ABC – the brutally simple world of a private equity lawyer

As diversifying private equity houses continue to drive transactional activity in Europe, the battle to build high-end buyout teams intensifies. Who has made the right bets?

The philosophy of Richard Matthew Youle is simple: ‘If you’re moving firms then you’ve got to back yourself that you’ve got the charisma to bring in the clients and have chosen the right firm with a strong enough platform to service them. Then you better deliver the deal, because if you fuck it up, you’re toast.’

The plain-speaking private equity man has certainly lived up to that mantra. His current role as co-head of private equity at White & Case comes after high-profile stints at Linklaters and SJ Berwin. Youle joined the US-based law firm two years ago along with his old friend and frequent colleague Ian Bagshaw in a significant reverse to the Magic Circle firm’s ambitions in the buyout space.

The pair are, of course, among a large group of City private equity advisers to move in the past three years, with go-to lawyers at Clifford Chance (CC), King & Wood Mallesons (KWM) and Ashurst making high-profile transfers, primarily to US firms.

When the credit crunch gripped the market in 2007, cutting off the cheap debt that was fuelling the rise of private equity over the preceding decade, many thought the obsession of major law firms for the sector would fade. In reality, sponsors quickly rebounded, as ultra-low interest rates, a globalising funds sector and a widening menu of debt options rebooted the market.

For the legal industry, this competition has been driven more than anything by the enthusiasm of US law firms, attracted by the increasing European activity of their key clients and the portability of the practice area. Lawyers usually mirror clients so private equity lawyers remain the buccaneers of City law. In comparison to the ever-more pasteurised plc lawyers, hard-nosed buyout lawyers still sound like they are auditioning for Glengarry Glen Ross (researching this piece, no-one actually says ‘coffee’s for closers’ or ‘third prize is you’re fired’, but it’s a close thing).

Simpson Thacher & Bartlett, generally viewed as Wall Street’s top buyout shop thanks to its status as house counsel for The Blackstone Group and KKR & Co, made several key City recruits, with CC veteran Adam Signy joining in 2009 and CC’s highly-rated funds head Jason Glover in 2010.

Other firms making high-profile hires more recently include Latham & Watkins; White & Case; Weil, Gotshal & Manges; Kirkland & Ellis; Gibson, Dunn & Crutcher; Fried, Frank, Harris, Shriver & Jacobson; and Proskauer Rose. These acquisitions have been backed by record-setting remuneration packages, even against the backdrop of the City’s humming lateral hire market. Packages on offer for top practitioners have gone as high as $8m a year; $4m deals barely turn heads these days.

Even Freshfields Bruckhaus Deringer broke its lockstep in June to bring in high-yield partner Ward McKimm from Kirkland, which itself committed $8m a year to lure Stephen Lucas from Weil Gotshal in May last year. Rising activity levels have just about justified the mega-salaries.

Co-publishing feature
Fine wine and classic cars don’t necessarily make vintage investments
Chris Cole, Towry

Also significant has been the dramatic change in the financing of buyouts, as sponsors have turned to bonds after traditional bank lenders retrenched or tapped US investors via products like Term Loan B.

The market has also been reshaped by the continued evolution of leading buyout houses into shadow banks as the regulated banking sector contracts, with names like Blackstone, KKR and The Carlyle Group becoming multi-product line capital providers covering areas including real estate investment, special situations and direct lending. Such trends have largely, but not always, entrenched the position of top-tier sponsors, which have benefited from a more discerning fund-raising market, and worked against smaller sponsors. This has played well with American legal advisers that can more easily tap transatlantic financing, further upsetting the pecking order of the City market and driving more opportunities for the ambitious law firms.

Other features of the market, such as longer hold times and the vogue for co-investments, have underpinned the evolution of private equity houses from lean deal machines to a broader kind of institution. A widening array of alternative debt providers – some of them divisions of the private equity houses – has further accentuated the shift to a market defined by an ecosystem of funds and sponsors rather than banks.

Last year saw the number of UK private equity deals climb to 288, worth a combined £23.79bn, according to Mergermarket. With UK deal value up 50% last year and 2015 already close to surpassing that figure at the end of September, there are plenty of fees for the right teams.

Linklaters partner Alex Woodward observes: ‘Many houses have become alternative asset managers with different pools of capital to deploy for different strategies. To see them as old-school private equity houses is to miss the way they think about themselves.’

