A recession-weary Ashurst has finalised a long-planned but high-stakes global merger – only to eject the leader synonymous with its brand and strategy. Is Ashurst heading for peace-time prosperity or factional warfare?
The former Ashurst partner sits back in his chair and reads the text message. Having asked a friend about the mood at Appold Street in the wake of Ashurst’s expected vote for integration with its Australian ally and unexpected vote that unseated its high-profile head Charlie Geffen, the text response is succinct: ‘It’s a mess!’ The ex-partner smiles. ‘Well, it’s hardly surprising.’
The message came from one veteran Ashurst partner adjusting to an uncharacteristic period of uncertainty for the storied City institution, which has been a prominent player in London’s commercial legal community throughout its 191-year history. Much of that upheaval may ultimately prove to be for the good. Yet it remains jarring for a firm that spent, in the words of one partner, ‘20 years waiting to be taken over by a US law firm’. Ashurst and strategic clarity are only recent bedfellows. As yet the pair are still getting used to each other’s company.
Such upheaval was tempered, of course, by the staged process in which its merger with big six Australian practice Blake Dawson was achieved. The deal was agreed back in September 2011 as a formal alliance under a single brand with a set path to this autumn’s successful vote for an all-in merger.
While the firm is understandably eager to talk up the high-stakes union, which it hopes will help it secure a position as a credible global player – the deal has provoked mixed reactions from Ashurst’s partnership. There is a broad understanding of what the union offers – primarily a balance sheet sufficient to back the heavy investment Ashurst requires globally and critical mass in the Asia-Pacific region. There is considerable support. But there are also the doubts, disappointments and resentments that have built up since the banking crisis recast the global economy and Ashurst’s partnership was subjected to intense scrutiny and bracingly robust – some argue plain ruthless – management.
Whether a well-executed integration effort and a genuine cultural fit between the two firms will be enough to turn guarded support for the union into galvanised enthusiasm is yet to be determined.
But the election in October for the leadership team to run the merged firm – which saw the relatively low-profile litigation partner Ben Tidswell defeat Geffen to become the unified chair – highlighted divisions within the firm. Such divisions arguably extend to the tie-up but more clearly focus on discontent about how the London firm has been led through the punishing post-Lehman years.
And neither is it as simple as a hard-nosed leader being ejected by a resentful partnership. As one of Ashurst’s leading corporate partners in one of the City’s most corporate-centric firms, Geffen enjoyed strong support from ‘Charlie’s boys’, who are now coming to terms with their standard-bearer being deposed. The firm has already faced several notable departures since the vote, but more ominously some of its remaining transactional partners still struggle to conceal their unease at the result.
The official message is that Geffen, while doing what was necessary during tough times, had accumulated too much baggage. As Tidswell comments: ‘Charlie became senior partner just as the wheels came off the global economy. It was a tough job and he did it really well. We did what we had to do and we did it the best we could.’
But inevitably, the understated Tidswell has to do more than pay tribute to his predecessor. He has to concentrate minds on what has been achieved over the last five years and the opportunity at hand. ‘There is a mood of confidence now. [This merger] is ambitious. This is a push back against the idea that law firms are conservative.’
‘The world had changed’
Australia has for years remained unusual in the global economy. As a G20 member in a strategically well-placed country, the jurisdiction has long gained plaudits for the technical quality, commercial nous and can-do attitude of its lawyers, not to mention the slick management of its major law firms.
Yet Australia’s leading six national players have historically struggled to break out into the wider region, despite several well-publicised merger attempts by Mallesons Stephen Jaques.
Blake Dawson was by no means the strongest brand in Australia’s legal community, having neither the prestige of a Mallesons or an Allens Arthur Robinson nor the size and ambition of a Freehills. But in some regards it was ahead of the pack. While Norton Rose had sent ripples through the market in 2009 with the surprise takeover of Deacons Australia, which proved successful despite being initially treated with bemusement, by 2010 Blake Dawson had taken a hard look in the mirror and decided it needed to make some difficult decisions.
The 828-lawyer firm had already been taking steps to strip back its partnership to raise profitability and implemented a rigorous cost-cutting programme, including redundancies in 2009. In 2010 it introduced fixed-share partners. According to one Ashurst partner, Blake Dawson’s equity partnership had been trimmed from around 160 three years ago to 123 currently.
As such profitability rose considerably during its 2009/10 and 2010/11 financial years (the firm reported to the end of June). Despite the turmoil in the global economy, there was a 25% hike in profitability.
