‘Initially the client was concerned, but the investment banks said: “A big tick for Gibson Dunn in public M&A in London.” Five years ago people would have said they don’t know us, now investment banks are pitching for us.’ Charlie Geffen, chair of Gibson, Dunn & Crutcher’s London corporate practice, cites a mandate secured in early 2019 to answer the perennial question of whether US firms will ever directly challenge the Magic Circle in mainstream corporate work.
With his firm leaping up the M&A ranks by deal value – advising on $28.6bn UK deals in 2018, according to Mergermarket figures – the former Ashurst senior partner has some cause to be upbeat. Five years ago, when Geffen had only just walked through the door, the Los Angeles-born institution was nowhere to be seen among the top 20 law firms for substantive corporate work in the region, either in the UK or Europe.
The inroads of American advisers in what remains the most important business line of the Magic Circle is still an unresolved issue. Top London partners from US firms recently gathered at a Legal Business debate and were alive to the oft-cited arguments of City detractors (see ‘Marching on’).
One such naysayer sums up the consensus: ‘US firms typically have a role on the US antitrust or regulatory piece. You see them pop up on public M&A deals, almost always for US clients they’ve persuaded to lead it out of London.’
One case in point is the £10bn Asda/Sainsbury’s merger on which Gibson Dunn partners Ali Nikpay and Deirdre Taylor rubbed shoulders with Slaughter and May and Linklaters to advise Asda and US owner Walmart on antitrust. Geffen defends the firm’s position. ‘For the London office of a US law firm to act on a domestic antitrust matter of this magnitude is significant.’ Another key role for Gibson Dunn saw it advise The Stars Group on its $4.7bn acquisition of Sky Bet.
Two of the largest deals of the year – Japanese giant Takeda Pharmaceutical Company’s $79.7bn bid for Irish drug-maker Shire and Comcast’s $51.5bn Sky bid – demonstrate both London firms’ continued dominance on marquee deals in Europe and the recent inroads made by US challengers.
Albeit leading out of the US, Wall Street leader Davis Polk & Wardwell shared mandates alongside Slaughters advising Shire and alongside Freshfields Bruckhaus Deringer for Comcast to rack up $223.6bn of ranked European deals – including $69bn in the UK alone.
A longstanding relationship with Comcast won it the mandate with a team including ex-Herbert Smith London corporate partner Will Pearce and Nick Benham, who moved to Davis Polk in 2014 from Ashurst. Although not a lead role, Benham’s part in the financing package underpinning Comcast’s bid earned the firm a place in the shortlist for the Legal Business Awards 2019.
That such mandates can be secured at Davis Polk, a firm that has invested in London primarily to support its US business rather than building a fully-fledged European law practice, is significant. Because a number of Davis Polk’s peers have for five years now been more aggressive in securing locally-sourced corporate work and building big-tent City teams.
Amid another expansive year for White & Case’s City office, London executive partner Melissa Butler highlights one standout deal: advising regular client Avast Software on its main market listing on the London Stock Exchange, a tech float valued at $816.6m. The firm now fields no less than 28 corporate partners in the City.
Ex-Linklaters partner Ian Bagshaw, regarded as one of the most productive deal lawyers in the City, co-led the Avast team along with partners Jonathan Parry and Jill Concannon.
While proof that US firms can handle sizeable IPOs, albeit leveraging a longstanding relationship, the deal was something of a bellwether, also featuring Latham & Watkins advising the underwriters.
And even begrudging Magic Circle figures concede that Skadden, Arps, Slate, Meagher & Flom has carved out a strong profile in substantive European M&A thanks to the efforts of Michael Hatchard, its core M&A partner until his retirement at the end of 2017.
Casting back to 2013, the Wall Street giant was comfortably within the top 20 firms by deal value, advising on deals valued at $57.8bn in Europe. While questions over succession are often raised over its 14-partner City M&A team, Skadden currently sits in the top ten in the UK and Europe rankings. In 2018, the corporate powerhouse acted on $115bn worth of European deals and $55.7bn in the UK.
‘There was a historical perception US firms didn’t do UK plc work. We broke down that construct.’
Pranav Trivedi, Skadden
London head Pranav Trivedi (pictured) strikes a bullish note: ‘We are outplaying Magic Circle firms in their own backyard. There was a historical perception that US firms didn’t do UK plc work and that UK firms didn’t do Inc work. We broke down that construct. I would argue US firms have had greater success in breaking into plc boardrooms than vice versa.’
Trivedi cites deals highlighting Skadden’s English law strength, including CME Group’s bid for NEX and Bain Capital’s £1.21bn acquisition of esure, both led by Scott Hopkins. Prominent proposed matters in 2018 included International Paper’s bid for Smurfit Kappa and Dana’s unsuccessful attempt to buy GKN, led by Scott Simpson and Hopkins respectively. And since the hire of Richard Youle and Katja Butler from White & Case in 2017, the private equity practice has advised on more than 25 deals worth in excess of $15bn, notes Trivedi.