Man Utd after Giggs

There is no doubt about the biggest change to private equity’s legal hierarchy since the banking crisis recast the market. CC has seen its once-unchallenged dominance – built on the pioneering work of Clifford Turner – severely challenged in both corporate and funds work (by a similar token, the original brand firm for funds, SJ Berwin, has seen its duopoly with CC heavily eroded since US law firms started moving into that market with Kirkland’s 2007 hire of a three-partner team led by Mark Mifsud).

Even for a team with CC’s famed depth, the loss of brand names is striking. Aside from Glover and Signy, a four-partner funds team led by Ed Gander quit in 2011 for Weil Gotshal. The private equity team also saw the loss of two of the most respected older guard as James Baird retired in 2011 and Matthew Layton – viewed by many as the best City buyout counsel of his generation – moved into management in 2013 to become CC’s managing partner.

In the last three years, Latham has hired five notable practitioners from CC: global head of private equity David Walker, City partners Kem Ihenacho and Tom Evans, and earlier this year the German duo Burc Hesse and Oliver Felsenstein, the latter a high-profile practitioner drafted in as practice co-head by CC after Walker’s departure.

One ex-CC partner voices common sentiments: ‘We were the Manchester United of the 1990s. Jason Glover, Matthew Layton, James Baird, David Pearson, David Walker, Simon Tinkler and Adam Signy were our Beckham, Giggs, Scholes and Van Nistelrooy. Then the CC team imploded, fragmented across the market and other teams got stronger.’

The Latham departures have made an impact on two of CC’s client relationships – Carlyle and Hellman & Friedman – sending millions of pounds in legal fees to Latham. The earlier transfer of the ultra-high-billing Glover to Simpson Thacher, launching the US firm’s funds practice in the City, also saw CC clients such as EQT Holdings, BC Partners and Charterhouse Capital Partners shift work.

While colourful rhetoric about CC’s fall from grace has to be taken with a very large pinch of salt – the clubbable and gossipy City private equity community has always been prone to back-biting and exaggeration – the critique extends beyond the more excitable figures in the private equity circle.

One general counsel (GC) comments: ‘When you lose people, you get worse, not better. Their biggest loss was Layton. It may be better for them as a firm, but for the private equity practice it’s a huge blow. Matthew and Adam were the best in the City. Layton was sensational.’

Leadership of the team is often cited as an issue. While former practice leader David Walker was viewed as a polished all-rounder, current head Jonny Myers does not garner the same following.

Myers – who says that CC’s team is currently 22% ahead of last year and on course for a record performance – comments: ‘We do seem to have been a hunting ground for a number of firms. You never want to lose good people. Money is a very attractive reason for a number of people, but each person will have an individual reason [for leaving].’

Myers notes that many of the US firms that have been expensively recruiting private equity partners have also seen partners depart, though arguably the traditional market leader should be able to retain high performers.

While Myers insists that CC is still ‘number one’ for private equity, last month another notable practitioner, Caroline Sherrell, became the latest to depart Canary Wharf by joining White & Case.

Myers responds: ‘Look, we lost five partners to Latham and they’ve been on the phone week in, week out, for the last three years looking to recruit our associates. They’ve only managed to hire two associates from a very deep bench. That tells you something about the quality of the practice. We’ve got stars. There’s David Pearson, there’s Amy Mahon, there’s Simon Tinkler, there’s Nigel Wellings, there’s Nick Hughes, there’s Thijs Alexander and there’s Roderick McGillivray.’

The more thoughtful critics of CC concede that the firm retains a strong brand and wide client base. The firm – which earlier this year advised New Look and owners Apax Partners and Permira on its £1.9bn sale to South African investment house Brait – also by consensus has a strong associate base, a well-regarded performer in Spencer Baylin and a solid track record at cultivating sovereign wealth funds and infra-related work.

Claims that CC has lost considerable ground in a market it helped to invent have been underscored by the steady track of its closest peer, Freshfields Bruckhaus Deringer, which has proved resilient to lateral exits.

A common view among peers and clients is that Freshfields has overtaken CC as the top City player in high-end private equity. This reflects a consistent and sustained push in the sector since the firm recruited Chris Bown from Baker & McKenzie in 1998 to lead its practice. Much of that success stems from Freshfields frequently putting strong corporate lawyers on buyout work and managing to avoid the team-within-a-team dynamic that often plagues PE practices within large institutional law firms.