A partner conference in August 2010 saw the firm put forward a bold agenda to go global and that meant seeking an international suitor. Bravely – and this attitude was to win it admiration from Ashurst – the firm had determined that ground would have to be given early. The likelihood was that the name would go.
As one Ashurst partner puts it: ‘Basically, they’d decided the world had changed.’ Mary Padbury, Ashurst vice chair, who was then Blake Dawson’s chair, bears this out, recalling the firm’s expectation that her firm would take on the name of a foreign – most likely English – partner: ‘We liked the crispness and certainty [of the name change]. The market was consolidating and we wanted to get ahead of it.’
Beyond a pragmatic streak, Blake Dawson had other qualities to offer. The firm regularly acts for major mining giants like BHP Billiton and Rio Tinto, local oil and gas companies Santos and Woodside Petroleum and Australia’s four major banks – Commonwealth Bank of Australia, Westpac Banking Corporation, National Australia Bank (NAB) and Australia and New Zealand Banking Group (ANZ).
Like most leading Australian firms – the challenge of a competitive domestic market operating across multi-office networks, has bred financial rigour and well-honed governance. The chances were that in any deal Blake Dawson would be contributing as much as it gained in terms of management nous.
As a proud brand that traces its origins back to 1841, the firm is generally regarded as strongest in Melbourne and Sydney, where its two oldest legacy practices trace their roots. It was largely formed in its current incarnation in 1988 with a three-way merger that forged a national practice under the name Blake Dawson Waldron.
With six national offices in Melbourne, Brisbane, Perth, Sydney, Canberra and Adelaide, the firm had established a strong position in the domestic market. Blake Dawson was also the first Australian firm to secure a licence in Japan, launching in Tokyo in April 2010, adding to its offices in Shanghai, Singapore, Port Moresby and its associated office in Jakarta. But with around 75 lawyers based outside its homeland, the firm lacked a substantive presence in Asia.
Aside from the challenges of going international that afflict all Australian law firms, opinions in the national market remain divided over the 192-partner firm’s relative standing against its peers.
One partner at King & Wood Mallesons (KWM) characterises Blake Dawson as ‘a firm that used to be a brilliant market leader, and has kind of lost its way’. Rivals sometimes argue that the firm has suffered more since the banking crisis of 2008 than its peers, though it remains a very well respected practice that was ‘regarded top-tier and had impressive clients’.
in 2012 gave Blake Dawson a total of 27 recommendations, including eight tier one rankings. This compares to 37 at Allens, which had a total of 16 top-tier citations. Blake Dawson’s 16 rankings in Australia compares well to KWM’s 15 domestic rankings, though the larger firm has 12 top-tier recommendations in Australia against six at Blake Dawson.
Austerity Ashurst
If Blake Dawson was facing up to hard decisions, Ashurst was going through a similar process, if anything under more difficult circumstances.
The firm’s history is well publicised. Formed in 1822, Ashurst Morris Crisp has a proud record in the City, including ‘giving birth’ to Slaughter and May in 1889 when William Slaughter and William May departed to set up on their own.
Yet the firm failed to keep pace with larger rivals during the 1980s and 1990s, a reflection perhaps of its commitment to a classic partnership style of consensus decision-making. In response the firm held three well publicised merger talks between 1998 and 2003, with Clifford Chance, Latham & Watkins and Fried, Frank, Harris, Shriver & Jacobson. The former two would have potentially had a huge impact, but Ashurst was unwilling to submit to a take-over, and arguably unable even to manage the structured debate that would have been required to bring such a decision to a head. The latter talks with Fried Frank were the most drawn out and proved divisive and unpopular before the plug was pulled after a year’s fruitless wrangling, much of it about partner pay, in the spring of 2003.
With former managing partner Justin Spendlove in March 2004 departing for Fried Frank, it was left to his replacement Simon Bromwich and senior partner Geoffrey Green to galvanise the firm. The pair did nudge Ashurst towards faster decision-making, which had to be deployed to deal with a European practice that continued to disappoint.
Markets proved kind at this point. A firm with strength in private equity, deal finance, structured products and a lean but effective property team, was ideally placed to advance through the credit boom. Revenue surged, rising from £201m in 2005 to £323m in 2008. The impact on the bottom line was even more dramatic, with profits per equity partner (PEP) rising from £567,000 in 2005 to £1.04m in 2008.
