It was not all plain sailing,’ reflects Ben Tidswell, Ashurst’s chair, on the aftermath of its 2013 merger with Australia’s Blake Dawson. ‘But partners saw what we were trying to achieve and most wanted to be part of that. Now the firm is enjoying the success of that.’

Tidswell speaks with the palpable relief of one whose darkest days are behind him. The merged firm is now on the brink of revealing its best financial showing to date after years of indifferent or poor performance. Tidswell may well celebrate given the upheaval that preceded this inflection point, dwarfing any woes suffered by City rival Lovells following its 2010 union with Washington DC’s Hogan & Hartson.

Ashurst’s story remains emotive. One ex-partner, who left the firm more than 15 years ago, lambasts ‘the disastrous foray into Australia and the idiotic failure to merge with Sidley’ in 2013 as nails in the coffin for the 197-year old City institution that struggled post-Lehman because of over-exposure to private equity and a lack of investment in litigation. It has also shot itself in the foot at times, famously frittering away £4m on echo-chamber consultancy fees from Bain in 2014/15 – invoking the ire of the partnership – and, in 2017, witnessing an alarming exodus of teams from its Paris office in key areas such as disputes and corporate, including a buyout team billing around £8m a year to Freshfields Bruckhaus Deringer. People still talk about the dramatic departure of Charlie Geffen, then senior partner and driving force behind the Blake Dawson merger, as if it happened yesterday. To many, the exodus of serious corporate players – accelerated by Geffen’s exit and Tidswell’s election – sounded the death knell for Ashurst as credible competition to the Magic Circle in premium private equity and public M&A. The sentiment of ‘what if Ashurst had instead merged with a US firm?’ still lurks.

Still described as the best deal that never happened, merger talks in 2000 between Ashurst senior partner Geoffrey Green, managing partner Ian Nisse and Latham & Watkins chair Robert Dell came to nothing thanks to a mutual suspicion of compensation structures. Besides Sidley Austin, another credible suitor was Fried, Frank, Harris, Shriver & Jacobson in 2002/03. Other US firms that Ashurst has been linked with over the years include Mayer Brown and White & Case.

‘It is snakes and ladders with the equity. Paul Jenkins and the remuneration committee won’t hesitate to move people down. That’s what was missing under the previous managing partner.’

However, the soon-to-be announced financial results suggest reports of Ashurst’s demise have been greatly exaggerated. ‘Ashurst is in the strongest position we have been in since I became global managing partner in 2016,’ says incumbent Paul Jenkins, who on 1 May won his second four-year term. ‘That means the strongest double-digit profit per equity partner (PEP) and revenue growth, above what we achieved last year.’ Estimated revenue growth of between 13% and 15% from £556m to anywhere between £630m and £640m, and around a 25% uptick in PEP for the 2018/19 financial year, from £743,000 to more than £925,000, may not be far fetched.

Three consecutive years of revenue and PEP growth coincide with Jenkins’ tenure as global managing partner. A five-year view shows the firm will have pulled off at least an 8% revenue increase and a roughly 15% PEP hike on the 2013/14 financial year. A three-year view is more striking. The latest results – if they come within the range suggested – would mark at least a 25% revenue increase and a 53% hike in PEP since a disastrous 2015/16 financial year, when revenue fell 10% to £505m and PEP took a 19% hit to £603,000. That was when Jenkins emerged as a leader armed with a strategy.

Change from Down Under

‘Ashurst is not even run out of London anymore!’ This view from a former partner echoes many that suggest the election of an Australian over a City partner is symbolic. There has certainly been a shifting of power since the merger completed in 2013, when the Legal Business cover feature ‘After Charlie’s War’, focused on how Tidswell, the respected London-based litigator, would steer the firm through those tricky post-merger years. It is telling that these days the New Zealander is mainly mentioned as a wingman to Jenkins, focused on pastoral care and giving the Australian ‘the air cover he needs to get the job done’.

That shift in power Down Under might reasonably be expected to rankle City partners. But of the more than 20 current and former partners interviewed for this article, many London-based, not one has a negative comment about Jenkins, which at Ashurst is really saying something. ‘Paul is universally respected and exceptionally hardworking. He has a clear vision and is a strong leader,’ enthuses Jason Radford, London-based head of corporate and member of the executive team.

