With the market recovering slowly, Ashurst’s new-look corporate management team has its work cut out. The duo not only has to build and retain market share, but also restore some much-needed morale to the firm’s transactional team.
In City parlance, Stephen Lloyd and Simon Beddow could be said to be buying at the bottom of the market. Ashurst’s new corporate heads, in place since July, have taken over a practice hit hard by the drop off in deal activity and by the firm’s own restructuring. Partners have been asked to leave the practice, while some of its best young talent has left of its own accord.
Lloyd and Beddow have assumed the leadership of the practice from Adrian Clark,a 20-year Ashurst partner who became corporate head in 2004. The role has beensplit, giving both partners the freedom to fee earn – Lloyd is now global head of corporate while Beddow has special responsibilityfor the continent as European corporate managing partner.
As one colleague puts it, Beddow was ‘within days of going to Ropes & Gray’.
Given their profile and experience, when it was announced that Clark was stepping down, both appeared as strong candidates to succeed him. However, it had been less than certain that their futures lay at Ashurst. One of the year’s worst kept secrets was that Beddow was, as one colleague puts it, ‘within days of going to Ropes & Gray’.
Similarly, Lloyd has had his US admirers and, in the run up to him being appointed global head, rumours persisted that there was an offer on the table from Simpson Thacher & Bartlett. Both flatly deny these claims.
Despite all the success of the firm’s finance team, corporate remains the bellwether practice for the denizens of Appold Street. Keeping hold of the practice’s best partners, improving communication and improving the performance of corporate globally are among the challenges that the new management duo face.
Two heads are better than one
The consensus among London partners is that the timing is right for change and the duo will refresh the practice, giving them impetus to tackle the issues that have held it back in recent years. While Clark was a highly respected practitioner when he was appointed in 2004, there was hardly a plethora of options for the top corporate job. Having said that, he is regarded as being an able manager and his investment banking focus has been one of the firm’s biggest successes over the past six years.
The laid-back Lloyd trained at Herbert Smith before doing a five-year stint with Weil, Gotshal & Manges in London. He joined Ashurst in 2001, making partner two years later. Now a youthful 42, despite his years at the buyout coalface, he has been a regular fixture in the firm’s team, positioning himself as the go-to man for Apax Partners in London.
The Apax relationship grew out of the private equity house’s first formal panel in 2004, which senior partner Charlie Geffen, finance partner Helen Burton and Lloyd pitched for. It has since been made Lloyd’s own, seeing him lead teams advising on the 2007 £1bn offer for Emap and more recently on Promethean World’s £400m IPO. With a burgeoning portfolio of deals he emerged as one of the practice’s leading lights, particularly after Charlie Geffen became senior partner in 2009.
‘One of the things I need to address is the perception that we are somehow an underperforming department.’
Stephen Lloyd, Ashurst
The 46-year old Beddow, a more general corporate practitioner with a private equity background, joined in 1996 from Travers Smith before making partner in 1998. His client roster has a distinct private equity tinge, including the likes of Dubai International Capital and Cognetas. He managed the German practice between 2005 and 2009, taking over at a difficult time after the departure of co-head of German corporate and private equity rainmaker Jörg Kirchner to Latham & Watkins in 2005.
He is considered to have turned the practice around, restocking the corporate practice by bringing in the likes of Claudia Junker from Hengeler Mueller (who recently joined Deutsche Telekom as its new general counsel).
Beddow’s time on the continent – he also did a short stint in Paris – has helped make him a popular figure among the firm’s European offices. Not surprisingly, he is seen as the key to harmonising the European corporate team, something that Clark struggled to do during his tenure. Observers suggest that he will provide the integration and stability to ballast Lloyd’s inspirational bright spark.
The theory, according to Lloyd, is that the two-pronged approach will allow them more time to shore up relationships with foreign offices. ‘Simon has a very natural empathy with all the Europeans. He is a good guy, he understands their practices, they like him and he is a good manager. So I think he’ll take a large amount of the burden. I think we have probably been less good at keeping in contact with international offices from London than we might have been, and having Simon focus on Europe will only improve that,’ he adds.
‘Part of my job in London is to make sure that every decision we take is challenged to make sure it works outside of the City.’
Simon Beddow, Ashurst
Beddow agrees, ‘Part of my job in London is to make sure that every decision we take is challenged to make sure it works outside of the City. We now need to make it hum together.’
However, wholesale change is not on the agenda. Both Lloyd and Beddow say that the practice has come a long way over the past six years, especially in its links with investment banks, and the next stage is very much about bringing the disparate parts of the group together and improving communication. The talk is of consolidating, re-engaging, cleaning up lines of communication and working as a united team.
Foreign fields
As a firm, Ashurst was hit harder than many of its peers in the downturn. PEP slumped 35% in 2008/09 to £673,000, inching back up in the last financial year to £689,000 but still well short of the £1m mark it hit in 2007/08. Despite the fall in profitability the firm has continued to invest, opening offices last year in Hong Kong and then in New York and Washington DC.