Despite markets super-charging its performance, Ashurst was moving towards a far more actively managed partnership. Reforms had been ushered into its lockstep in 2007 taking its point range from 20-50 to 25-65, while the scope and use of two discretionary gates had been widened. There was also more scope to move partners on the lockstep. In addition, during 2008 around ten partners were asked to leave the firm.
That year, Ashurst had elected Geffen as its new senior partner in a contest against litigator Ed Sparrow. Arguably the firm’s top corporate partner, Geffen had been the driving force behind the firm’s private equity practice and worked with a string of major clients, including Apax, Cinven and Warburg Pincus.
This clubbable and pragmatic corporate lawyer was a classic Ashurst appointee. But two things were to make his leadership more turbulent than expected. The obvious one was the economy; days before his election in September 2008, Lehman Brothers had collapsed and the banking crisis was at the height of its intensity.
The less obvious reason was that, as polished with clients and personable as Geffen was, at essence, he was a single-minded character more willing to follow his own course without soft-soaping the partnership. Green was no push-over and capable of difficult decisions but he was a political animal; Geffen focused more on what he thought should happen and could shut out dissenting views.
But if Geffen could be unsentimental, he was also progressive and focused on modernising Ashurst, improving its governance and boosting its representation of senior female lawyers.
As the banking crisis sent shockwaves through the City legal market in the first half of 2009, in February Ashurst proceeded with an against-trend move into the US structured finance market with an acquisition of a 12-partner team in New York and Washington DC from McKee Nelson.
It was a troubled and expensive move that proved hugely divisive, in part because the market was savaging the firm. PEP plummeted to £673,000 during 2008/09 while £22m was wiped off the firm’s top line in a year. Revenue would slide further in 2010 to £293m. Ashurst was continuing to trim its partnership ranks, with a further ten being asked to leave during 2009. For a firm that prided itself on having a more collegiate culture than Magic Circle rivals, it was a shock to the system.
A complication was that Ashurst was striving to invest while shaking up its partnership – with sustained partner recruitment conducted throughout this period. This was most visible in Asia, where the firm had transferred Green to spearhead a launch in Hong Kong. Lawyer numbers surged through the downturn, rising from 725 in the boom year of 2007 to 926 at the end of 2009/10.
By 2010 – the team of Geffen and Bromwich was trying to tell a restless partnership that hard decisions had been taken and there was opportunity ahead. It didn’t always convince at a time when a number of the firm’s high-profile banking and corporate partners barely concealed their lack of engagement.
Many felt the firm was failing to punch its weight in its core corporate finance hunting ground. Despite the brave face, Bromwich looked visibly wearied by the job. Geffen remained unflappable, even as two of his protégés, private equity partners Gavin Gordon and David Arnold quit in June 2010 for Kirkland & Ellis.
The departure in September 2010 of highly regarded structured finance head Erica Handling for Barclays Capital also sapped morale. The 2010/11 financial year saw some revival in performance but in many regards Ashurst looked uneasy.
Meet the new boss – Ashurst’s new leader
Ben Tidswell
2013: Chairman, Ashurst
2007-13: Board member, Ashurst LLP
2005-07: Chairman of new partners committee, Ashurst LLP
2000-present: Disputes partner, Ashurst LLP
Recent clients includes: Goldman Sachs, J.P. Morgan, The Royal Bank of Scotland, Crédit Agricole, Cargill, Intel, Telefónica and Virgin Media
Ashurst’s new chairman, Ben Tidswell, has been a partner in the firm’s London dispute resolution team for 13 years. He specialises in commercial litigation, with particular expertise in finance disputes, antitrust litigation and some telecommunications and media dispute work.
Some of his recent work includes advising Cattles in its claim against PwC for negligence over PwC’s audit of Cattles; acting for Virgin Media on its High Court claim against BSkyB relating to abuse of dominance in the pay-TV market; and advising the former non-executive directors of The Royal Bank of Scotland over the regulatory inquiry into the bank’s state bailout.
The message Tidswell took to partners ahead of October’s leadership vote was that he would usher in a more consensual style and clearer framework of governance. He tells Legal Business: ‘I have very strong views on business, contribution, partner behaviour and how to incentivise them. I talked a lot about this when I went around the firm and it was something partners were very interested in. I want a clearer system and one that rewards not just the rainmakers but also takes overall contribution to the firm properly into account.’
