Reborn supremacy – inside the unlikely White & Case revolution

‘Stick that in your pipe and smoke it!’ exclaims Oliver Brettle, White & Case’s London executive partner, before getting up and heading for the door.

Given an amicable discussion of the considerable recent growth of White & Case’s City arm, the reaction to a question about the firm’s disputes practice seems a little abrupt.

Relief sets in as instead of storming out, Brettle graciously offers another cup of coffee to Legal Business. Being on the verge of revealing 2017 financial results that speak of 13% revenue growth in London to $328m – meaning City revenue has effectively doubled in six years – amid a 10% uptick globally to $1.8bn is hardly cause for conflict.

Brettle’s uncharacteristic hint of defensiveness speaks to the impatience with its lingering reputation as one of global law’s also-rans, a reputation it feels recent years should have buried.

A case in point was an unflattering Legal Business feature back in 2010, when Number 5 Old Broad Street was a less upbeat place. The office was then still overshadowed by the 2008 departures of playmaking finance duo Michael Goetz and Maurice Allen to Freshfields Bruckhaus Deringer.

In the foreground had been a divisive 2007 election that installed projects veteran Hugh Verrier as the firm chair, which exposed the divisions in the firm between its deal finance and projects teams and those wanting to focus on key hub markets over its emerging economies branches.

And in the depths of the financial crisis, it was inevitable a firm so entrenched with banking clients, was still reeling, leading to more than 400 job losses in 2009, including 95 in the UK.

The redundancies were brutally highlighted in a New York Times article of 2009: ‘A study in why major law firms are shrinking’, which received little notice externally given the wave of cuts sweeping peers but left management bitterly stung at the time.

And in 2010 the firm would go on to see a devastating team exodus for Latham & Watkins, depriving it of four productive City partners, alongside eight further finance partners in the Middle East and New York.

Today, even its staunchest detractors admit Verrier and White & Case have gone on to fare much better than expected amid an aggressive growth drive that suits the firm’s culture much better than retrenchment and cost-cutting.

Reflects one ex-partner who left the firm around the time of that article: ‘In fairness to Hugh, he was deliberately focused on improving profitability and has done a very good job. He chopped some of the partners at the bottom. It has culturally changed the firm for the better.’

White & Case is halfway through its 2020 strategy, which – ironically, given the reservations about Verrier’s commitment to the City practice – put London and New York at the centre of its ambitions and is explicitly determined on expansion in core markets. The plan was to have 500 lawyers in London and New York by 2020 and the firm looks on course. By office, the firm’s London base made the second-largest contribution to total revenue after New York.

By that token, the 446 fee-earners (including 105 partners) are looking forward to a major refurb of the meeting rooms and canteen area, which will from early April include a bar.

‘London felt like the poor cousin after New York got the new offices so we decided to create a bright collaborative space to reflect the changing concept of the office,’ says US securities partner Melissa Butler of the investment.

The firm ran a competition to name the new space, giving rise to the inevitable Boaty-McBoatface-style suggestions. Disappointingly, those ideas failed to make the cut, and neither did another suggestion, ‘Brettle’s Bonanza’. The latter would have been apt, given the firm’s reversal of fortune. The winner, ‘Broad Street Kitchen’, just doesn’t have the same ring.

The big breakthrough

In 2015, the firm set out a strategy to drive profitable growth in London and New York, crucially in disputes, M&A and capital markets and in the industries of financial institutions, oil and gas, private equity and technology. The move would mean a clear pivot from its infra/emerging markets business back towards mainstream transactional and disputes work in core centres – defying the predicted agenda of Verrier, who had previously headed its branches in Moscow and Ankara.

Brettle and Co have turned this into a simple mantra: ‘Going toe-to-toe with the Magic Circle.’

When asked to pinpoint when White & Case started successfully playing footsie with the London elite, partners, peers and ex-partners agree that the turning point was reached some two years before the strategy shake-up, with the hires of private equity rainmakers and long-time wingmen Richard Youle and Ian Bagshaw from Linklaters in 2013.

Notes one ex-partner: ‘The big breakthrough has been the PE practice. The firm had hardly added anyone in corporate, it had been weak. The turning point was when it started to build a proper corporate practice. Bagshaw and Youle transformed it.’

The hires fired a dramatic expansion of the deal practice, with work streaming in from 3i and HgCapital, a key client of Youle. The pair soon counted among their clients Mid Europa Partners, Global Infrastructure Partners, Triton Partners, Novator Partners, CVC Capital Partners, Rhône Capital, Bridgepoint and Arle, while the firm now has 51 lawyers covering private equity, including 11 partners in London. The team was bolstered in 2015 with Clifford Chance (CC) partner Caroline Sherrell and Debevoise & Plimpton’s Kenneth Barry, while this March the firm announced it had hired Mike Weir from Jones Day’s City private equity practice.

