Month: September 2019

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A no-deal outlook and the law – time for pragmatic pessimism

Alex Novarese

We go to press with Parliament locked in battle with the Government over threats to take the UK into a ‘no-deal’ exit from the European Union (EU). I’m not going to offer political predictions but we are clearly at the point where a disorderly exit from the EU is a very real prospect for the country and the profession.

The good news is that the largest UK law firms feel confident they can largely mitigate the immediate impact of no-deal, even with the abrupt end of EU rights to practise that have been such a boon. This is because potentially obstructive Bars in key markets in France and Germany have been kept onside and UK lawyers feel that other decent workaround options are available (see pages 12-13). With leading UK firms also having substantial foreign operations, including the Legal Business 100 having 19% of their lawyers in mainland Europe, and rapidly increasing their ranks of Irish-registered solicitors, the large outfits at least are braced. The Law Society recently issued research arguing a no-deal would knock 10% off the value of the UK legal market, equivalent to more than £3bn, and costing 10,000 jobs. Most law firm leaders see such predictions as excessive – a scepticism I share – though the industry does believe such an exit would be damaging. Continue reading “A no-deal outlook and the law – time for pragmatic pessimism”

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LB100: Legal elite shows resilience amid ominous haze

City with red sky and planes

It is a measure of how fast-moving the Brexit-dominated landscape now is that imagery in this year’s Legal Business 100 (LB100) is dominated by Conrad, Castro and Coppola as the summer months have moved to rapidly challenge notions of how Britain works. One of the most stable and predictable major economies in the world has been locked into a mounting political conflict more akin to a banana republic than the Mother of Parliaments. Sooner or later Westminster drama on this scale will spill into a real economy that already contracted in the second quarter.

And yet, the UK’s largest law firms have endured another 12 months of uncertainty and ominous haze with impressive resilience, pushing revenues up 9% to £26.35bn, one of the better years of all-round performance since the banking crisis. And though a handful of mergers flatter that headline figure, 28 firms managed double-digit revenue growth, showing that plenty of UK firms are thriving in these challenging conditions. Continue reading “LB100: Legal elite shows resilience amid ominous haze”

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The end of A&O’s marathon O’Melveny merger bid reveals the stark choices facing the Magic Circle

starry sky over the City

This article sits in the news leader slot of our latest issue, but when considering Allen & Overy (A&O) and its epic courtship of O’Melveny & Myers, the defining factor has been the absence of news. Since it emerged last spring that A&O was in merger talks with the Los Angeles-bred firm, there have been bare scraps of information, alongside alternating whispers the deal was/was not on. Finally the resolution came on 2 September, with the pair announcing the end of the talks with the traditional noises about mutual respect.

The reason for the long delay was as much the scale and ambition of the merger as the inevitable complications of bringing 700 partners on side. The looming spectre of a messy ‘no-deal’ Brexit and fresh falls in sterling further strained a delicate situation, probably tipping it over the edge. Not only were the firms aiming for full financial integration upfront – a move never attempted on the scale of a £2.4bn transatlantic union – the aim was to do an immediate merging of governance, leadership and remuneration. Forget vereins and grace periods kicking tricky issues down the road. That all-in approach raised the stakes and logistic issues enormously. Not least it would have involved substantive reform of A&O’s remuneration structure to make it more compatible with a US firm. Continue reading “The end of A&O’s marathon O’Melveny merger bid reveals the stark choices facing the Magic Circle”

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Mud sticks to Burford amid intense row but dispute funders’ rise looks assured

City of London

‘Throw enough mud at a wall, and some of it will stick,’ the proverb says. But since US investor Muddy Waters published a scathing attack on third-party litigation funder Burford Capital on 7 August, the muck-slinging has not stopped.

The charges in the 25-page report were devastating. Having labelled Burford a ‘poor business masquerading as a good one’, and suggesting the company was ‘already insolvent’, more than £1bn was wiped off the listed funder’s value. Five days later, Burford enlisted Freshfields Bruckhaus Deringer, Quinn Emanuel Urquhart & Sullivan and Morrison & Foerster to pursue claims of illegal market manipulation. Continue reading “Mud sticks to Burford amid intense row but dispute funders’ rise looks assured”

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Dealing with no deal – Can top law firms cope with a chaotic Brexit?

protesters

Simon Davis has had quite a start to his one-year term as the 175th president of the Law Society of England and Wales. Taking office just a few weeks before Boris Johnson was appointed Prime Minister in July, the Clifford Chance (CC) litigation partner faced the reality of a nation that was heading for a cliff-edge exit from the EU, with major potential disruption for its legal industry.

With the new Conservative government promising to deliver Brexit on 31 October – ‘do or die’ – and the path to a withdrawal agreement with the bloc getting narrower by the day, the prospect of a disorderly exit has rapidly become a realistic possibility. Continue reading “Dealing with no deal – Can top law firms cope with a chaotic Brexit?”

