Approving the Investment Is Not Approving the Transaction
An architect’s reading of how an approved investment becomes the transaction an institution ultimately holds.
Architecture of Return · Issue 15 · The Architect’s Reading
By Chudi Ofili · Founder & Transactional Architect
An investment committee will usually approve an investment once it is satisfied with the amount, instrument, valuation, principal rights and the key conditions on which the investment is to proceed. That does not mean that every aspect of the transaction has been settled. Much of the work of getting it to closing is still ahead.
As that work progresses, things change. A regulatory approval may affect sequencing, a financing requirement may change how an asset has to be held, or a condition expected before closing may prove impossible to satisfy in the way originally contemplated. These are ordinary transaction issues, and they are generally dealt with as they arise by the people responsible for them.
Depending on their significance, none of those changes may require the investment to return to committee. The transaction simply continues towards closing. The question is whether, at some point, anyone looks at the result of those changes together and asks whether the transaction that is now being completed still gives effect to the investment that was approved.
None of this means that an investment committee is considering the investment without regard to the transaction. The investment memo may set out the proposed jurisdiction, instrument, principal rights, conditions to approval and the execution risks already identified. Those matters can be important to the decision the committee takes.
But at that point, parts of the transaction are necessarily still proposed. Some terms remain to be negotiated, conditions may be satisfied differently from what was anticipated, and other decisions will be made as the transaction moves towards closing.
The approval is, therefore, a judgement about an investment, taken on the best available description of a transaction that has not yet been settled.
An investment committee can approve the investment without ever approving, as a whole, the transaction through which that investment is ultimately made.
Two Decisions of Different Kinds
An investment decision is relatively easy to locate. There is a meeting, a memo and a record of what was approved, so even years later it is usually possible to establish what was decided, on what basis and by whom.
The transaction is arrived at differently. It develops through a long sequence of choices: a jurisdictional recommendation, a financing term, a security requirement, a consent regime, or a sequencing decision taken under timetable pressure in the fortnight before closing. Each of those decisions has an owner, and each person is answering the question put to them within the mandate they have been given.
Much of this is simply the ordinary work of getting a transaction done. Terms change through negotiation, regulatory processes affect what is possible, lenders introduce requirements, and conditions expected before closing sometimes have to be dealt with differently. None of that necessarily points to poor structuring or a failure of care.
The difficulty is that a decision can be entirely sensible on its own terms and still change something elsewhere in the transaction. A financing requirement that changes how an asset must be held may also affect what can later be transferred, secured or separated. A consent introduced to accommodate a lender may affect a decision the committee expected the investor to control.
What does not always happen is for someone to bring those decisions back together and ask what they now add up to. There may be no equivalent point at which the transaction, as it has developed, is considered again as a whole against the investment decision that started it.
The approval process is, therefore, much clearer about how the investment decision is made than it is about whether the transaction that eventually gives effect to that decision should be considered again as a whole.
This is one way Structural Debt can begin to accumulate before closing. It does not necessarily begin with a transaction that was poorly designed. It can arise through the cumulative effect of reasonable decisions made as the transaction progresses.
When the Difference Matters
The consequence may not become apparent during execution because the transaction can continue moving and ultimately close. It may only become clear later, when the institution tries to rely on something the investment decision assumed would be available to it.
A protection the committee considered important may now operate behind a consent negotiated as part of the financing. A distribution that was expected to move through one part of the structure may depend on a route that changed while the transaction was being settled. An approval obtained on one basis may limit a step the investor later expected to take. In each case, the transaction may have been properly executed and every decision along the way may have been reasonable. What has changed is what the transaction allows the investor to do once those decisions are taken together.
Sometimes that difference will be immaterial. Transactions develop, assumptions change and not every variation deserves to return to an investment committee. The concern is where the difference affects something the investment decision actually relied upon: a right, an economic assumption, a source of control, an ability to move capital or an option the investor expected to retain.
Closing does not answer that question. It establishes that the transaction could be completed on the terms ultimately agreed. A closing memorandum can tell you what was done. What neither necessarily tells you is whether the transaction that now exists still does what the investment decision required of it.
Where Volume II Begins
Volume I looked largely at transactions from the point of assessment: what an institutional investor should see in a structure put before it and what those features may mean for the investment.
Volume II follows the transaction further. It looks at what happens as an investment decision is translated into the transaction the institution will ultimately hold, including the decisions made during negotiation, structuring and execution that shape the result.
That is why this volume begins with the investment decision. Approval is a natural starting point, but the transaction continues to develop from there. The institution ultimately holds the transaction that emerges from that process. Whether it still does what the investment decision required of it is the question that approval alone cannot answer.
SOVEREIGN SUMMARY Approving the investment is not the same as approving the transaction. The transaction continues to develop through negotiation, structuring and execution after the investment decision has been made. Those decisions may each be reasonable on their own terms, without the transaction they collectively produce ever being considered again as a whole. |
CONTINUE THE RESEARCH
This issue opens Volume II of Architecture of Return, BACH Global’s ongoing research programme on Transactional Architecture™, institutional capital and cross-border capital deployment in African markets. The Second Edition of the founding paper was published this month. Explore both below.
Until the next issue,
Chudi Ofili
Founder & Transactional Architect
BACH Global
© 2026 BACH Global Strategy Inc. All rights reserved. No part of this issue may be reproduced or distributed in any form without the prior written permission of BACH Global Strategy Inc.
The conceptual framework and original expression contained in this publication are proprietary to BACH Global Strategy Inc.
Transactional Architecture™ and Independent Transactional Architecture™ are trademarks claimed by BACH Global Strategy Inc.
Comments