Youle’s departure last year to Skadden, Arps, Slate, Meagher & Flom has been a double-edged sword for the practice. On one hand it deprived the practice of a muscular practitioner who had done much to usher in a more driven style to the firm’s City arm, while the long-term friendship of Bagshaw and Youle, dating back to Eversheds, had proven highly productive.

‘Rich left a big hole. The whole team had to make up for that loss of his charisma, but we are a better team for it.’
Ian Bagshaw, White & Case

 

Yet in contrast to Bagshaw’s focus on new clients, Youle’s practice was based around a portable business with several core clients like HgCapital and Montagu. Never one for diplomacy, Youle had clashed with some peers and there had been some raised eyebrows at his call for Katja Butler to be made up to partner earlier than was traditional at White & Case (Youle disputes this version) and relationships had clearly frayed.

Now that the dust has settled, Brettle and Bagshaw are philosophical, while the practice has so far regrouped effectively (one London partner claims Bagshaw was largely responsible for bringing in $40m of business to the office last year). ‘Rich [Youle] is a fantastic partner with a big personality, he left a big hole,’ concedes Bagshaw. ‘The whole team had to make up for that loss of his charisma and qualities, but it has been a catalyst for change and we are a better team for it.’

To underline the point, Bagshaw launches into a rundown of his record year, by value and volume of deals, at the coalface of EMEA private equity in London. Bolstering the deal book was the €1bn IPO of marquee Polish telecoms giant Play, led out of London by Bagshaw and Jill Concannon, who is widely cited as a rising deal star.

‘Play has been a core client of the team since I joined White & Case. That mandate wouldn’t have been possible at Linklaters,’ says Bagshaw. ‘The US financing element is more relevant for a US firm. It justified my belief in the firm and played on the strengths of the ECM practice.’

Another highlight was acting for Bridgepoint on the £750m acquisition from HgCapital of UK vehicle fleet management group Zenith. Bridgepoint was a trophy win for White & Case in January 2017 and the deal was one of the sponsor’s largest investments. ‘Bridgepoint is a client close to my heart and the deal is a building block for repeat work,’ adds Bagshaw.

Also last January, the team went on to advise Bridgepoint and Nordic Cinema Group on the $929m sale to AMC Entertainment. The team scored a hat-trick that month by also advising Harbour Energy, the investment vehicle managed by EIG Global Energy Partners, on a deal to lead the $3bn acquisition by Chrysaor of a portfolio of oil and gas assets in the North Sea from Shell UK.

Advising CVC Capital Partners leading a consortium on the acquisition of a controlling stake in pharma company Alvogen in 2015 was a watershed moment for the team’s relationship with CVC, leading to a subsequent deal advising CVC portfolio company Alvogen on its acquisition of County Line Pharmaceuticals in the US.

Bagshaw remains a Marmite figure in deal circles, though the admirers outweigh the detractors and even his critics frame it with grudging admiration. In person, a ball of entrepreneurial energy, tactical nous and blarney, he talks a lot about how the team is the focus, while mainly talking about himself. Yet, amid the stream-of-consciousness, he is also one of the most thoughtful partners discussing the business of law, more so than most managing partners, let alone deal junkies. It is hard to escape the conclusion that his singular talent has found its perfect platform at White & Case.

There is also a lot of confidence around the firm’s equity capital markets (ECM) team, with the recruitment of Ashurst partner Jonathan Parry regarded as providing a palpable lift since joining the firm on the ominous date of the June 2016 referendum.

‘The real Rubicon-crossing moment was Jonathan Parry getting the company-side mandate on the Alfa Financial Software IPO where Freshfields picked up a role advising the underwriters,’ says Brettle.

Valued at more than £1bn, the tech float is widely touted as a breakthrough deal for the firm in 2017, given the paucity of London listings. Transactions like this contributed to White & Case topping Bloomberg’s league tables for IPOs in EMEA. Asked which firm came second in the table, Brettle retorts: ‘If you’re number one, you don’t care who’s number two.’

White & Case wins plaudits for a management style that avoids the death-by-committee bureaucracy of London leaders and the leadership-in-your-lunch-break excesses of billing-obsessed US peers.

‘This is a rare example of a non-Magic Circle firm executing on a premium listing,’ says Parry, adding that the mandate has led to work for other parts of the firm. ‘This is proof that if you invest strategically, it can pay off.’

Stuart Matty has been global head of capital markets since 2012 but is a White & Case veteran, having joined as a mid-level associate some 18 years ago in the Maurice Allen era. Matty reflects on the most important developments for the practice in the last five years: ‘The debt capital markets practice has matured into a tier-one practice and the equity capital markets practice has gone from being a support function to being seen as a big player in its own right.’

Inigo Esteve, who was hired as a partner in 2014 from CC has been another productive addition for the ECM team along with Parry, argues Matty.