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Case study: Kennedys

Nick Thomas

Kennedys senior partner Nick Thomas describes 2018/19 as a year of consolidation: ‘The acquisitions are up and running and, despite those investments, we had growth all over the place throughout the year.’

In 2017/18, this insurance and shipping specialist was hands down the star performer of the 26-50 bracket in revenue terms, recording a 31% rise in global turnover and 14% for UK income on the back of sustained geographic expansion. But, while it failed to emulate that racy performance in 2018/19, with 10% revenue growth to £216m, what is far from average is Kennedys’ five-year track. The firm has grown revenue 68% since 2014 when it turned over £128.5m and has increased headcount by 51% in the last five years on the back of a dynamic international investment drive. Continue reading “Case study: Kennedys”

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Under pressure – Retail GCs fight to adapt to a brutal High Street

High street - 'Closing down'

The crisis engulfing high-street retailers is showing few signs of abating. May saw the public collapse of almost the entirety of Jamie Oliver’s restaurant eateries, and in June, retail tycoon Philip Green’s Arcadia empire narrowly avoided bankruptcy with a rescue deal severing some 50 clothing stores.

According to data from Deloitte, 125 retailers went into administration last year compared to 118 in 2017, including 26 large companies. Continue reading “Under pressure – Retail GCs fight to adapt to a brutal High Street”

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Life during law: Ian Bagshaw

Ian Bagshaw

I’m less Marmite than I was. Never been deferential. Having a Mancunian directness, I was brought up by people who called a spade a spade. Helps me with clients massively. Sometimes it’s not what other lawyers want. I could be more political and in the past, I’ve tried. You can only be yourself.

I was the first person in my family to go to university. I didn’t grow up dreaming of being a solicitor. I still think football coaching was my true calling. Continue reading “Life during law: Ian Bagshaw”

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Start-ups in India – Reaping what you sow

Start-up culture

2018 was a good year for Indian entrepreneurs. The world’s third-largest start-up ecosystem saw its base expand by 12-15% and investor funding grow by 108% year-on-year, as well as a rise in late-stage funding, according to a 2018 report by industry association NASSCOM and consultants Zinnov. This boom was last year enough to hand unicorn status – valuations on young tech companies of more than $1bn – to more than eight Indian companies.

But just a few years ago, things were not quite so rosy. Despite the success of e-commerce wunderkind Flipkart (sold last year to Walmart for $16bn) and its ilk, investment plummeted from $1.42bn to $583m between Q1 and Q2 2016 (according to CB Insights, October 2016) and businesses started to go under. Continue reading “Start-ups in India – Reaping what you sow”

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The in-house debate: Run the risk

Manu Chopra

Is the job of the legal function to be the ringmaster and cheerleader, managing risk and compliance effectively within an organisation? Should it have to win over the hearts and minds of the board just as much as those on the front line? These were the main discussion points of a recent panel debate between nearly 20 in-house lawyers and private practice risk management specialists gathered at Mayer Brown’s London offices this summer.

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David Harrison, Mayer Brown: A common challenge across practice areas is how to move away from historical perceptions of compliance and risk – that this is for the lawyers and could get in the way of the business, with the result that it’s underfunded. It often takes a crisis, typically an investigation or a major breach, for significant resources to be deployed. Continue reading “The in-house debate: Run the risk”

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Project India – Meet the GCs charged with building on a vast scale

infra planning process

As the world’s second most populous country, India accounts for 17.5% of the world’s population. And it is rapidly catching up with the number one, China. On an annual basis, India’s population growth rate of 1.2% is more than double that of its Asian neighbour.

But while population growth is largely seen as a means of economic development, it comes with costs. The burden on cities and infrastructure of a rapidly-growing population must be addressed if the country is to reach its full potential. The need is such that the infrastructure question was a cornerstone of this year’s election. The Bharatiya Janata Party, led by returning Prime Minister Narendra Modi, pledged $1.44trn towards infrastructure – a stark contrast to its main opponent, the Congress Party, which instead focused on alleviating poverty and job creation. Continue reading “Project India – Meet the GCs charged with building on a vast scale”

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Deal View: Five years on – How Akin Gump’s Bingham acquisition turned bust to boom in the City

James Roome

‘Our team was nearly twice the size of Akin Gump’s London team. There was potential for vulnerability on both sides. They didn’t want their entire lives disrupted by a very large cuckoo in the nest.’ Five years on, restructuring partner James Roome reflects on the potential pitfalls of Akin Gump Strauss Hauer & Feld’s 28-partner acquisition of the City arm of his former shop, Boston’s ill-fated Bingham McCutchen.

In contrast to more ostentatious US counterparts, the Texas-bred Akin Gump has since flown under the radar to turn Bingham’s bust into its boom, thanks largely to the trophy restructuring team fronted by Roome. City growth has culminated in a blistering 2018 run as revenue spiked 28% to $123.5m, catapulting it into Legal Business’ Global London top ten firms by revenue. Continue reading “Deal View: Five years on – How Akin Gump’s Bingham acquisition turned bust to boom in the City”

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Big pharma, small partners: the key transactional trends in life sciences

panel

Given that mega mergers coming out of the pharmaceutical and life sciences sector have dominated the corporate agenda for decades, it was fitting that an afternoon session of our inaugural Corporate and M&A Summit focused on transactional trends in this area. Chaired by Laura Anderson, co-chair of Bristows life sciences group, it gathered a collection of in-house experts from big pharma.