Of more than 20 current and former partners interviewed, not one has a negative comment about Paul Jenkins, which at Ashurst is saying something.

Wholesale changes had been made to Ashurst’s lockstep back in 2007 under the leadership of Simon Bromwich, taking its point range from 20-50 to 25-65 and adding more discretionary gates. However, Jenkins is lauded for further overhauling the equity ladder to reach a ‘super level’ of 75 points for star performers. Crucially, he began to put the theory into practice.

‘It is snakes and ladders with the equity. Paul and the remuneration committee won’t hesitate to move people down the equity. That’s what was missing under the previous managing partner, James Collis. There used to be a whole bunch of older partners sitting at 65 points not doing much. Now the younger partners have been allowed to flourish.’ This recent leaver’s view chimes with the consensus internally that Jenkins, while understated, is as driven as they come in pursuit of a high-performance culture.

Jenkins also masterminded the introduction two years ago of a bonus pool capped at 5% of the firm’s total profit for the year. The obvious question is whether such an American style of remuneration has undermined the clubbable culture the firm once held dear. However, current partners rush to defend the remuneration structure and the metrics used to reward people. Says Helen Burton, London-based banking partner: ‘We don’t have an eat-what-you-kill culture. We also value collaboration and wider contributions. Even if you don’t end up working on the transaction, your role in bringing the matter to the firm is taken into account.’

Tidswell stresses that the bonus is not reserved for high achievers at the top of the equity and can be awarded to younger partners who outperform their peer group. ‘Equity is calculated on a three-year look-back. The bonus makes it worth your while to do something extra, such as referrals, with partners materially helping other partners.’

Radford is among many advocates of a management style that has melded high performance and a collegiate culture while being an improvement on the boys’ club of yesteryear. Radford himself has promoted female partners in his leadership team, with 66% of his practice heads now women. ‘In annual appraisals, Paul wants to see you cross-selling the business. You are encouraged to hunt in packs and share the credit where it’s due,’ says a recent leaver.

Jenkins also inspires loyalty for the softer skills – his approachability, lack of management speak and the fact he is not the type to go ultra vires. M&A partner Tom Mercer says partner conferences are refreshingly devoid of jargon, big reveals and hyperbole on the strategy.

‘I had never been in a partner meeting before where the managing partner stood up in front of the other partners and straightforwardly answered questions, some of them posed pretty vigorously,’ says Matthew Saunders, the London dispute resolution partner Ashurst hired in 2016 from DLA Piper. ‘It is a place where partnership means something.’

Focused approach

Detractors measure the success of Ashurst by benchmarking it against its former strength in private equity and plc work. ‘The synergies with Blake Dawson were all infrastructure. Ashurst has turned into an infra-driven firm and all the influences are infrastructure lawyers, like Logan Mair, Jason Radford and Terry van Poortvliet,’ says one ex-partner, listing three of the firm’s top performers. ‘I didn’t want to work for an infrastructure firm. I wanted to work for a corporate and capital markets powerhouse.’

But Jenkins insists Ashurst’s rebounded financial performance comes from sticking with the strategy of investing in the five key sectors of banks and funds, energy and resources, real estate, infrastructure and digital economy. ‘When I first started in the role, less than 80% of the firm’s revenue was generated by these areas and now it’s around 90% – the focus has really paid off,’ he says.

‘Ruth Harris and Karen Davies are examples of credit being given where it’s due, rather than being an old-school chaps’ club.’

Energetic projects specialist Radford was a popular candidate for head of corporate with most partners but some saw a kick in the teeth for Robert Ogilvy Watson, the M&A partner who previously held the role and recently left for Macfarlanes. Radford himself admits he was not the obvious choice and that it led to some head-scratching from friends at other firms. ‘If you are looking to choose a classic public M&A person as your divisional head, I’m not that person. I’ve always undertaken a lot of private M&A and you don’t need a public M&A lawyer to run the division. Am I here to be strategic about what we do and create new revenue streams? Yes, I’m doing that. Funds, infra and energy M&A? Yes, I’m doing that. You can say I’m not a public M&A guy, but I say: “Yes, so what?”’

However, the firm may never truly have recovered from the loss of certain respected corporate partners. Steven Fox’s departure to Clifford Chance in 2011 proved a shock, given he was considered a dyed-in-the wool Ashurst partner. Private equity partners David Arnold and Gavin Gordon defecting to Kirkland & Ellis in 2010 was an early sign of the post-Lehman London market turning in favour of US rivals. ‘When Gavin and David left, that was the tipping point, when it looked like the US had won’, says one former partner who has been at a US firm since 2016.