Even more significant has been the 2016 recruitment of Patrick Sarch, one of the most high-profile public M&A partners yet to quit a City leader for a US shop. The recruitment was aimed at bringing in a name that the firm could use to build on its success in private equity into general work and it did not just happen.

Latham & Watkins had courted the clubbable Sarch, with co-vice chair Richard Trobman dogged in pushing to secure his services. But it was largely the intervention of Bagshaw that secured Sarch against competition from a firm with deeper pockets and a stronger brand. (Sarch, Bagshaw and fellow corporate partner Guy Potel have been on good terms going back to their CC days.)

Brettle notes: ‘Patrick ticked all the boxes. We wanted to grow in London – he ticked that box. We wanted to concentrate on financial institutions, tech, oil and gas and PE – he ticked that box. At CC he was co-head of the global banks sector team, so he ticked that box. We wanted to concentrate on M&A, disputes and capital markets – he ticked that box too.’

‘I breathe pressure,’ quips Sarch, before launching into a progress report. ‘The main thing that’s kept me off the streets is the Co-op Bank restructuring,’ he says. Sarch had advised Co-op while at CC on its restructuring and, after joining White & Case in January, he was asked to act as an independent adviser to the board. ‘I played nicely with ex-colleagues from CC in the summer.’

One former colleague notes that the Co-op mandate was a good win for Sarch but expresses surprise at his role last year acting for an Anchorage Capital consortium, which also included Davidson Kempner and GIC, on its sale of a majority interest in Irish telecoms business eir for €3.5bn.

‘I was surprised he turned up on that because it’s a private company. I get the feeling that he’s not getting the big-ticket M&A that was his bread and butter at CC.’

Nevertheless, Sarch remains a widely respected performer and it is conceded that building a pipeline in this kind of work is an 18-month affair, even with a large team around him. Anchorage is a longstanding client of White & Case and is one of the alternative capital providers along with Silver Point and Oaktree, which is an increasing focus.

‘We didn’t hire him just to do repeat M&A, it’s a rare corporate vehicle that has repeat M&A as its strategy. Also a priority is the financial institutions work,’ argues Brettle. The firm currently has around 30 partners covering corporate in London, with the practice generating over $80m in 2017, substantial by any yardstick.

A bit of personality

Against stiff competition, there is more nonsense talked about culture in the legal profession than any other topic, but it is widely conceded that White & Case’s City arm actually has one, and one that even the detractors salute. An evening drinking with partners in a Tower 42 bar with panoramic views of the City feels more like a university reunion than a networking event.

From the point it began investing seriously in English law in the early 2000s, the firm was marked out for hiring strong-willed British lawyers with personalities and peculiarly local ways of doing things, rather than the usual practice of US peers of imposing Americans.

‘White & Case facilitates success. You can fly high in a way you can’t at the Magic Circle.’
Patrick Sarch, White & Case

The attempt to assign the US finance partner Mike Goetz to keep rainmaker-come-raconteur Maurice Allen in check back in the 2000s famously backfired when Goetz became a convert to British sport.

The firm has long cultivated English lawyers that have also managed to maintain a strong chemistry with its US practice and considerable clout within the firm. Part of the fallout after the 2007 election had been the fears (which turned out to be overblown) that the stiff Verrier had little interest in London, in contrast to his easy-going Anglophile predecessor Duane Wall, who enjoyed working with senior London lawyers.

Brettle is also given much credit for effectively presiding over the office during a period beset with turbulence, a job that has meant effectively managing the competing egos. He also enjoys good relations with the US, which has benefited the City arm in securing investment. Brettle was re-elected to the firm’s influential executive committee in 2015, alongside Donald Baker in São Paulo and New York banking partner David Koschik.

The New York/London duopoly has endured, helped by the fact that White & Case’s Manhattan office has never had the pedigree or arrogance typical of Wall Street peers.

The firm is also lauded for striking a winning balance between the diverging approaches of Magic Circle and New York firms to foster an energetic and entrepreneurial culture, which plays well with transplants from London law firms.

It wins plaudits for a management style that avoids the death-by-committee bureaucracy of London leaders and the leadership-in-your-lunch-break excesses of billing-obsessed US peers. Few decisions are put to the vote. One exception occurred years ago amid a fraught debate about moving to Canary Wharf. The London office was largely unmoved about the prospect of a transfer to the sterile Docklands, while the US was in favour. Eventually veteran IP litigator David Llewellyn found the language to bridge the rare transatlantic divide by telling New York colleagues: ‘It’s like you moving to Hoboken, New Jersey.’ Common sense prevailed.

Sarch sums up the can-do spirit on Old Broad Street: ‘Ian [Bagshaw] is a force of nature and White & Case facilitates that. The success is that someone like him can fly exceedingly high. You can’t do that at a Magic Circle firm, because of lockstep and other factors.’