Freshfields also this summer invested in the sector by breaking its lockstep to bring in Ward McKimm from Kirkland to fulfil global financial services group co-head David Higgins’ goal of securing a big-name high-yield partner (on a deal reputedly worth as much as $6m a year).

Higgins says: ‘We have the most stable team in the City and the firm has got behind the business. The partnership understands what we’re trying to achieve. You’ve still got to convince people of your decisions, but everyone already knows what we’re trying to do. It would be hard for another Magic Circle firm to pull off a big lateral, but I can say, “Look at the success we’ve had over the last ten years,” and prove the rationale.’

The lack of movement in and out of Freshfields’ private equity team has helped the Magic Circle firm to break a number of institutional relationships, with the firm building its relationship up through the 2000s with CVC Capital Partners, after a CC conflict, which led to a string of sizeable deals. Cinven was an early and loyal client.

Bown has since left for CVC, but Freshfields remains its go-to law firm, with Tim Wilmot inheriting the relationship and signing off on its acquisition for Sky’s gaming platform Sky Bet for around £700m last December. Meanwhile, Higgins and the much-touted Adrian Maguire are handling the Cinven relationship.

Freshfields has continued to expand, securing deals from leading US house Blackstone. That opportunity opened up with Blackstone’s creation in 2012 of a Tactical Opportunities group to invest in financial services firms and loan books.

Geoffrey Bailhache, European GC at Blackstone, says: ‘Tac Ops has been the fastest growing of our businesses and we’ve asked Freshfields to help us with a lot of things. Simpson Thacher is still very much our go-to firm and I don’t see anything that changes that, but the businesses Tac Ops has been looking to invest in, whether that’s because they are heavily regulated or in insurance, require regulatory work.’

With private equity houses leaning heavily on co-investment opportunities to pull off high-value deals in the financial services sector, Freshfields’ creation of a financial investor group in 2011 to bring alternative capital providers, sovereign wealth funds and private equity lawyers into one group was well timed. Freshfields has handled three financial services deals for Blackstone’s Tac Ops group in the last two years, advising on the purchase of a 64% stake in pensions group Rothesay Life in a co-invest with Singapore’s sovereign wealth fund GIC and life insurer Massachusetts Mutual Life Insurance Company, a £317m deal to acquire wealth management business Lombard and a £180m acquisition of buy-to-let mortgage firm Kensington with Texan house TPG Capital.

Blackstone also selected the firm for the dual-track exit of Center Parcs, which was eventually sold for £2.4bn. Freshfields now accounts for almost 20% of Blackstone’s European legal spend, understood to be more than £30m annually, after having bitten into Simpson’s share of the work. Higgins concludes: ‘The financial investor group has been vital for what we do as we’ve seen the market completely converge.’

The hire of McKimm addresses the most obvious weakness in Freshfields’ sales pitch, a lack of US financing coverage, with the high-yield heavyweight arriving to work alongside US securities and finance partner Denise Ryan, a former Cahill Gordon & Reindel lawyer who covers Term Loan B financing.

Higgins brushes off claims that Freshfields – a rare lateral hirer in London, which famously misfired with its recruitment of White & Case finance duo Maurice Allen and Mike Goetz in 2008 – is struggling to integrate McKimm in the practice, arguing the attraction of the firm was its team approach. The firm’s practice did, however, suffer a reverse this summer with the departure of well-regarded young finance partner Michael Steele for Kirkland.

With Freshfields generally cited as having achieved the best balance of individual star power and institutional commitment, Higgins says the firm is now intent on improving its coverage in the US and France.

Dedication

Aside from traditional sector-leaders, views vary on the relative strengths of other firms, with around 15 firms fielding sizeable teams in the City in what has become a far more competitive private equity market. The serious names that spring to mind for most include Linklaters and Travers Smith on the UK side, and Weil Gotshal, Latham, Simpson Thacher, White & Case and Kirkland of the US advisers.

There is considerable variation between the strategies of that group, with Simpson and Weil Gotshal the most historically-committed of the US camp.