But there is confidence now that a revived meritocracy has allowed a younger generation of partners to flourish. ‘Ruth Harris and Karen Davies are examples of credit being given where it’s due, rather than being an old-school chaps’ club,’ says one ex-partner of real estate finance partner Harris, who recently succeeded veteran Simon Beddow as London managing partner, and Davies. ‘How many multi-million pound deals did Karen have to do to be recognised?’

Some recent highlights for Davies include acting for new client CareTech Holdings on its acquisition of Cambian Group in August 2018 and Stafford Capital on its takeover of Phaunos Timber Fund, both of which started off as hostile bids. ‘Ruth does drink the Ashurst Kool Aid but that’s not necessarily a bad thing. She’s managed to build a great practice while being a nice, approachable person. She is direct and focused, not needlessly aggressive,’ says a former colleague.

‘It is a place where partnership means something.’ Matthew Saunders, Ashurst

Accused of having a greatly diminished corporate bench, Ashurst partners reel off a list of standout performers, including public company dealmakers Davies and Mercer. Ashurst-trained equity capital markets partner of two years, Simon Bullock, is often cited as a rising star although some say he is overshadowed by head of ECM Nicholas Holmes. The firm attributes 20% of headcount and revenue generation to the global corporate practice, which includes 331 lawyers, of which 82 are partners, though this is a small ratio for a firm of its heritage.

Corporate partners Nick Williamson and Nick Bryans are also often mentioned. Says one ex-partner: ‘Nick Bryans is very successful, an Ashurst lifer. He acts for the Japanese trading companies in public and private M&A. Nick Williamson is high up in the equity.’ Corporate partner Michael Robins, who specialises in energy and resources deals, energy specialist Michael Burns, and rising stars James Fletcher and digital economy partner Tara Waters are also cited as names to watch.

And, in response to criticism that the firm mainly acts on cash-confirmation and underwriter roles these days, Radford is bullish that the strategy is working to secure big-ticket, lead roles. ‘Private equity is a good example of our strategy in action. How do you access those big-ticket deals? We go and talk to sponsors about infrastructure and energy. It’s a way of differentiating ourselves.’ In particular, he points to recent deals for clients including TDR Capital and Kohlberg Kravis Roberts & Co.

Going global

Whereas long-time rival Hogan Lovells has struggled to sustain the post-merger growth expected in the US market (see box), Ashurst’s strategy has meant the firm has been able to make targeted inroads into the lucrative US market, again via infrastructure.

Radford set up the New York infrastructure practice in 2011, and created a platform that has seen revenue and headcount grow by 250% in the last three years. The US office is small but strategically important, generating more than $20m a year in revenue. Andrew Fraiser was hired from Allen & Overy in New York to take over as head of energy and infrastructure for the Americas in 2016 when he returned to London. Leveraging government mandates on large-scale projects in the UK and Australia, the approach has led to Ashurst’s instruction by public agencies in eight of the nine infrastructure projects it pitched for in the last year.

‘The US will become the biggest infra market in the world. We can’t afford not to be a part of it.’ Andrew Fraiser, Ashurst

Fraiser is ambitious. ‘The expectation is that the US will become the biggest infra market in the world. I don’t know when that will happen but we can’t afford not to be a part of it. There will come an inflection point where we’ll look beyond vanilla public-private partnerships and do other types of project finance out of New York, in addition to structured finance and derivatives. Everything we’re doing is about building off the foundations.’

Yet even the most pro-Australia-merger partners have admitted to concerns over how the firm will fare in the notoriously tough Asia market. But Jenkins, whose own international credentials include stints as an associate with Clifford Chance in London and Freshfields in Tokyo, tells a different story. ‘There has been strong performance across all regions but Asia is the fastest growing – we now have 40 partners. Australia is also growing fast in financial services, investigations and regulatory advice, infrastructure and energy and resources.’

Breakthroughs include a joint venture with Chinese law firm Guantao and opportunities arising from the $1trn One Belt One Road development project. ‘At the moment Asia is not generating as much revenue as Australia or the UK but we are planning to double revenue in the next five years,’ says Patrick Phua, managing partner of the Beijing office and head of Asia. ‘It’s very much about attracting the right partners.’

