Rain men – goodbye Harvard Kool-Aid, hello plain speaking at Linklaters’ c-suite

With high-billing duo Charlie Jacobs and Gideon Moore taking the helm at Linklaters there is renewed swagger on Silk Street. Will it be enough to revive the City leader after a troubled post-Lehman run?

For a young South African who saw law as a stepping stone to business, Charlie Jacobs has had quite a journey. Something of an anomaly at Linklaters in the early 1990s, when even by the standards of the City elite, the firm was ‘stiff and English’, Jacobs found the place ‘a bit intimidating’ in the early years. But if he truly lacked confidence then, he hid it well. Now, after nearly a decade as Linklaters’ unrivalled corporate star, the youthful-looking 50-year old has this month begun his role as the City giant’s new senior partner for a five-year term.

What was then Linklaters & Paines has since transformed into the world’s tenth-largest law firm by revenue following rapid internationalisation through the late 1990s. Linklaters struggled in the early 2000s after a series of troubled European mergers but quickly regained form under the leadership of ambitious Tony Angel, managing partner between 1998 and 2007. At its boom-time peak, Linklaters was in striking distance of becoming the world’s largest law firm by revenue, with profitability approaching levels achieved by Wall Street rivals. But such momentum has long since dissipated in the very different market ushered in by the 2008 banking crisis.

The first task for Linklaters’ new-look leadership of Jacobs and managing partner Gideon Moore, who replaced Simon Davies at the start of the year, is reconnecting with a partnership that has become detached from management. The regime of Davies and outgoing senior partner Robert Elliott never recovered from the fallout of a series of partnership restructurings, culminating in an embarrassing vote of no confidence in Davies in 2012 when, despite being the only candidate, he failed to win a simple rubber-stamping vote to continue heading the firm. It took debatable tactics to get Davies’ ratification through on a second attempt, further stoking ill-feeling. The episode resulted in lame-duck leadership, contributing to Davies’ announcement of his early departure in July last year.

There are other major strategic issues to address, including an underweight contentious practice, an uneven performance in corporate and an unloved US practice, if Linklaters is to truly assert itself on the global stage and keep pace with its old sparring partner, Freshfields Bruckhaus Deringer. There is, in short, a lot riding on Jacobs and Moore at a key moment and it will take more than Linklaters’ c-suite generating a few warm fuzzies from its jaded partnership to succeed. But warm fuzzies are at least a good start.

At a meeting with the duo in September, Jacobs was in a characteristically upbeat mood, setting out his approach: ‘You have a chance to shape the culture as a new leadership team. People are genuinely excited by our appointment. We’ve got great people, they work really hard, and everyone thinks this could be quite cool.’

Linklaters is certainly in for a change of style… and diction.

‘You can do it all!’

The initial draw was London. Having grown up in apartheid-era South Africa, Jacobs’ father told him: ‘If I were a young guy, I’d get myself to London. It’s the Big Bang and London’s exploding.’ Jacobs flicked through a legal directory to find a firm with some South African connections. Linklaters, which counted Anglo American, De Beers and Impala Platinum as clients, caught his eye. Jacobs recalls: ‘I did a vacation scheme, liked it, came back as a trainee solicitor. As a young associate I went into [then partner] David Cheyne’s office and said: “Have you got any of that African work? I’d love to do it.” He smiled and said to me: “No one has ever volunteered to do that stuff – you can do it all!” That’s how I got into the mining and energy work.’

Jacobs stood out early on. As one of the City’s most prestigious corporate firms, Linklaters had a reputation for developing astute and technically polished deal advisers, not hard-driving business winners. Jacobs was more informal than many peers and from the start focused on bringing in work. His official profile calls him ‘Charles’ but it has always been ‘Charlie’; for the last decade, saying ‘Charlie’ at Silk Street has needed no surname. In a firm more known for refined gravitas or intellectual intensity, Jacobs was a more obvious cultural fit for Freshfields.