Responding to a question posed by Anderson as to whether the spate of significant deals in the sector will continue, Dr Sahar Shepperd, senior legal counsel at Johnson & Johnson, pointed to his company’s recent $30bn acquisition of Actelion as a sign the pipeline for M&A deals in the sector is healthy, along with the recent acquisition of Shire by Takeda. ‘That deal was about accessing Shire’s rare disease portfolio. If you bring in an entire portfolio of assets into the pipeline, you have obviously done the maths and are mindful of the fact that that will generate revenue for the next ten years or so.’ Continue reading “Big pharma, small partners: the key transactional trends in life sciences”

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Auctions – how to play the game

panel

The final session before lunch in our Corporate and M&A Summit looked at the mechanics of auctions and how best to handle the competitive bid process from both the buyer’s and seller’s perspective. The session, moderated by co-chair of Greenberg Traurig’s global corporate practice, Fiona Adams, brought together panellists experienced in the auction process. Joining Adams was colleague Paul Maher, veteran corporate lawyer and vice chair of Greenberg, along with Jessie Gill, head of legal at Stemcor; Chris Hunt, group head of M&A for Rentokil Initial; and Nick Johnston, partner at Perella Weinberg.

Adams kicked off the core of the session by asking the panellists how sellers can successfully handle an auction process, to which Gill stressed the importance of an even-handed approach. Auctions are long processes and there is a need to foster a spirit of compromise: ‘Use up your currency when it matters and do not be a nightmare counterparty.’ Continue reading “Auctions – how to play the game”

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The Takeover Panel – that crucial first week

It was fitting that one of the first morning sessions of our inaugural Corporate and M&A Summit dealt with arguably the trickiest period of any public M&A deal – the first week, and specifically critical initial dealings with the Takeover Panel.

Introducing the topic, moderator Simon Wood from Addleshaw Goddard – who spent two years on secondment with the Takeover Panel – said: ‘A bit like with Charles and Diana’s wedding, it sometimes feels in an M&A transaction that there are three parties, and that third party is the Panel.’ However, he stressed it is not a regulator to fear but a well-respected organisation that encourages consultation and is relatively easy to deal with. Continue reading “The Takeover Panel – that crucial first week”

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Tougher competition – the growing impact of antitrust marquee deals

Claudio Calcagno

A key morning session of our 2019 Corporate and M&A Summit saw Linklaters London competition head Nicole Kar chair a lively debate on competition law and policy and its effect on M&A. The panel of three featured economist Dr Claudio Calcagno, a vice president at Analysis Group and an expert in the competition arena, and John Gray, partner at Finsbury and head of its competition practice, who focuses on public affairs aspects of merger control cases, both in the UK and the EU.

Kar introduced the topic: ‘If you ask many general counsel what keeps them awake at night on a big deal, they will say: “Whether we are going to get clearance and at what price.”’ Set against this, she observed that competition policy is undergoing an existential crisis. A number of pressure points are causing this, namely a narrative among competition agencies and policymakers that there has been under-enforcement, particularly in the digital sector, and that competition policy should take account of wider social objectives alongside a defining philosophy that big is bad; and the general sense that major corporates wield too much power. Continue reading “Tougher competition – the growing impact of antitrust marquee deals”

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Nice problems to have – Where now for Stephenson Harwood as veteran chief hands over?

Sharon White

With longstanding chief executive Sharon White bowing out, Stephenson Harwood can look back on a strong ten years. Thomas Alan assesses its record and prospects

‘My understanding is the Stephenson Harwood of 2002 needed a new strategy because it was doing very badly,’ reflects corporate head Andrew Edge, looking back on the City thoroughbred’s much-publicised problems. ‘It was losing people and the finances were extremely precarious.’ Continue reading “Nice problems to have – Where now for Stephenson Harwood as veteran chief hands over?”

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Case study: Ince

Nick Goldstone

What a difference a year makes. After an initial public offering, a series of acquisitions – including City institution Ince & Co in October 2018 – and a share price drop earlier this year, Ince Group plc, which previously operated as Gordon Dadds, moves up 23 places in the Legal Business 100 2018/19 following a 69% boost in revenue from £31.2m to £52.6m.

The listed firm added £21.4m to its top line through five acquisitions in 2017 and 2018. The group reported a 73% profit increase from £8.8m to £15.2m, while earnings per share surged by 79% and dividend per share increased by 50%. However, the group reported a £14.3m non-recurring acquisition cost and a debt reduction of £5.5m, bringing the actual figure down to £2.9m. Continue reading “Case study: Ince”