Perth-based Geoff Gishubl, until recently divisional head of projects and real estate, took over from Jan Gooze-Zijl as chief operating officer on 1 May. He points to a replication of the firm’s UK infrastructure approach in Australia, which has meant a 40% uptick in revenue from projects since 2017 and close to double in Asia. Meanwhile, global income for projects is up 30%-40% since 2017.

Joss Dare, who has recently returned to London from the Middle East to co-head the global projects practice, is upbeat. ‘Profitability is above average in the Middle East and we are just completing our third successive year of record growth in a row. This has been driven by a surge in oil and gas activity in Abu Dhabi and Kuwait, and also a big infra boom in Saudi as part of the Vision 2030 strategy.’

‘If you are looking to choose a classic public M&A person as your divisional head, I’m not that person.’
Jason Radford, Ashurst

One potential threat to the firm’s future finances may be the roughly £40m in fit-out costs of new London premises in Spitalfields, but the flip-side of that is the general boost to morale and symbolism of bringing the City contingent into the current decade, including investing in facilities appropriate to a younger generation of partners. Recalls one ex-partner: ‘A film crew once went into the Ashurst offices and asked if they could do some shooting there. When asked why Appold Street was so special, the response was: “We were looking for a 1980s office and this is perfect!”’

Jenkins remains clear that Ashurst’s transformation is not yet complete. ‘We spend a lot of time talking to US firms and looking at opportunities for a potential combination. If we want to achieve our objective of being a truly global firm, this is the missing piece.’ Prospects of a tie-up with a top 50 US firm may now seem unlikely, but having been through the pain of an Anglo-Australian merger, management is alive to how much harder it would be culturally and financially to crack the US.

‘The stars are aligned and there is real enthusiasm. We are the firm to watch,’ says Harris. Her optimism speaks of a firm that is happier in its own skin, or at least its new skin. Barring any more market-changing inflection points – Ashurst’s recovery looks set to continue. LB

nathalie.tidman@legalease.co.uk

marco.cillario@legalease.co.uk

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A meeting of minds – Hogan Lovells

‘I was sitting in the Goring Hotel in London on 15 September 2008 when Lehman collapsed: we had our first meeting with Lovells management. Both firms recognised that staying the same would be more dangerous than changing.’

So reflects Steve Immelt, chief executive since 2014 of Hogan Lovells, nine years after the trailblazing deal between the UK’s Lovells and Washington DC-bred Hogan & Hartson went live in May 2010.

Financially, growth has not been as pacey as hoped and predicted. The firm recently posted revenues of $2.12bn, 4% up on $2.04bn in 2017, more subdued than the 6% achieved in each of the previous two years. In dollar terms, PEP increased 8% to $1.38m, albeit against a 6% drop in equity partner headcount.

The numbers are less flattering in sterling terms, with turnover increasing less than 1% to £1.6bn while PEP passed the £1m mark, growing 4% to £1.035m. Hogan Lovells may not have enjoyed a dramatic upside post-merger but neither has it experienced the startling lows that Ashurst did after its tie-up.

Since taking up the role of the firm’s first sole chief executive from joint heads Warren Gorrell and David Harris five years ago, Hogan & Hartson litigation partner Immelt has overseen steady growth rather than flat financials during his tenure with capital markets lawyer David Hudd as his deputy.

Washington-based Supreme Court litigator Neal Katyal, who even appears as himself in an episode of House of Cards, joined the firm in 2011.

Katyal is glowing about Immelt’s leadership style. ‘Steve has been excellent. He had really big shoes to fill: Gorrell was perhaps the best leader of any organisation I have worked with. Steve is not flashy, he is quietly capable and does his job so well.’

Understated in person, Immelt wins plaudits for creating a more unified firm under one leader, being an effective communicator and having a strong global strategy. Billed as a ‘tremendous internationalist’, he had headed legacy Hogan & Hartson international offices and built his reputation on making inroads with recruitment in the Paris market, building out the German offices and having knowledge of areas of focus outside litigation.