While the conservative Simpson is primarily focused on handling work for core clients such as KKR and Blackstone, the firm’s City business in Signy and Glover boasts two of the top performers in the market, and the practice has extended beyond annuity clients. Nonetheless, Blackstone remains a benchmark client, with Simpson handling the lion’s share of its lucrative real estate business. (Blackstone’s chief operating officer for real estate in Europe, Farhad Karim, is a former Simpson partner, as is Blackstone chief legal officer John Finley and KKR GC David Sorkin.)

The expansion of Simpson’s UK business is most striking on the funds side, where the firm has positioned itself at the top of the market to benefit from the winner-takes-all shift in fundraising that has channelled capital towards a smaller group of brand sponsors, in part a reaction to more due diligence and regulation, and the vogue for tapping US investors. Says Glover: ‘The reality is that the fundraising world has become binary. Gone are the days when you have an okay fundraising – you’ll either have a blowout and everyone wants it or you’ll struggle to get it raised.’ Simpson Thacher now has over 20 London lawyers covering fund work for a string of clients, including CVC, Apax, EQT, BC Partners, Cinven and Charterhouse.

Given Simpson Thacher’s profitability, brand and associate base there is little doubt it could easily widen its business in London if desired, but the firm remains wedded to the classic Wall Street model of strongly focusing on premium work.

Weil Gotshal has gone for more width in its practice, having largely built out its business on the back of the eight-lawyer team hired from Lovells in 2006 under the lead of Marco Compagnoni. The famously driven Compagnoni is the go-to lawyer for Advent International and Providence Equity Partners, and has remained one of the City’s most productive front-line deal lawyers over the last ten years (observes one client: ‘We don’t go to Marco because he takes us to the opera; we go to him because he’s one of the market-leaders.’).

Compagnoni underlined his continued pull in the sector last year after advising a four-firm consortium made up of JPMorgan Chase spin-off CCMP Capital Advisors, Providence, Thomas H Lee Partners and Quadrangle Group on their €7.2bn sale of Spain’s largest cable broadband provider Ono to Vodafone.

Weil Gotshal, of course, has a long US pedigree in private equity – chairman Barry Wolf advises clients like Lindsay Goldberg, Perella Weinberg Partners and American Securities – and around 30% of its revenues come from private equity clients.

In Europe, the firm has established private equity dealmakers in London with Mike Francies and Jonathan Wood, and in Paris with former Linklaters partner David Aknin. One GC at a US private equity house calls Aknin ‘the best lawyer in France by a country mile’ and Compagnoni, a hard-to-impress operator, adds that Aknin is ‘a big gun who’ll just pick the client he thinks will win the deal and go and work for them’.

The firm has considerably widened its deal finance practice in recent years and bulked out its funds practice with the four-partner CC team. The former move is considered more successful than the latter, with partners Nick Benson and Jonathan Kandel since quitting the funds team for Latham and Kirkland respectively.

Nevertheless, Weil Gotshal has faced its challenges in recent years, in part due to its US-focused restructuring and lay-offs in 2013, and claims of internal fiefdoms. Despite success in building its finance capability, the departure of Lucas for Kirkland last year was viewed as a set-back, while critics often cite succession issues (Francies turns 58 this month), internal discord and a reliance on Advent as challenges.

Compagnoni responds: ‘The next step for us is expanding our client relationships into the other Weil offices. The growth of multi-line private equity houses has given firms more touch points, but it is harder to cross-sell than people think.’

Another long-term player in private equity, Travers Smith has clearly proved one of the most resilient of the City firms, if anything strengthening its position in the quality mid-market in recent years, even as some peers such as Ashurst and King & Wood Mallesons have lost ground, while Macfarlanes has pivoted towards broader corporate work.

Travers has acted for Bridgepoint since 1999, and 3i Group, Lyceum Capital and Equistone Partners Europe are all longstanding clients. Despite facing competition from Linklaters, CC and Shearman & Sterling over the years on Bridgepoint’s legal roster, Travers has retained a healthy share of its legal work, including the purchase of restaurant chains ASK Italian and Zizzi for £250m in February. Charles Barter, who Bridgepoint recruited to become its first GC in 2008, says: ‘Some firms have a personality cult and rely on one or two individuals. Travers are extremely good at creating a genuine team culture.’

Set against that, the firm did last year see the loss of former head of private equity Phil Sanderson to Ropes & Gray, while the Americanisation of the funding market provides some long-term challenges. Likewise, even some inside the firm concede that it needs to be careful with its market positioning and conflict policy – notably being drawn into too many roles acting for management in buyouts.