In contrast to the conservative Skadden, Baker McKenzie’s investment in several lateral hires for its London corporate team in 2018 – with plans to continue that strategy in London, New York and China – is a statement of intent. While traditionally a mid-market contender, rather than a natural choice for larger deals, the firm is emphatic that it will continue investing to upgrade its deal practice in key global hubs. And the numbers suggest solid progress, with Mergermarket ranking the firm on $81bn deals in Europe and $15.6bn across 45 deals in the UK during 2018.
Bakers’ London managing partner Alex Chadwick is clear that the key to success lies in continued investment, having also promoted six City partners in 2018. ‘Most of what we will do this year is progress with our growth programme and hiring in the transactional space.’
Other deals saw Bakers’ London private equity head David Allen and corporate partner Jannan Crozier lead a team advising Hitachi as the Japanese conglomerate acquired Swiss giant ABB’s power grid, a deal with an enterprise value of $11bn. The team was in good company opposite Freshfields’ M&A playmaker Piers Prichard Jones and Stephen Hewes advising ABB. The firm also stepped up for longstanding client Unilever, led by corporate partner David Scott on its $4.5bn acquisition of malted drink brand Horlicks against Slaughters acting for GlaxoSmithKline.
M&A by the side door
With private equity continuing its sustained rise, with European buyout activity hitting $195.5bn across 1,458 deals in 2018 – the highest level since the financial crisis – advisers that have invested with sponsors are reaping big rewards.
Kirkland & Ellis has gone from being near-invisible in the M&A rankings in 2013 to racking up $103.4bn across 127 deals in Europe in 2018. The firm now has 40 corporate partners in London while overall lawyer numbers were up 28% annually in the City.
Kirkland also has no difficulty in reeling off a striking list of mandates for a client roster that includes Advent International, Apax Partners, Apollo Global Management, Bain Capital, BC Partners, The Blackstone Group, EQT, Kohlberg Kravis Roberts & Co and Canadian pension funds Ontario Teachers’ Pension Plan and CPP Investment Board.
It had been difficult to imagine how the Chicago-bred giant could raise the stakes on last year’s hire of Freshfields deal veteran David Higgins, which with a $10m-a-year package had a good claim to being the most expensive lateral ever in the European legal market.
Yet Kirkland started 2019 as it meant to go on – with the hire of Freshfields private equity star Adrian Maguire after last year recruiting prominent intellectual property litigator Nicola Dagg from Allen & Overy, and Linklaters private equity duo Vincent Ponsonnaille and Laurent Victor-Michel for its long-awaited Paris launch.
As City revenue soared to $380m in 2018 and profit per equity partner topped $5m for the first time, it is hard to see the juggernaut slowing.
Traditionally ranking well in the M&A tables on the back of its much-vaunted deal finance practice, Latham was also on confident form in Europe’s deal market last year. A year on from becoming the first law firm to report revenue in excess of $3bn (usurped by Kirkland the same year), Latham in 2018 generated $3.386bn in total fee income, up 11% on 2017. The firm now has 45 corporate partners in London.
Chair and managing partner Richard Trobman points to booming M&A levels along with litigation as the basis of that success. The firm’s high-yield pedigree won it mandates advising the lenders on the €10.7bn high-yield bond and loan refinancing of Wind Tre, a key player in the Italian telecommunication market, one of the largest ever European leveraged financings, as well as acting for the banks on the Avast IPO.
Corporate standouts saw it advise The Carlyle Group on the €10bn acquisition of AkzoNobel’s speciality chemicals business, the largest European buyout in 2018, and Global Infrastructure Partners on the buyout of the Italian railway operator Italo – Nuovo Trasporto Viaggiatori.
In spite of an emerging consensus that high levels of deal activity must eventually face a downturn, Mike Goetz, co-head of Ropes & Gray’s City arm, echoes the faith of many that sponsors will continue to generate opportunities. ‘The market is still very buoyant. Private equity people have money to put to work and if the market is seriously adversely affected by Brexit, they will have thought about that too.’
Either way, a half-dozen US firms have already amassed teams of a scale and quality fit to seize increasing chunks of City rivals’ premium deal business in the years to come. LB
nathalie.tidman@legalease.co.uk
European M&A 2018 – Top-ranked US advisers
By value (deal count in brackets)
| 1 | Davis Polk & Wardwell | $223.6bn (41) |
| 2 | Latham & Watkins | $151.1bn (145) |
| 3 | Sullivan & Cromwell | $146.7bn (39) |
| 4 | Skadden, Arps, Slate, Meagher & Flom | $115bn (62) |
| 5 | Cleary Gottlieb Steen & Hamilton | $94.7bn (58) |
By deal count (value in brackets)
| 1 | Baker McKenzie | 229 ($81.1bn) |
| 2 | White & Case | 173 ($63.2bn) |
| 3 | Latham & Watkins | 145 ($151.1bn) |
| 4 | Kirkland & Ellis | 127 ($103.3bn) |
| 5 | Orrick Herrington & Sutcliffe | 99 ($11.9bn) |
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