German corporate head Reinhard Eyring describes Tidswell as balanced but ready to be outspoken: ‘We were on the board together. Ben is the type of character who will evaluate his opinions before expressing them.’ Despite mixed feelings in London regarding the result of the election, more than two dozen interviews conducted for this article found considerable goodwill towards Tidswell, even among Geffen supporters, with many partners viewing him as a credible successor to his more high-profile predecessor.
That famous lunch
An unexpected solution to the problems facing Ashurst and Blake Dawson first presented itself in a Tokyo bar during the autumn of 2010 amid a discussion by John McClenahan, the current managing partner of Ashurst’s Tokyo office, and Ian Williams, who headed Blake Dawson’s Japanese practice. The two knew each other well and regularly worked on deals together.
Both firms had established a formal relationship of referral work going back to the early 2000s, and had shared informal referrals as far back as the early 1990s, including handling work for joint clients like The Royal Bank of Scotland and Mitsui.
Both firms often worked together on energy and infrastructure projects and the idea of a union between the two was kicked around – reflecting their shared desire to expand in Asia.
The concept quickly percolated around the firms; Ashurst was fast realising its hopes of growing a credible Asia practice alone were unrealistic. By January, Geffen and Blake Dawson’s Padbury had what one partner dubbed ‘that famous lunch’ after Geffen took a detour from a family holiday to meet in Australia. The two discussed a tie-up over a bottle of Tractor Wine and agreed to set up a working team to explore a deal, naming the venture ‘Project Tractor’. Ashurst was the only firm that Blake Dawson held serious discussions with.
It was not an obvious move – Ashurst had remained far more focused on securing a US merger and Geffen has conceded that an Australia merger ‘wasn’t really on the firm’s radar’ at this point. However, Geffen was impressed by Blake Dawson’s clear vision and willingness to take bold decisions and things moved quickly. By March the pair moved into serious merger discussions, appointing working parties to work through issues. Ashurst veterans Green and energy partner Logan Mair conducted due diligence. Public word of the talks first emerged in press reports in June 2011 but in contrast to previous discussions Ashurst was moving quickly.
Not that this was an easy sell. The troubled US structured finance launch had stretched the City firm’s resources and cost senior management considerable support.
One Ashurst partner recalls hearing of the deal: ‘My first thought was it would be interesting to do something in Asia. As talks continued, a full merger became appealing to the board. My first thoughts on this was: “Bloody hell, we’ve never done anything like this before; it won’t succeed.”’
The unusual staged deal proposal that was put to both firms’ partnerships in September 2011 reflected concern about how far Ashurst could push its partners to accept a major deal in a market that City firms had sized up and rejected for over a decade. Instead of an outright merger, the firms would combine operations in Asia, forge a formal alliance and set a time-frame for a vote for full integration. There were two kickers: Blake Dawson would adopt Ashurst’s name when the deal went live in March 2012, a hugely symbolic gesture that helped gain support in London. Secondly, there was a break clause that allowed Ashurst to walk away if an opportunistic US merger appeared during the interim run-up to a full vote.
Ashurst has often tried to make light of the clause but the reason for its existence was simple: without that insurance the firm wasn’t sure it would get the deal through a restless partnership.
It worked. On 23 September both partnerships backed the deal, which was announced three days later. The alliance would launch in March 2012 with a timeframe to consider a full merger in early 2014. The deal would forge a 421-partner practice with combined revenues of £553m, with Blake Dawson at the time contributing around £250m. In Asia, the Australian firm’s 13 partners joined Ashurst’s then 18-partner practice spread across Hong Kong, Singapore and Tokyo.
Despite the familiar problem of lower profitability at Australian firms having blocked previous Anglo-Australian deals, thanks to a commodity-powered boom and Blake Dawson’s restructuring, the firm’s PEP was at the time about 90% of Ashurst’s then £723,000. The message was that the gap would close entirely – a key issue given Ashurst’s stated commitment to raising its profitability to give it the muscle needed to compete on the global stage.
There was a logic to the deal – at the time the first tie-up between a big six Australian practice with a City firm – and Australia’s energy-focused economy and strategic position in Asia had, of course, attracted a stream of firms to enter the market, including Allen & Overy (A&O), Clifford Chance and DLA Piper.
But it still provoked a somewhat bemused response, both at Ashurst’s choice of partner and the Australian firm’s decision to give up its name upfront.
One partner at Clayton Utz comments: ‘I still don’t understand the English firms’ obsession with entering the Australian market. It’s over lawyered and a very small market.’