But under the energetic head Paul Dolman and senior partner Chris Hale, the firm retains an impressive bench, with Helen Croke, Edmund Reed and Ian Shawyer all prolific in the mid-market.

Dolman sums up the pitch: ‘We attract people who want to dedicate their careers to working in private equity, so people don’t just end up here. Once they’re here, we dedicate hours, days and months turning them into our partners of the future. It is no coincidence that over half the PE [private equity] team’s partners trained at the firm. We’re not a giant firm so there’s closer interaction between partners and associates, and that creates a deep bench.’

New money

Of the outfits investing in the sector, there is little doubt that Latham is now regarded as the US firm with the strongest prospects of building a genuinely market-leading practice.

Judged by many to have an unparalleled debt platform, Latham has also made substantial investments in the last three years to reposition what was historically a finance shop into a broader sponsor practice.

Unlike some rivals, such as Simpson, the firm has the scale and willingness to make large commitments in Europe to directly compete with leading City rivals. The only serious question facing the team is whether its commitment to Carlyle – for years one of its biggest clients in the US – will hamper its European ambitions. Nevertheless, Walker has handled a number of deals at the firm, including last month advising Hellman & Friedman on its purchase of Bain Capital’s stake in home security service Securitas Direct, which the private equity houses jointly acquired in 2011. It is Hellman’s largest deal since founding in 1987. While Carlyle has been less active than usual in Europe, it has money at its disposal, with a €3.75bn fund raised by its European arm in July.

Comments one rival: ‘Latham have the best banking practice in the City – high yield, Term Loan B and lev fin. They’ve got the perfect mix. But have they got the ambition and hunger to build out a top-tier sponsor practice? The deal volume isn’t there. Is David Walker there to build a legacy or make some money and work for Carlyle?’

Walker is clear on the aspiration: ‘We would place ourselves as one of the top two firms in Europe, and that’s us and Freshfields. We’re working on most of the biggest deals in the market. It’s not just about me; it’s about the whole package. Other firms have hired good operators but don’t have the US private equity and finance base that we have. We’re creating a private equity team within the firm that has lev fin, high yield, funds, M&A, real estate, employment and tax. Latham is looking to build for the future.’

While Walker’s team has so far concentrated on a small group of clients, there are signs that Latham is bulking out in London, with first-time instructions in the City from Blackstone, Ares Management, Chicago-based GTCR, Ontario Teachers’ Pension Plan and GIC. Ihenacho is also seen as an astute hire in positioning Latham for deals in the expanding African market, an approach which plays to Latham’s prominence in projects, energy and infra.

The advantage of having probably America’s top high-yield practice – and bond guru Richard Trobman in London – speaks for itself, given the sharp shift towards high-yield financing in European deals. Ihenacho comments: ‘For any deal where the debt financing is over €200m, high yield is relevant. That plays to our strengths as the decision to finance a deal is sometimes left late in the process, so you need to be able to run multiple financings and we can.’

The European practice is well complemented by a Paris team, including M&A partners Olivier du Mottay and Thomas Forschbach. One rival concludes: ‘Latham are sensitive to upsetting Carlyle at the moment, but once they’ve got over that, they have the ability to be a deals machine.’

In contrast, as ever, Kirkland continues to divide opinion, with critics arguing that its individualistic culture and a run of recent departures has slowed its march and pushed it into the mid-market. Laughs one peer at a US-based law firm: ‘I had one of their clients on the phone the other day screaming about how they’d billed $10m on a $1.5bn deal. I’d have struggled to bill $2m.’ Another bluntly concludes: ‘It’s a dysfunctional unit.’

Finance partner Neel Sachdev says that Kirkland is well into a major strategic push after chair Jeffrey Hammes concluded its City practice was too narrow for its ambitions. This investment has seen a changing of the guard with the likes of corporate veteran Graham White and finance partner Stephen Gillespie – respectively recruited from the partnerships of Linklaters and Allen & Overy before the banking crisis – recently departing for Fried Frank and Gibson Dunn. Part of the well-regarded funds team, led by Mark Mifsud, also left for Fried Frank; and there is also the departure of McKimm and the retirement of key Bain contact Sam Pakbaz.

As such there is a lot riding on the recent recruits, including the well-regarded Linklaters corporate duo Roger Johnson and Matthew Elliott. The firm also saw the return of one of its biggest billers with Jim Learner re-joining the London office in January after two years at US sponsor HGGC.