It is not all about the dollar. ‘It’s hard to criticise the firm… it’s a broadly happy place. It’s a successful group of lawyers,’ says one former partner, expressing common sentiments. ‘People don’t stay there because it’s the best money they could get. The culture is sociable and there is good interaction between the international offices.’

The firm has managed to lure 20 lateral hires since the start of 2015, most recently this year Weir, well-regarded tax litigator Hannah Field-Lowes from Weil, Gotshal & Manges, and Dominic Ross for corporate from Ashurst.

Another promising hire has been capital markets partner Chris McGarry from Ropes & Gray, while the firm bolstered its already solid reputation in antitrust by recruiting Marc Israel from Macfarlanes. McGarry is credited with a breakthrough deal, opening up a new class of client when he advised Trafigura, the commodities trading and logistics company on the establishment of the world’s first ‘true sale’ commodities securitisation programme.

And solid financial performance in recent years has not hurt. Global profit per equity partner (PEP) for 2017 has hit $2.26m. According to two separate accounts, its compensation ladder pays top-earners seven times that of junior partners. One recent partner puts entry earning for partners in the $600,000-$700,000 region, rising above $4m for top earners. According to this account, the firm can pay seven-figure bonuses to stars, in theory pushing earning above $6m, though the bulk of partners are earning between $1m and $1.7m.

Top earners are suggested to include Bagshaw, Sarch and Gareth Eagles, who has driven growth in the firm’s direct lending and alternative finance clients. Others high billers likely to be taken care of include projects veteran Philip Stopford, litigator John Reynolds, restructuring partner Christian Pilkington and rising star arbitrator Charles Balmain. Not all hires deliver, of course, and there have been a handful of groan-inducing misfires in recent years but the dash for growth has largely paid off.

This has been backed up with office launches in the last three years: Houston and Boston in the US; Seoul, Sydney and Melbourne in Asia; and Cairo and Tashkent. The US launches in two key regional markets and a dramatic Australian launch with a ten-partner team from Herbert Smith Freehills all look to be significant additions.

The growth story

The debate remains in the industry about how far White & Case can go. While peers cannot quite get used to the idea of seeing a firm once bracketed with Baker McKenzie as a potential world beater, it is conceded that White & Case has real momentum.

The big question remains whether the bet of investing heavily for the medium term can drive Global Elite-levels of profitability rather than dilution. Many peers question if the 2020 goal of getting PEP to $3m can be achieved for a firm with such broad global spread.

The firm will need more growth in the US to drive such ambitions – though relative improvements in its New York office, which generates in the region of $350m, bode well. There is also talk of further launches in the US.

It should also be remembered that for all the talk of the trade-offs between size and profitability – the trend of the last ten years has shown many firms like Kirkland & Ellis, Ropes & Gray, Latham and Quinn Emanuel Urquhart & Sullivan, driving dramatic increases in profit growth off the back of strong top-line growth.

On this basis, White & Case’s gamble on being long-term greedy looks to be worth the benefit of the doubt. And though the firm is focused on growth it has not been dogmatic about it, increasingly focusing City growth on its bustling ranks of young partners and lowering leverage rather than piling on associates (the firm is also investing in project management).

Peers cannot quite get used to the idea of seeing a firm once bracketed with Baker McKenzie as a potential world beater.

Bagshaw comments: ‘When I joined, White & Case was not the obvious choice for private equity. Lawyers are slow to accept a new reality – there’s always an established order that will remain for all eternity. Now they can see we’re doing well. We are winning more friends.’

A major question will be whether the firm can secure its major breakthrough in corporate. Says Brettle: ‘It will be a tough ask for us to convince people that a US firm is best for M&A London market work but we will prevail, like we did with PE. We have prevailed in PE and now we’re one of the best.’

Promisingly the firm has scored two recent UK plc panel wins – to advise Smiths Group and Johnson Matthey. While Sarch concedes that the latter was won by his colleague Marcus Booth, the panel win has already led to work on three connected M&A transactions as a result.

He had been advising UK debt collection business Cabot Credit Management on a dual-track potential IPO/M&A deal before the IPO was pulled last November. Lazard, the financial adviser to Cabot, had been dubious, saying White & Case was not known for listed work. ‘When they saw Jonathan Parry and me in the room, we got the gig,’ says Sarch.

There will be questions over what happens if there is a change in the management team of Verrier or Brettle, with Bagshaw seen by some as likely to want to take on more responsibility.

Yet the strange, unsettling truth is that White & Case is doing a lot better right now than anyone expected and there is no sign yet – beyond another patented Bagshaw flounce – that its momentum is spent. Global Elite status is nearly there and yes, disbelieving reader, you can put that in your pipe and smoke it. LB

nathalie.tidman@legalease.co.uk

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