Roger Davies, a Perth-based Ashurst corporate partner, says: ‘We thought very deeply about the name change. It was a name that had a long history and strong market recognition, but having analysed the pros and cons what was more important was becoming one firm.
‘It hasn’t been hard to adapt to losing the identity of being one of the big six and it wasn’t that hard to put this message out to our partners. Nobody is calling us Blakes anymore, everybody is talking about Ashurst.’
In retrospect, the name move was astute – working as a daring tactical concession. It also spoke to another issue that worked in the deal’s favour. Though the tie-up was in many senses a merger of equals, ultimately the then 229-partner firm was a little more than equal to its Australian suitor – providing a clarity of leadership that is notoriously hard to achieve otherwise.
There was just the small matter of making it all work.
In it together
The two firms set aside considerable resource to promote the union and rebrand in Australia, including posters on airport doors and in airline lounges, television adverts on aeroplanes and billboards in the Melbourne Cricket Ground, spending around £1m.
They also secured some notable joint deals since the combination, including advising the Qantas Group on its first corporate mandate in Asia to launch a 50:50 joint venture with China Eastern Airlines to create the new airline Jetstar Hong Kong.
Other highlight work in the Asia-Pacific region has included acting for Samsung in a huge IP dispute with Apple, the largest patent litigation ever in Australia. The firm has also handled a stream of major restructuring mandates in Australia, including MF Global and Banksia Financial Group. In energy, the firm has worked on a run of major projects, including oil and gas company INPEX’s $30bn Ichthys Project and several multibillion-dollar LNG projects.
The combined firm has performed consistently for the last two financial years, reporting revenues of A$390m in 2012/13 and A$398m in 2011/12 since the combination, while in comparison legacy Blake’s turnover alone was A$379m and A$356m in the previous two years before the deal was announced.
The two years after the vote were also notable for a lack of tension between the two firms and a genuine cultural affinity.
By consensus, the staged integration model also proved an effective structure for the two firms to combine, with partner Bruce Hanton and Blake Dawson GC David Somervaille deployed to handle many of the difficult integration issues.
With a ‘best in breed’ approach, Ashurst shifted its capital structure towards Blake Dawson’s model (the Australian firm is acknowledged to have been more rigorous and disciplined on cash management and was in many other operational respects ahead of the improvisational Ashurst).
But it hasn’t all been plain sailing. There will be some work to do convincing major clients of the deal, with GCs typically being wary of such foreign mergers. Several Ashurst clients interviewed for this piece were relatively low key, with one GC at a large UK plc client commenting: ‘Our feeling is that Ashurst has taken its eye of the ball. If the merger with Blake Dawson is good news it’s not clear to me what’s in it for us. Our sense is the firm has been distracted for an extended length of time. We are concerned that partners we have relationships with keep moving. We would like more stability.’
In addition, the 2012/13 year undershot expectations for both firms, with costs creeping up at Ashurst LLP – pushing PEP down from £747,000 to £677,000. The Australian practice was also having to contend with a marked slowdown in its domestic economy as the global commodity market slowed and a divisive general election this year drained confidence. The firm’s revenue was £561m for the 2013 financial year-end with £323m coming from Ashurst LLP and £238m from legacy Blake’s, compared to £553m in 2011 with £303m and £250m from each respective firms.
One UK partner in management says: ‘Last year was a bit of an aberration, we took our foot off the brake on costs and we didn’t grow as much as expected.’
There was a further period of introspection through late 2012 and early 2013 when the strain of solving integration issues and the problems of running dual support teams were sapping enthusiasm. Gripes among City partners about the amount of time spent in meetings became common.
One partner at Ashurst says: ‘The short-term negative impact of the merger has been the distraction it has caused. The number of executives on it could have been streamlined. Too many meetings, too many papers and far too much emotion. There are parts of the firm that have not been as busy as they would have liked and this has been a nice distraction for them.’
There was also grumbling about the size of the legacy Blake Dawson’s partnership, with some arguing that Ashurst expected further cuts to its ranks. And despite its substantial restructuring, the gap in PEP has yet to be closed.
Australian press reports emerged earlier this year that claimed legacy Blake Dawson was planning to cut up to 50 partners in Australia, highlighting potential losses in the Sydney and Melbourne corporate groups and the firm’s practices in employment, energy and insurance.
Management convincingly rebut such claims with Tidswell commenting: ‘During the whole period, Mary has sat on our board and Charlie sat on Ashurst Australia’s. There was no discussion on lawyer headcount.’ However, it is expected there will be modest trimming of the Australian partnership over the next three years.