Given that the recruitment of Lucas was not only a major investment but was likely to lead to a substantial shake-up of senior lawyers, a lot is riding on Lucas as a force to galvanise and build out the practice. Lucas – an intense and energetic presence even by the standards of leverage finance lawyers – is cited by many as instrumental in building out the finance and funds practice at Weil Gotshal.

Sachdev says that Lucas ‘has been very systematic at building the practice with the aim of achieving cradle-to-grave instructions’.

He adds: ‘No fund has a problem using us in the US and we need to do that here too. We have a concentration risk as it stands, so we want to do work for more standalone European funds, and be hedged in more asset classes and do more mid-market work.’

Sachdev admits that ‘one of the biggest issues we have is our outside perception and how that’s been filtered’, but argues Kirkland has ‘a clearer view of what we’re doing than almost any other firm’.

Lucas himself divides opinion like no other individual in the European leverage finance sector, with peers splitting into staunch admirers and the distinctly unimpressed. ‘Clients can’t believe what he’s getting paid,’ notes one rival. ‘The fascination with him is half curiosity and half bemusement at the salary he gets. No-one would give a toss if it weren’t for the $8m.’ Given that Lucas’ CV includes partnerships at no less than four major firms, questions have also been raised over whether he will remain at Kirkland for the long haul. In comparison, the flamboyant Sachdev – whose colleagues printed t-shirts and mugs with his face emblazoned after several newspapers earlier this year ran stories declaring him the ‘sexiest solicitor in the City’ – is universally praised for his entrepreneurial ethos and sheer work rate.

If Kirkland attracts praise and back-biting in equal measures, the dramatic impact in private equity made by White & Case came out of the blue. While White & Case previously had functional coverage in the area and a reputation for handling emerging economy work, no-one was citing the firm as a serious player until the arrival of Bagshaw and Youle. The pair had initially worked together in the 1990s at Eversheds, when Youle was Bagshaw’s trainee. A decade later while at CC, Bagshaw was rebuffed in a bid to recruit Youle from Linklaters, which resulted in Bagshaw instead jumping ship the other way.

Though Linklaters has expanded in private equity since first making a play in the sector way back in 2001 with the hire of then SJ Berwin partner Graham White, the practice has been plagued by tensions with Linklaters’ finance practice, and claims that its mid-market profile didn’t fit Linklaters’ institutional and public M&A pedigree. A dispute over the call by Bagshaw and Youle for Linklaters to provide dedicated finance to service the team was the final straw for both sides.

But while the pair have a reputation as driven deal-doers in the upper mid-market, few would have predicted the rapid expansion of the team at White & Case. An early transfer was HgCapital, taking more than £2m in billings a year. The firm has the fastest-growing private equity practice in the City – with more than 40 lawyers arriving in the past two years.

London hires include CC partner Caroline Sherrell, who focuses on infra deals, and Debevoise & Plimpton’s Kenneth Barry, who was promoted to partner on arrival. The firm also added Peggy Wang from Linklaters in Hong Kong. Two years after arriving, the private equity group in London is already pulling in close to the £40m that the Linklaters team had been generating under their leadership.

Bagshaw comments: ‘Our clients supported us moving because they wanted us to be at the centre of a firm. Our practice is very mid-market with some big-ticket clients. We always felt mid-market is the heart of private equity and, given the volume of work our clients were sending us, they wanted to use a firm where the firm was about them. White & Case needed us and we needed them so it was a win-win. It has a global footprint, US financing and a desire to grow. We wanted a firm that would let us blow the doors off and build a dominant player.’

While some find Youle and Bagshaw’s patented boys-from-the-north approach brash, Bagshaw says the pair are intent on building a ‘legacy’ at White & Case.

In the age of the bland transactional lawyer, such an approach still stands out, with Hg, Mid Europa Partners, Global Infrastructure Partners, Triton Partners, Novator Partners and Arle all following them with instructions for White & Case. Andrew Jessop, GC at Hg, comments: ‘We hadn’t used White & Case at all before Rich moved across, but he and Ian have really helped that practice to change gears. Rich knows our business inside out so he’s very strong in knowing the hot points for Hg. That’s great in being commercial and delivering tailored advice to us. A lot of law firms give you a good service, but how relevant are you to their business and how much does it matter to you in the 11th hour? We’re very relevant to White & Case’s PE practice and there’s been times when Rich has been the differentiator for us.’

