me but never say never). 😂​

I have seen so many former classmates/friends go from having strong preferences for transactional/litigation work and completely flipping their preferences on qualification. I'm also anticipating it in myself (if I ever get a TC that is). 😆

 

[TCpleasex]

@Jessica Booker Hi Jessica, just wanted some advice if possible. Do law firms care at all about what you do prior to starting the SQE/TC? I am scheduled to do the SQE February 2026 and start the TC the February after. Now I just have this massive year long gap between now and studying the SQE. Many people have advised that I should travel/enjoy this amount of time since I'll never have this much free time again and I'll be stuck in an office doing silly hours for my legal career, but travelling for that long period of time is not feasible for me. I've currently been working in an admin role unrelated to law since October, but it is stressful and uninteresting. I would like to leave to improve my mental health, and I'm fortunate enough to not have to rely on this role. If I do this, and if I don't go in any sort of employment between now and next Feb, would this be detrimental going forward in your experience?

I can’t really talk on the employment side of taking a break between SQE & your TC, however, I have been on a gap year for the past 2 years travelling and something I will say is if you have enough money to even spend a small amount of time travelling do it.

The experiences I have gained whilst being away honestly cannot compare to what I would have in an office - not just fun travel stuff but also cultural awareness which if you’re going into an international firm or have international clients would be so important.

From a financial perspective, we have worked at the same time so we don’t really have savings per se that we are dipping into, however, I’ve been back in the UK for a fortnight so far and the prices are insane. We were literally booking beachfront accommodation in Sri Lanka for £15 per night.

So basically, from a career perspective I don’t think it’s hindered me in anyway, if anything I think it has gave me invaluable insights into different cultures & working life around the world that you can bring to your new role.

 

[Legalgirl]

Congratulations!!

Did you apply for spring or summer?

Thank you!! I selected both spring and summer as I couldn't decide xD