At a sensitive moment, Ashurst took the bold decision to announce the launch of its low-cost back-office in Glasgow with plans to transfer a large proportion of its London-based support staff to the new office. The handling of the venture, which echoed a previous initiative in Belfast from A&O and Herbert Smith, led to 350 support roles being put in scope for redundancy, though only 120 roles were actually at risk.
Since the news staff morale has, by most accounts, taken a severe knock. One senior staffer at the firm says: ‘It has been emotional. I have worked with some of these guys for years and it’s sad to see them go through this. We tried to have a little celebration once things settled a little to raise morale, but nobody was interested.’
The Scottish venture was led by global managing partner James Collis and managed by head of strategic projects Mark Higgs, to create a 150-strong unit headed by former Dundas & Wilson partner Michael Polson. The firm confirmed there will be no transfers until January 2014 and is unable to confirm how many individuals had chosen redundancy over relocation.
But while Collis led the project, the boldness of the timing was classic Geffen, reflecting his pragmatic and unsentimental view of the industry. Few other law firm leaders would have pushed on with such an initiative at such a moment but the firm was under pressure to improve profitability.
Ashurst’s Logan Mair comments: ‘We opened in Glasgow, which was a difficult step for us as it’s affecting a lot of staff as we move many of our business support activities there. But we moved with the market and it’s necessary if we want to remain competitive on pricing.’
But despite such tensions, a lot of the hard work on implementation had already been done. Notable dramas had been avoided and whatever tensions that existed, were often probably inevitable given the challenge of integration amid turbulent global markets.
The firm decided to bring the decision on full integration forward, setting the scene for a vote in September. On 26 September the firm announced its full integration following a 97% vote by both partnerships, including salaried partners, six months ahead of schedule. The result was a 1,800 lawyer strong firm, 419 partners, with 151 and 123 equity partners from legacy Ashurst and Blake Dawson respectively, 28 offices and a combined revenue of over £561m under the Ashurst brand.
The firm would operate a single profit pool and one global management structure, for which the chair, vice chair and board elections were to follow. Geffen, the architect of the leaner, more driven and more global Ashurst, looked the clear front-runner to lead the firm.
Ashurst – the new leadership team
The executive committee (ExCo)
Global managing partner – James Collis
Managing partner Asia – Matthew Bubb
Managing partner Australia – John Carrington
Client partners – Tony Denholder and Logan Mair
Corporate, commercial and competition division co-head- Phil Breden
Disputes, IP and employment co-heads – Simon Bromwich and Lisa Ritson
Energy, resources, real estate and infrastructure co-heads – Mark Elsey and Geoff Gishubl
Finance co-heads – Paul Jenkins and Laurent Mabilat
The board
Chairman – Ben Tidswell
Vice chairman – Mary Padbury
Global managing partner – James Collis
Chief financial officer – Brian Dunlop
Four elected legacy LLP members:
Mark Vickers, banking, London; Simon Beddow, corporate, London; Reinhard Eyring, corporate, Frankfurt; and Cristina Calvo, real estate, Madrid
Three elected legacy Ashurst Australia members:
Peter Armitage, competition, Sydney; Ian Williams, corporate, Sydney; and Roger Davies, corporate, Perth
One elected legacy Asia member resident in Asia:
Robert Ogilvy Watson, corporate, Hong Kong
Independent board members:
Robert Gillespie and David Turner
Dumping Churchill
The announcement on 16 October that Tidswell had won the vote sent a jolt through the firm. But it did not come out of the blue. There had been some indications that Geffen would face a serious challenge in securing the vote from a bruised partnership when it emerged in September that Tidswell and Australian competition partner Peter Armitage would also stand.
Indeed, there had been claims that Geffen would face a challenge from a more high-profile protest candidate, with some claiming Bromwich, who was running the firm’s litigation practice after handing over to Collis as managing partner, would stand, although Bromwich denies he considered standing.
According to one account, a small group of partners, including Logan Mair, Simon Bromwich, Mark Elsey and then corporate head Stephen Lloyd, who quit the firm shortly after the chairman vote, informally came together to consider the process.
But in the end, the group was apparently split, with one partner strongly suggesting Geffen should be put forward, claiming it would be ‘utter madness to go forward with Geffen’s plan without him’. According to the account of one former partner, others believed there was a case for a change of leadership, citing Tidswell was the right man, while another senior candidate was floated.