London corporate however has not been the focus of the largesse and feathers have clearly been ruffled. A clear example of internal disaffection came to light earlier this year when a London-based corporate partner sent an open e-mail to the equity partnership slamming management for its decision-making over the past two years. The corporate partner’s ire was particularly raised by the 2009 launch of the US practice with a 12-partner structured finance team from McKee Nelson.
The e-mail reflected a frustration not just with management but also a recurring sense that the corporate practice as a whole has been left in the shadows, particularly by finance, and has not been getting the recognition that it deserves internally. Especially, as some grumble, since finance has been sitting on a US business that has underperformed without reprisals.
There is a feeling that, even between practice areas, there is a lack of understanding of how corporate is performing (it was the only practice to hit budget last year) and disbelief that no one recognises its achievements in a bear market. As one partner in corporate explains, ‘If you have come through 18 months of outperforming other practices for someone to turn round and ask where their cross-referral work is, it grates massively.’
A paucity of investment in the team over the years as finance and energy, transport and infrastructure have grown exponentially adds to the feeling of detachment. While other practices were given the freedom to make significant investment, London corporate was too top heavy and unable to make any hires. The flab has been cut – over a period of 14 months the London corporate department lost 13 partners through departures and retirements and a further three relocated to overseas offices– and Lloyd believes now is the time for investment.
‘One of the critical things I need to try to address is the apparent perception that we are somehow an underperforming department within the firm, when the figures clearly show we are not,’ Lloyd says. He points to the fact that the practice has increased its revenues, even as its headcount has dropped, as a sign of its current strength.
‘Expansion of the London corporate practice in the last few years has been somewhat restrained because we had quite a lot of generalist partners. Now that we are much leaner we are in a position to really invest in a focused way,’ Lloyd adds. ‘Part of my job will be to sell that to the rest of the firm.’
A related perception is that some believe that politically, corporate does not have enough clout at the top end of the firm. This is despite the presence of Geffen and corporate partner Anthony Clare on the eight-partner management board. It’s a point not helped by the fact that there is only one London deal-doer, Richard Gubbins, at the top of the firm’s equity, while five finance partners feature in the 12 top earners. Perhaps not surprisingly, one partner urges Lloyd to play hardball with the board to ‘get our voice heard.’
As well as increasing the practice’s internal standing, the new management duo will need to keep their movers and shakers on board. The departure of Gordon and Arnold to Kirkland & Ellis was a shock to a practice that was finding its feet after the exits caused by the restructuring. Their move to K&E doesn’t deliver a fatal blow to what is still a leading practice, but the loss of Gordon, who was inheriting some of the private equity practice’s major relationships, such as European buyout house Cinven, was particularly damaging.
Ashurst likes to think of itself in the top City practices – at least on a par with Herbert Smith and just behind the Magic Circle’s global giants as well as Slaughter and May – but while its client profile is good, it’s a relative minnow in comparison. Herbert Smith houses 122 corporate partners globally to Ashurst’s 71, while, in London, Ashurst has 41 partners compared to 57 at Herbert Smith. This makes it particularly exposed when key partners leave – if there is another high-profile departure, then suddenly the practice is under even greater threat from circling head hunters.
In equity capital markets, for instance, the practice looks dependent on its star performers, Nicholas Holmes and Steven Fox. As Gordon’s and Arnold’s departures also show, US firms will continue to offer vast sums of money to impressionable senior associates and young partners – protecting them is key, as will be protecting their clients.
Arguably Clark’s greatest achievement was to get Ashurst on the radar of more investment banks, no mean feat considering how entrenched those relationships are at a Magic Circle level. Relationships with the likes of Citigroup, JPMorgan Chase & Co, Credit Suisse and Morgan Stanley are all well established. Although this wasn’t necessarily to the detriment of blue chip clients, there is a sense that the firm took its eye off the mid-market.
Increasing the blue-chip client base, particularly on the continent, is now at the top of the agenda. In terms of FTSE 100 clients, the firm has done well to retain the bulk of them over a five-year period. On the downside, it has been edged out of the largest corporate instructions from Imperial Tobacco Group and lost much of the work from Smith & Nephew, both historically big clients of the practice.
The FTSE 100 is an incredibly competitive marketplace to pick up new work and the feeling is that European corporates and big private companies will help drive the growth of the business.
‘I would like more FTSE clients, who wouldn’t?’ Lloyd comments. ‘But you can’t just ring up the general counsel of a corporate and ask to be their main counsel. These relationships are old and run deep; actually you are more likely to lose a FTSE 100 client through a random stroke of luck, for instance a takeover, than you are to pick one up.’
The success of the international practice will play a large part in the success of the duo’s tenure. Historically much of the work done in Europe has been for financial institutions, and now the focus is on extending those relationships to corporates. The recent successes of winning major mandates from Total and Rusal are obvious examples that Beddow will want to follow.