But former partners point to a lack of traction in building out the corporate practice, especially in the City. M&A and private equity brought in $487m in revenue in 2018, or 23% of the firm’s total. There is still sensitivity around the SABMiller debacle, when the firm in 2016 failed to secure the main mandate on the SABMiller-ABInBev $108bn merger, despite SAB being a long-term client. The lead role was taken instead by a Linklaters team led by Charlie Jacobs and Nick Rumsby, while Hogan Lovells took the lesser mandate of management and competition advisory. The alarm that generated caused the firm to redouble its efforts to secure new listed clients.

Hogan Lovells may not have enjoyed a dramatic upside post-merger but neither has it experienced the startling lows that Ashurst did after its tie-up.

The biggest criticism of Hogan Lovells’ post-merger years is that it has demonstrated a lack of ambition. The stated heavy investment in the deal markets of New York and London simply never materialised. In the City it remains light of veterans that can secure marquee work, though there are some promising younger hands. ‘The three young guns – Rich Diffenthal, Dan Simons and John Connell – are awesome. They are the future,’ enthuses one ex-partner.

One big-hitter is Ben Higson, a member of the board who counts among his key clients Asahi and Mitsubishi. Connell is hotly tipped, having joined the firm from Slaughter and May as an associate in 2013 and making partner in 2016. He is credited with growing the relationship with Goldman Sachs and a number of funds. His former flatmate at Manchester University and Nottingham Law School, Simons, joined as a partner in 2014 from Travers Smith, having trained at Linklaters.

Diffenthal joined in 2004 as a trainee and has built client relationships in digital economy, tech, financial services and healthcare. Ed Harris, who joined from SJ Berwin in October 2013, is a well-regarded private equity lawyer although one of only three London transactional partners on an underweight bench. He is known for having forged a good relationship with PE house Pantheon Ventures.

While still obviously underweight in New York, with only 203 lawyers, one major breakthrough on the other side of the Atlantic has been the hire of a four-partner team from Weil, Gotshal & Manges in Silicon Valley, comprising M&A partners Richard Climan, Keith Flaum and Jane Ross, as well as IP and technology transactions partner John Brockland. The group has been together for more than two decades, first at Cooley (where Climan led the M&A practice), then Dewey & LeBoeuf, then Weil before joining Hogan Lovells in May 2017. In June 2017 the firm added Christopher Moore, also from Weil, who had been working with the group for three years at his former firm.

The hires have been a clear success, with clients following them to Hogan Lovells including Adobe, Walmart, Intel, Facebook, Marvell Technology, eBay, Samsung Electronics, Applied Materials, Oracle and Synopsys. The group is said to have brought in $40m in revenue in 2018 – twice as much as expected.

However, the merged firm’s move away from Lovells’ modified lockstep in favour of Hogan & Hartson’s remuneration structure – a contribution-based system – was not without its teething problems. There was initially an issue with origination credits, with some partners fearing it would incentivise people to keep their book of contacts to themselves because it was their pay cheque for the future.

It is now generally recognised that the system works both sides of the Atlantic, allowing the firm considerable leeway to reward top performers, although some London-based critics also bemoan that top-paid partners are largely in the US, with Katyal reportedly taking home around $10m and Climan also said to be among the highest paid. There are also accusations (which management strongly denies), that members of the international management committee would give themselves top bonuses from the 15% of profit available annually for that purpose.

‘For me the ultimate test is: are people staying? Our best partners are still here.’
Steve Immelt, Hogan Lovells

Immelt and Hudd defend a remuneration system not purely based on financial metrics but calculated using three criteria: productivity of the team (revenue and profitability), business generation and non-financial contribution.

‘For me the ultimate test is: are people staying? That’s never going to be 100%, but our best partners are still here,’ says Immelt. However, well-regarded London M&A infrastructure and energy partner Steven Bryan left for Paul Hastings in March.

Merging with a DC firm may not have been as effective a route to becoming a transactional powerhouse as a Wall Street merger, with the post-tie-up firm still having a way to go to meet its ambitions, especially building out its New York office. But it has done the firm little damage culturally, with the consensus being that Hogan Lovells remains a broadly happy place to work.

It has also cemented the firm’s position as a leader in litigation and regulatory, both in the US and in London – the City litigation practice has just had its best first quarter on record. Hogan Lovells has cautiously negotiated the post-Lehman years by choosing the least dangerous option.

Still, it’s hard to escape the conclusion nearly a decade after its high-stakes deal, that Hogan Lovells is capable of more. LB

nathalie.tidman@legalease.co.uk

marco.cillario@legalease.co.uk