Matthew Middleditch, global corporate chair at Linklaters, recalls: ‘We were working on the IPO for Computacenter in 1998 when Charlie was an associate. What became clear quickly was that Charlie very naturally, not in a pushy way, moved himself to the centre of the table. As a partner I just let him talk and relied on him. He did the deal and remarkably quickly he became the core relationship partner for Computacenter. He brought a great, very commercial approach that worked for clients. He has carried on doing that on a huge scale.’

Jacobs credits two of Linklaters’ biggest personalities in the 1990s – Cheyne and corporate veteran Len Berkowitz, like Jacobs a tall South African – as mentors. Cheyne – a dry, driven and mercurial figure not given to team bonding – in particular struck up an unlikely bond with the young Jacobs. ‘Cheyne and I were different personalities but both straight-talking and got on very well. He was very generous with his relationships, but you had to know how to play him. He came out with a great line that I now give to my young partners. He said: “This relationship is perfect, 85% of the time they call you and if it’s really important they call me. If you ever try to cut me out of that 15% I’ll cut your balls off!” It’s the way it should work. You grow up, you delegate and you push down and share relationships – but don’t cut me out completely. Some people didn’t read that, and he’d cut them out of the deal flow.’

The decision to concentrate on natural resources and Africa paid off during those years, with Jacobs chomping through deals as the region’s biggest mining companies went on acquisition sprees and eventually headed to London to float. In 1994, as a two years-qualified associate, he worked for South Africa’s Gencor on its $1.2bn acquisition of Billiton’s mining division from Shell and the spin-off of that business three years later in a London Stock Exchange float. ‘It was doing those early mining deals where many relationships were born. Billiton was the first South African company to get on the FTSE 100 and that started a spree of South African companies who re-domiciled into London. To do the Gencor and Billiton IPO in the run to partnership was a hell of a grooming. That got me into the mining space – and I’ve continued to mine that ever since.’

While the self-assured Jacobs was making an impression, his fellow associates were surprised by his laid-back attitude to making partner. ‘I thought I’d do two years and go off and do something commercial. People always said “you seem quite relaxed” and I’d respond “I am”, because I’ll keep doing it while I’m enjoying it and if not I’ll go off and do something different – be a banker or go to a corporate. I always thought about my career in two-year chunks as most lawyers do and every two years it got better and better.’

Consolidation in the commodities sector in the 2000s, combined with growing demand for resources from the electronics industry, gave Jacobs a chance to build a reputation as a lead deal adviser following his promotion to partner in 2000. He gained prominence in 2001 when he led on the $38bn merger between BHP and Billiton to create what was then the world’s largest natural resources group. He would go on to become the key legal adviser in the City for Billiton, Glencore, ArcelorMittal and Hochschild Mining.

Jacobs formed part of a thrusting group of corporate lawyers coming through the ranks, among them Chris Kelly, now Asia head of M&A at White & Case, and Dominic Welham, a close friend of Jacobs who died in 2007 at the age of 44 after a battle with cancer. Jacobs’ approach also endeared him to the firm’s young and ambitious lawyers, some of whom would later depart for more individualistic US firms.

Alex Woodward, head of private equity at Linklaters, recalls: ‘It was my first week as a summer vacation student at Linklaters in the late 1990s and it was ticking towards 5.30pm, so all the guys were getting ready to go to the pub. I told them I’d meet them down there but that changed when a young South African lawyer I’d never met before strolls into the room and asks: “Do you want to sign a deal?” I explained I was just a vacation student but he wasn’t worried. We went to the signing room with all the lawyers from the other side and Charlie ran me through the deal step-by-step. I’d done a summer vacation at other firms and didn’t get near a partner, let alone a deal.’

Reputation management

Jacobs’ first leadership role at Linklaters came in 2009 when he was voted onto the firm’s supervisory body, the international board (now the partnership board). However, with Simon Davies becoming increasingly unpopular and decisions poorly communicated, Jacobs was voted off the governance body along with banking partner David Ereira and tax partner Lynne Walkington in 2012 as a reaction against a controversial partnership cull in 2011.