According to this version, it initially appeared that Geffen would stand against the Australian competitor, who was not viewed as having anything like the support needed to defeat Geffen. But late in the process Tidswell decided – either through his own volition or encouragement of others – that he should stand. (Ashurst denies there was a group formally taking soundings on candidates.)
One Ashurst partner in management at the firm says: ‘Charlie being booted out was brutal. He didn’t reach out to the whole business and Ashurst is now a diverse business.’
A former partner says: ‘It’s a real shame that [Geffen] has been voted out. He has faults but no one else works as hard for the firm or has put more into the firm. It seems odd that someone who was in charge of the whole run-up to the merger is not there to see through the implementation stage.’
Before the election result was announced, Armitage received a phone call at a quarter to midnight with the result. He comments: ‘My first words were, “Oh good,” which surprised the person that called me, but it was a sense of relief because the election campaign had been very gruelling physically.’
The firm understandably refuses to disclose the breakdown of voting but several partners internally suggested that Geffen had won the majority of the legacy Ashurst votes but lacked support in Australia, where Tidswell secured strong support.
One former partner comments: ‘It was a close election but a lot of people in legacy Ashurst are now feeling like they got the person they didn’t want.’
However exactly the voting fell, there is consensus that Geffen’s willingness to take difficult decisions and the continuous overhaul of the partnership had substantially eroded his support even in the City. He had also been robust in pushing through the merger itself, leaving some feeling rail-roaded.
During Geffen’s term the firm’s partnership was reshaped radically. Since 2008, over 40 partners were asked to leave or left after being demoted, while 74 were hired since April 2008. There was a further shake up of Ashurst’s lockstep in 2010, which demoted a swathe of partners on 50 points to 45 points on its equity ladder, one of its main gates, while a smaller group were promoted.
Ashurst’s nine-step partnership had become increasingly actively managed – with a few partners accelerated and a larger group demoted. While it was largely lockstep from 25 to 33 points, when the first gate kicked in, past the 45-point gate, advancement was largely discretionary. There were plenty of losers in this bracing meritocracy; Ashurst had arguably become the most robustly meritocratic partnership for a major City firm that still called itself lockstep. And Geffen – known to talk of the difference between the ‘finders’ and the ‘grinders’ – was closely associated with this approach, though Ashurst had an independent remuneration committee.
Added to which, Geffen’s self-possession meant he would not always engage in bringing along partners with whom he didn’t agree. While certainly not an aggressive man, he could be dismissive of views he fundamentally disagreed with.
Once he had become convinced of the deal, Geffen had been single-minded in pushing through the Blake Dawson merger. There are some indications that even some members of Ashurst’s board felt ‘Charlie is going too fast for the grass roots’.
‘Geffen got the merger through – he is determined to get things done his way. The difference now is, things will be better communicated to the partners,’ says one former partner. ‘When I was at the firm, Charlie would decide what needed doing and would just get on and do it. There was no discussion or trying to understand how different people might run the business and this was always my concern.’
A related oft-repeated claim from his critics was that Geffen presided over an ‘us and them’ culture where advancement was too closely based on being one of ‘Charlie’s boys’.
One ex-partner comments: ‘There were always some obvious candidates that were going to be restructured, but there was a real feeling that some people were not fairly treated and that the knife was wielded too aggressively. There were one or two controversial decisions and when partners see their mates being treated unfairly it doesn’t go down well.’
Ashurst Germany head Reinhard Eyring offers a nuanced view of Geffen’s style: ‘Charlie was a 100% convinced Ashurst partner. Whenever I needed to speak to him, I could. He was always approachable. He moved the firm further and he guided us through the recession.’
But if Geffen had made some enemies, there is no doubt his defeat raises cultural challenges. He retains many strong supporters and there has been much unease in the firm’s City corporate practice – Ashurst’s true heartland – as a result.
One current partner at the firm said that some corporate partners were ‘devastated’ Geffen was voted out and ‘in shock’ that a litigator is now in charge.
Whether related or not, the potential for discord has been heightened by the resignation last month of the well-regarded Lloyd, who had yet to finalise his next move as went to press. He was close to Geffen and had been previously persuaded to stay when Simpson Thacher & Bartlett had tried to recruit him and had been charged with re-invigorating Ashurst’s corporate practice, pushing him to the top of Ashurst’s lockstep.