In Asia, Hong Kong has been an area of significant investment. Former senior partner Geoffrey Green launched an office in January 2009 and it has expanded quickly, now housing seven partners. Hong Kong, along with Singapore and Tokyo, will take a great deal of careful but speedy investment if Ashurst corporate is to pose a serious challenge to the likes of Herbert Smith.
Lloyd’s list
Lloyd and Beddow inherit a corporate business that, despite its troubles, still has much going for it. Since the 2006/07 financial year, the transactional team has never dropped below 27% of the firm’s revenues. Last year corporate turnover stood at 30% – just under £90m.
In terms of headline deals, the firm has enjoyed some notable successes. The equity capital markets team, with Fox and Holmes to the fore, picked up roles on more than a fifth of all announced UK capital raisings in 2009, worth around £8bn.
The M&A team has acted on the only two recent hostile bids in the London market – Chloride Group’s £564m offer from ABB and URS Corporation on its £997m bid for Scott Wilson Group. Private equity partner Bruce Hanton led a team advising three private equity houses on Gala Coral Group’s £3bndebt-for-equity restructuring. More recently, teams have worked on Apax’s Sophos buyout and the Promethean IPO as well as advising Candover on its restructuring.
Client wins include the likes of Autonomy and Bellway, both in the FTSE 250, and the practice has also won its first corporate instruction from The Royal Bank of Scotland. Regular deal work continues to flow infrom National Express, Virgin Media and Balfour Beatty.
‘Clients really want a quality team that can provide great service, that understands the client’s objectives and gets on well together,’ Beddow asserts. ‘They want the experience to be as pleasant and professional as possible. The team approach and a quality of service is what marks us out.’
Warming to the theme, Beddow adds: ‘We are one of the strongest corporate teams in London. If you took the entire team and looked at it person for person, partner for partner it is quality through and through. There are very few firms with a corporate client base as diverse as ours.’
Lloyd concedes that even he didn’t know how many deals the group was handling when he took over as practice head. ‘I was genuinely amazed about how many deals were going on that I didn’t know about. The problem is that there aren’t as many deals around as there were three years ago so people think we can’t be doing as well as we are.’
Outside of corporate, partners leap to the defence of the practice. ‘They ooze quality – I struggle to find evidence that corporate is going backwards,’ reckons one finance partner. ‘Perhaps the partners are not as high profile as they should be, what we need to figure out is, have we got the practice configured properly and how do we enhance what we already have?’
There remains a core of excellent practitioners; private equity head Hantonmay not enjoy anything like the sameprofile as Geffen, but is regarded as oneof the most technically gifted lawyers inthe firm. Elsewhere partners like Eavan Saunders Cole, Giles Boothman, MarkSperotto and Nick Williamson are allstand out.
Nick Bryans boosts the core corporateteam having recently returned from histour of duty in Dubai, soon to be followed by Sperotto from Milan. There is also a pool of young talent waiting to break through, with Jonathan Earle being handed a number ofkey relationships recently. Below partnerlevel, M&A specialist and senior associateTom Mercer and private equity senior associate Karan Dinanani are touted as stars of the future.
Grey matters
These are all names that will crop up for years to come but there is a need for a bit more gravitas towards the top end of the team. Although Geffen, Clark and Gubbins are all well known through the City, if the firm does want to move up the corporate pecking order, then it is short of a senior statesman.
The latest data from mergermarket suggests that, in terms of M&A, the firm has some catching up to do. At the start of August, Ashurst had advised on 22 M&A deals globally with a combined value of £4.45bn according to mergermarket. That compares with Herbert Smith and its two alliance firms, which acted on 45 deals worth a total of £45.9bn. True, in a patchy M&A market the numbers can be easily skewed by one or two major mandates but the disparity in the figures, particularly in volume terms, is hard to ignore. Average deal value across the last four quarters up to 30 June provides little comfort. In a bear market the average M&A deal size at Ashurst was £206m, compared to Herbert Smith’s (and alliance) of £1.26bn
It should be particularly concerning to Ashurst’s new corporate heads as, privatelyat least, the firm’s dealmakers hate the suggestion that they have been somehow eclipsed by their counterparts at Herbert Smith. But Herbies’ edge reflects its greater strength and depth in corporate and the fact that it boasts a much more established international practice.
Herbies’ corporate revenue stands at £199.5m, giving them a revenue per partner of £1.6m. Ashurst’s corporate revenue of around £88m translates to a revenue per partner of £1.2m. Lovells’ global corporate income was around £162m last year, giving it a revenue per partner of £1.3m.
Ashurst’s corporate practice clearly has some issues to grapple with. If it didn’t,Gordon and Arnold would have stayed and Beddow and Lloyd would not have taken on the leadership from Clark. But the London business remains one of the strongest in the City and now the international practice has to step up to help make the firm a serious global player. If Beddow and Lloyd can change perceptions of the practice, they have a genuine opportunity to finally lay the gremlins of the last two years to rest and firmly re-establish it as one of the leaders in the market. That should ensure their stock will be running sky high. LB