Jacobs’ stock had been damaged by his association with the 2011 partnership restructuring but he regrouped to build links with partners at the coalface, separating himself from an unpopular management pair, and avoided taking on any new management roles after that with the top job in mind. One ex-partner remarks: ‘Charlie suffered from that, as it was done without a proper mandate in a way which partners were unhappy with, and has since become very astute at managing his reputation internally.’

With Linklaters at this point reliant on a handful of key corporate names, Jacobs’ position in the firm’s cornerstone City M&A practice was strengthened when the hugely respected Middleditch left the firm’s London heartland for the Hong Kong office in 2011 and the influential global corporate head Jeremy Parr departed for Jardine Matheson Holdings at the end of 2014.

Jacobs was now overseeing the rise of a new generation of ambitious corporate partners, such as Dan Schuster-Woldan, Simon Branigan, Nick Rumsby, Matt Bland, Iain Wagstaff and David Avery-Gee, and was to himself focus successfully on bringing in business in the run-up to his senior partner bid. ‘I push people hard but get a lot of loyalty back,’ says Jacobs.

According to several accounts, Jacobs has in recent years been the firm’s top biller in London by some margin, with his clients regularly bringing in well over £20m for Linklaters annually during this period. A standout role was spearheading commodities trading house Glencore’s IPO and long pursuit of mining company Xstrata. The $39bn merger, concluded in May 2013 after 450 days of intrigue, tough negotiations and lengthy antitrust reviews, became the biggest mining deal in history. With Elliott’s second term as senior partner set to expire at the end of September 2016, a stellar 2015 for Jacobs and a healthy distance from management made him the obvious candidate to replace him. He ran deals worth over £100bn last year, with the standout being a lead role advising brewer SABMiller on its $104bn sale to rival Anheuser-Busch InBev in what became one of the biggest deals in UK corporate history. SABMiller spent $76m on legal fees for that deal, with Linklaters taking the biggest slice of that.

Stephen Shapiro, SABMiller’s group company secretary, comments: ‘Charlie Jacobs and Nick Rumsby participated in all key board meetings and their technically excellent yet commercial and pragmatic advice and support throughout the extended “put up or shut up” period – which led to six bumps in the offer price – and subsequently, has been invaluable.’

John Davidson, SAB general counsel, adds: ‘Their work has been of the highest standard in all respects and we have relied heavily on their technical mastery, strategic advice, and attention to detail. Their proactive commercial approach, and good humour throughout a long and intense period of negotiations, made them a delight to work with.’

While little competition appeared at first for the senior partner role, with a number of Linklaters’ biggest names having already run in the managing partner race held in 2015, Belgium-based corporate partner Jean-Pierre Blumberg was the only other runner during the early stages. For arguably the most London-centric of the UK’s big four Magic Circle firms, Blumberg was an outsider. In the hustings in Berlin, Blumberg humorously retold a conversation with Cheyne in the race to replace him as senior partner in 2011. Cheyne blithely commented: ‘You should do it, it would be good to have someone from the continent in the race… but you won’t win.’ Jacobs and Blumberg eventually faced competition from London-based M&A partner Aedamar Comiskey, one of Linklaters’ most productive corporate lawyers in recent years and a standout name in a firm with a dismal record in developing star female partners.

 

‘We’ve moved away from the usual top-down approach. I don’t have all the good ideas.’
Gideon Moore, Linklaters

 

The difference in style was evident at the Berlin conference. While his two rivals gave detailed outlines, often covering internal issues, Jacobs gave a broad, off-the-cuff speech stressing his focus on clients and lack of interest in operational detail. Towards the end, Jacobs summed up his commitment to face time and winning business as senior partner, memorably telling partners that ‘clients like a bit of Charlie on the side’, a phrase that became a running joke among partners. In most other firms, office wags would have had that legend on a t-shirt in 48 hours but this is still Linklaters. While Comiskey gave Jacobs a stronger challenge than expected – a few Linklaters insiders find Jacobs’ style a touch laddish for their tastes – the partners did indeed like a bit of Charlie when the result of the partner vote was confirmed in May.