Lloyd’s resignation caused considerable resentment internally over the timing. Two other partners – corporate specialist Eavan Saunders Cole and junior finance partner Nick Benham – have both since quit, Cole for personal reasons and Benham to join Davis Polk & Wardwell in London. More problematic, two other well-known corporate partners are currently known to be talking to other firms regarding a move.
However, the official line is the qualities that made Geffen effective during tough times made a good chunk of partners long for a different approach.
Tidswell says: ‘Was Churchill re-elected after the war? In a sense, Charlie was a wartime leader. He was a brilliant leader during a time of great turbulence. His determination and energy carried the firm through a really difficult period. I don’t think anybody could have done better. But there is also a recognition that there are a different set of circumstances now where different skillsets and approaches are required. It is about looking forward. There are people who would’ve thought Charlie was the right person but a majority have said they want me as the chairman, and that is how a democracy works.’
After Charlie’s War
The newly-merged Ashurst faces a future that is both more promising than the outlook the firm has faced for years but in some regards is also uncertain.
It is an irony that a firm associated with fumbling decisions and aborted merger bids has executed its tie-up with considerable skill. It has covered much of the hard work of integration that many of its peers – among them Herbert Smith Freehills (HSF), Hogan Lovells and Norton Rose Fulbright – have arguably kicked down the road in their transformative unions.
In many regards operationally, the new Ashurst looks better placed than firms to have agreed major comparable tie-ups like HSF and KWM, having clarity on governance, a properly unified pay structure (with the Australia firm moving to the Ashurst LLP lockstep) and more common ground culturally.
As to the Anglo-Australian deal itself – there is a solid case for the union, even if it is more of a case of a marriage of practical benefits rather than the dream pairing with a New York firm some Ashurst partners still long for.
One partner puts it well: ‘The deal has made the firm more confident and grown up. There had been a sense of spending the last 20 years waiting to be taken over by a US firm. Would you rather engage with a US firm with a £300m business or a $1bn business with major operations in Asia? Some people said this means Davis Polk won’t merge with us. Well, Davis Polk wouldn’t have merged with us anyway.’
By consensus there has been progress in Asia, where the firm now generates around £50m following heavy investment. With the global outlook improving, there is also better news for the firm in the revival of the US structured finance markets. The US finance practice, so long an unpopular drag on the firm, has staged a sharp revival, being ‘incredibly busy’ according to managing partner James Collis. The firm’s US practice now generates over £15m.
Europe, in turn, is acknowledged as ‘unfinished business’ by Collis, with a prime aim probably the perennial challenge of getting its German practice in shape. Collis, who says the firm ‘needs to sharpen profitability’, says on current form the firm will post a considerably better performance than last year.
The big variable remains the US merger. This still remains the primary long-term aim; indeed the logic for the Australia merger was built on the idea that a Euro-Asia giant would have a lot more leverage stateside than a chasing pack City firm.
Of this there are no guarantees – especially in the US – but a more realistically minded Ashurst looks set to try to seal a deal, most likely with a non-New York firm, inside the next three years.
One managing partner at a top ten City law firm says: ‘Maybe the change in leadership is good. It may add some more balance, democracy and certainly freshens the whole thing up. I know some corporate partners that will not be happy about a litigator taking over, but it may be a good thing.’
Mark Elsey says: ‘Before we had a management structure that worked for a largely Western European firm and now we have one fit for a global firm. It is a more corporate structure and will allow us to manage the firm more effectively. We now have to focus on profitability.’
A challenge that remains will be handling the short-term fallout that could be unleashed by a large merger and even more so the leadership election.
In one regard, the firm is fortunate. The philosophical Geffen has shown no sign of resentment since the result. While he has indicated that he is considering his options – including working outside Ashurst – it also looks entirely possible that he will take a role in the combined firm. There is no sign of a leader in exile to sow discord at a period in which Ashurst needs to look forward.
And in truth, it is hard to question Geffen’s contention that Ashurst had to be a more actively managed, modern and global business. Whatever the rights and wrong of how that was achieved, Geffen was a major force in getting the firm where it needed to go.
Tidswell says he is ‘completely confident’ that he can unite the firm and reach out to natural Geffen supporters. ‘I’m not saying I’m confident I will succeed in making every person happy, but in terms of engagement, I have strong relationships. There may be people who want reassurance for their place in their firm, and that is my job and I have no doubt that I can give that.’
One Ashurst veteran puts it more succinctly: ‘All businesses need to push on. The king is dead, long live the king.’ LB
jaishree.kalia@legalease.co.uk
–>