Bagshaw concludes: ‘We want to build a standout business. It feels like we are on a different trajectory to everyone else as I’m not here to service someone else’s clients, I’ve got my own clients and I’ve got clients I want to originate going forward. Rich and I are a twin-engine machine focused on building a business, while most other firms rely on one partner for leadership and origination. We feel this makes us different in the London market.’

The outsiders

Given the steady loss of practitioners and well-publicised cultural problems that have dogged Linklaters’ efforts to build a private equity practice, it is perhaps surprising that on closer inspection its practice appears to have held up rather better than expected and is still viewed as serious competition by many rivals.

Aside from Youle and Bagshaw, the recent loss of Elliott and Johnson to Kirkland has proved problematic and comes as a blow to the firm’s rebuilding efforts. (Elliott in particular is cited by some as a case of Linklaters mishandling one of its more productive young deal partners. Elliott was initially promoted in real estate, rather than corporate, which involved a discount on his equity share.)

Nonetheless, there is a promising group of young partners that remains at Linklaters, with three-year partner Alex Woodward now co-head of private equity alongside banking head Gideon Moore. Woodward gains strong reviews among peers and clients, often cited as one of the most promising young names in the sector.

Jessop says: ‘If Alex had gone across with Rich to White & Case, it might have been a more difficult decision for us [to maintain the relationship], but Alex is very impressive – a real rising star.’ While Linklaters has secured Brait as a new client through its relationship with South African ally Webber Wentzel, there is obviously room to build the practice.

Stuart Bedford, London head of corporate, argues that Linklaters is committed to building a fully integrated practice at Silk Street. ‘For us, the key is making sure that the next generation of partners are core Linklaters people. We have a core group of partners, and partner prospects, with the potential of creating a practice to envy.’

Views are more mixed on Allen & Overy (A&O), which in 2013 recruited Stephen Lloyd, one of Ashurst’s leading deal partners. The firm has several other notable performers in partners Gordon Milne and Karan Dinamani, who joined from Ashurst early last year.

But given the strength of A&O’s finance practice, many see the team as focused more on the City firm’s general transactional practice than a private equity play. For some A&O will always be hamstrung by its background as a bank shop in the age of sponsor and fund-driven firms.

Current A&O clients include OMERS Private Equity, Lone Star Funds and Exponent, with its sale of vegetarian food group Quorn by Exponent for £550m the latest in a string of deals. Deal momentum has accelerated in 2015, with A&O’s private equity team handling OMERS’ $1.7bn purchase of environmental consultancy ERM Group and Lone Star on its €520m acquisition of carpet maker Balta Group in June alone.

Lloyd comments: ‘The team has grown a lot over the past couple of years. We’ve closed 15 deals worth over £500m in the last 12 months and there are not many people playing at that level. Freshfields are pleased as it validates the global law firm model.’

If even Linklaters and A&O can struggle to establish themselves in private equity, it underlines the competitive pressure facing a broad array of firms, such as KWM, Ashurst, Hogan Lovells, DLA Piper, Reed Smith and Proskauer Rose, all striving to assert themselves (though Proskauer has made an impact in funds with the 2011 hire of Nigel van Zyl from SJ Berwin, judged by many to be, along with Glover, the strongest funds man in the City). Even an M&A brand as strong as Skadden, Arps, Slate, Meagher & Flom – whose prolonged attempts to recruit a replacement for Allan Murray-Jones have become an industry joke in buyout circles – can find the going hard.

Nevertheless, in an age in which major corporates and banks are creating increasingly bureaucratic panels, the lure of the lucrative, relationship-driven private equity sector is obvious, doubly so as the sponsors mature into broader financial institutions.

Observes Bagshaw: ‘It’s like being in the English Premiership; the best teams tend to have rich owners now.’

A growing number of firms share the assertion that private equity is a sound investment but not all of them will see a strong return. Bagshaw concludes: ‘If you’ve got the wrong clients and the right people then it’s slow growth. If you’ve got the wrong people, it’s slow-to-no growth. If you’ve got the right people and the right clients then it can be explosive growth. It’s game on. The relationships are changing.’ LB

tom.moore@legalease.co.uk, alex.novarese@legalease.co.uk