‘I wanted to help drive the firm forward with high energy levels and if I didn’t do the SP role now, I might have some frustration not being part of that journey,’ says Jacobs. ‘I stood on a simple manifesto which was the three Cs: clients, culture and confidence. Everyone asks you how you’re going to split your time, I said I’d be disappointed if I didn’t spend half my time externally focused and that I wanted to continue winning work. I said I will keep respect by winning work for the firm and being out there generating work. I love that side, don’t want to give it up, and the partners didn’t want me to give it up.’

One ex-partner sums up a common view: ‘Charlie has the X factor. Charisma by the bottle. Linklaters needed a leader with that and they’ve got it.’

Running mates?

While different personalities, most partners have warmed to the joint ticket of Moore and Jacobs. After a period under the technocratic Angel and Davies, who ‘drank the Kool-Aid from Harvard’s fountain’ as one partner puts it, the new duo share reputations as pragmatic team builders.

Sheffield-born Moore is quieter and less flashy than Jacobs. While he has since his elevation developed a tendency for jargon-laden management speak, he peppers his speech with one-liners and self-deprecating humour. Like Jacobs, he has huge loyalty in his practice group, having run the global banking practice until 1 January when he took over as managing partner. Both men have little interest in the status symbols of the job, though Moore notes: ‘It did go a bit far when I went to Davos and my PA gave me a bus timetable.’

Moore has proven business-winning credentials having been one of the key partners, alongside the former Wilde Sapte contingent of Robert Elliott, Nick Syson, Brian Gray and Philip Spittal, that transformed the firm’s banking practice to become a challenger to Clifford Chance and Allen & Overy (A&O). Moore himself was a lateral recruit, arriving from Dibb Lupton Alsop (now part of DLA Piper) in 1999. JP Morgan became one of his biggest clients.

Unlike the senior partner race, there had been no clear front runner for managing partner. Moore ran against finance and projects head Michael Kent, Asia managing partner Marc Harvey, disputes chief Michael Bennett, Western Europe managing partner Pieter Riemer and co-head of operational intelligence Tom Shropshire. An appointment decided by the partnership board, Moore made a three-man shortlist against Bennett and Harvey before the litigator dropped out of the race for personal reasons just before the final decision. Moore then beat Harvey in the run-off. One partner surmises: ‘To me, none of the managing partner candidates stood out. I didn’t mind Gideon or Marc. The fact Gideon was in London won it for him.’

During the leadership race, Moore had a few detractors, mostly in corporate as Linklaters’ M&A and finance teams have frequently indulged in mutual shoulder-shoving over the years. But since his elevation, Moore has built support on the back of a consensual approach, while some partners note that Friday night drinks are once again taking place on the eighth floor where management sit.

‘It takes a bit longer to get to know Gideon, but once people have met him there’s been trust and respect,’ says one finance partner.

Moore comments: ‘We’ve tried to move away from the usual top-down approach. I grew up as a transactional lawyer and you don’t have a successful career in leveraged finance if people don’t get on with you. The other thing that will change is that I don’t feel I have all the good ideas. Companies instruct Linklaters as everyone around the table will be able to contribute. Why shouldn’t we look at it the same for ourselves?’

Jacobs summed up his commitment to face time and winning business as senior partner, memorably telling partners that ‘clients like a bit of Charlie on the side’.

The warm words for the Jacobs/Moore pairing go beyond the usual platitudes, with many of the less easily impressed Linklaters partners – both current and former – forecasting an effective partnership.

Blumberg says: ‘They are a very good combination. We have a banking partner as MP, which is a bit more of a technical practice, then we have a corporate going into SP, which is a very outgoing, market-facing practice. That combination of Charlie and Gideon should work well. We haven’t had such a pair in many years.’

Jacobs adds: ‘One of the things people have enjoyed about Gideon’s term so far is his openness and approachability. We’re saying to your backbench partner – who doesn’t like management and has a healthy mistrust of it – “We are partners as well and will earn your respect.”‘

The focus on cultivating the troops is clear. During an hour-and-a-half interview with Legal Business, Jacobs uses the word ‘love’ 11 times. A sample: ‘Lawyers are highly able, but highly needy people, who need a lot of love and need to be told a lot of times what a great job they’re doing. All law firms fall into this trap of giving our associates feedback but are poor at giving partners feedback. They just want love. They want to be told how great they are, and frequently. You’ve got to love and talk to them. You’ve got to tell them you’re thinking of them. I enjoy that side of the role.’

An interesting point will be how the pair learn to work together. This early in the day, the body language between the pair is still uncertain. Despite common ground as paid-up deal lawyers, the approaches and areas of focus are considerably different. Moore is focused on bringing operational polish back to Linklaters. This reflects the view that the early innovations in processes, infrastructure and client management under Angel, which had once given Linklaters a real edge over rivals, had not been built on, allowing more progressive firms such as A&O to move ahead with slicker back-office operations.

Jacobs, who will not sit on the executive committee, says he will ‘restrict the internal meetings and admin’, to focus on clients, people and chairing Linklaters’ partnership board.

‘When you have a new team, partners want it to work. They’ve voted for you and so it’s: “You know what we didn’t like about the old guys? Make it work!” So you’ve got goodwill, but then you’ve got to deliver.’

A sign of weakness

While Linklaters hit record revenue and profit per equity partner (PEP) in the last financial year, with top line up 3% to £1.31bn and PEP hitting a new high of £1.403m, it has been the slowest growing of London’s big four, with income up just 9% over the last five years. Performance on profitability – a major focus under Davies – has been better with a margin of 47% and profitability only seriously outgunned by Slaughter and May.

More problematic, the 2,600-lawyer firm is often claimed to lack the stars of bygone years, even in its core corporate practice, an assertion insiders concede has some basis, in part due to the loss in recent years of a stream of productive City partners to US rivals (see box).

Linklaters had once made a virtue of its ruthless, driven management style. By mid-way through the Davies era, the need for constant upheaval spoke less to ambition and drive and more to problems with partnership quality and a basic failure to motivate the troops. What once looked like strength had become a glaring sign of weakness.

The two big strategic issues facing the new leadership are clear – what to do regarding remuneration and how to build a credible US practice. Heavy losses in private equity reflect these cultural frustrations and the pay differential that has emerged between US firms and lockstep-restrained UK firms in London.

The last 12 months have seen Kirkland & Ellis hire former Nordic head of private equity Roger Johnson, private equity partner David Holdsworth, ex-head of real estate M&A Matthew Elliott, rising star Stuart Boyd and UK head of competition Paula Riedel. These departures came as a blow. (That group are understood to be worth well over £30m of billings annually.) The loss of German head of private equity Rainer Traugott in January to another US law firm, Latham & Watkins, is another example. Private equity has, of course, been a running problem with Ian Bagshaw and Richard Youle – who co-headed the group – departing in 2013 for White & Case (though Jacobs remains on good terms with ‘Rich and Ian’).

Numerous attempts to alter remuneration have not progressed, with Bennett’s review of the system – requested by Davies 18 months ago – leading nowhere in part thanks to the former managing partner’s early exit to Lloyds Banking Group at the start of 2016.

 

‘We’re saying to your backbench partner – who doesn’t like management – “We will earn your respect.”’
Charlie Jacobs, Linklaters

 

 

And there are wider questions over Linklaters’ practice mix. Unlike Freshfields, Linklaters is relatively light in key contentious areas such as commercial litigation, arbitration and global investigations that provide a natural hedge to the practice. While profitable, at 12% of turnover, Linklaters’ disputes practice cannot compete with top litigation players in the City.

The firm’s impressive finance practice, meanwhile, has been affected by the intense margin pressure from banking clients, triggering a push to bring in more sponsor and funds clients to rebalance the practice.

Moore admits that disputes is ‘somewhere Linklaters have lagged’ and a recruitment drive is expected. He continues: ‘Our dispute resolution practice needs to grow. We’ve always had quality individuals, they just haven’t had an appetite or seen it as their role to go and build the business the market suggests we ought to have. The big difference is that disputes now has people who are similarly wired to the banking team, when I and others came in, drove the business and it became a tier-one practice. What you don’t want to do though is just grow so that you’ve got 18% of people but the same revenue.’

Such issues are dwarfed by the American question. With the smallest and least effective US practice among the City’s big four, it is conceded that the firm needs a considerable upgrading of its practice to provide even the level of service expected of Linklaters, never mind attempt any form of frontal assault on the vast US market.

While Jacobs and Moore both cite a desire to expand the US practice, they stop well short of making commitments to heavy investment in the practice.

A simple business

While little of the pair’s strategic plan was revealed during the elections, Moore has begun addressing some of these issues. As Jacobs campaigned for the senior partner role, Moore proposed a raft of small but significant changes to remuneration at the partnership conference in Berlin that will free up more profit to reward and retain top performers. The firm currently operates a modified lockstep running from 10-25 points with each point worth around £74,000. Partners typically start on ten points and increase 1.5 points a year until they reach the top of the lockstep. There are also discount factors, with Germany operating on 0.9 of London, Belgium 0.7 and so on. The discount factor is also used in some supporting practices such as real estate.

According to one partner, one proposal could see that ratio of the lockstep stay the same, moving the lockstep to a 20-50 point ladder, but with a gate around the eighth year of progression. The proposed changes would also make it easier to move partners at the top of the equity down the ladder, with a review triggered after five years at the top of the equity. While the gate is at a relatively high point, the measures would help to boost profit-per-point and allow more scope to reward high performers.

What is notable is that such an approach would attempt to deal with remuneration within a core framework, unlike the response of A&O and Freshfields in having ‘super-point’ packages built on top of the core remuneration ladder, a model that has been divisive when used by Linklaters’ peers.

Inevitably Moore is cagey on the details at this stage, though his comments suggest little support for bespoke deals to attract marquee US partners and more emphasis on flexibility to manage profitability across its global network.

Moore also appears intent on avoiding explicitly backing one option to avoid appearing to push the partnership in one direction, in keeping with the newly-consensual tone on Silk Street. Linklaters expects to finalise its proposals before they go before the wider partnership in November.

‘Charlie has the X factor. Charisma by the bottle. Linklaters needed a leader with that and they’ve got it.’
A former Linklaters partner

‘I would not suggest a change to our lockstep with a view to being able to attract a US partner who would be outside our arrangement,’ says Moore. ‘That’s not a direction we want to go to. In order to get there, the downside might not be worth it, and as an institution we are not there yet.

‘The partnership understands the tune we currently dance to and they will vote on what’s best going forward. My credibility would be tarnished if I wasn’t proposing options and saying: “What do you think?” I wouldn’t be bold enough to stand up and say: “From tomorrow – it’s all change.” We’re a partnership and the partnership will decide.’

One partner comments: ‘It’s maths. It will be consensual when people move down. It’s a good thing, people need to manage their careers and, if anything, this will extend the careers of many people. The only tool we had before was to restructure when too many people got to the top of equity.’

Many also expect bureaucracy to be peeled back. Jacobs’ distaste for red tape is well known and he has long admired the approach of client Glencore, whose business cards carry no titles. Jacobs is similarly uninterested in the wider ambassadorial, talking-shop duties undertaken by some peers and predecessor Elliott, preferring to focus his considerable energies on clients, potential clients and colleagues.

‘It’s a simple business,’ says Jacobs. ‘We can over-complicate things and I wanted to set the tone from the top.’

It will be interesting to see how the pair manage to combine Jacobs’ breezy rainmaking instincts with Moore’s focus on nitty-gritty improvements in the process and interest in updating the firm’s model, including machine learning and automation.

Still, it is hard to imagine a leadership team better suited to the considerable task of bringing Linklaters’ partnership back on board or with a better cultural understanding of the institution. Moore concludes: ‘Quite a few other organisations would like to have our problems. We have to remind our fellow partners most of it is pretty damn good!’ LB

matthew.field@legalease.co.uk

For more comment on Linklaters new leadership, see: ‘Winning hearts and minds (but mainly hearts) at Linklaters‘