The veteran deal bankers have moved on and there’s a new pecking order with US banks and credit funds staking their position in Europe’s leveraged finance market. Legal Business assesses the debt professionals that lawyers want on their speed dial.
‘The crisis hit and Paul de Rome, who was then head of leveraged finance at Citibank, said: “You’ve got to shoot someone – I’ll fall on my sword – take me down.” It was a pure sign of class I thought. He was 50. He’d made his money, and was letting the young ones keep their jobs. Looking back I realise the reason Paul was such a successful old dog was because he knew it was just the first stage of the crisis. When he got shot, all his shares vested and he’s currently a partner in private equity firm EQT, which is THE place to move to.’
Indeed. The faces have largely changed. Amid the upheaval in the leveraged finance and syndicated loan desks in the wake of the banking crisis – many houses retrenched, senior figures departed and new players emerged in a deal finance market hugely changed since the boom.
Slade, de Rome and Yu arrived at EQT, also home to the former head of leveraged buyout at HSBC, Patrick de Muynck. Meanwhile, Sinik, who carried UBS up the leveraged buyout rankings in the late 2000s as global head of corporate credit, joined private equity house TowerBrook Capital Partners before founding Metric Capital Partners. One Magic Circle banking partner comments: ‘John Sinik played the investment banking system better than the banks played the rest of the world. He went to work for George Soros and now he’s head of his own debt fund.’
Flynn and Coles have also gone onto big roles, with even bigger pay packets, taking positions as chief executive of Haymarket Financial and chief operating officer of Actis Capital respectively. ‘Sitting in banks getting paid in shares will never get you rich as they’re not worth anything,’ reflects Maurice Allen, London senior partner at Ropes & Gray.
De Rome comments: ‘I thought I was going to be a Citi lifer but I could see the writing on the wall. It was just getting ludicrous as every quarter you’d just get a new headcount target so then you’d just try to pick which ones [to make redundant]. While I wasn’t a target, I felt that it was a good time to move on and make space for other people.’
Close relationships were formed between Magic Circle lawyers and the deal finance leaders at the banks, so much so that James Johnson, a finance partner at Clifford Chance (CC), invited Slade and de Rome to his wedding.
Nick Syson, co-head of Linklaters’ leveraged finance practice, comments: ‘During the boom, leveraged bankers were the rock stars of the market and there were a set of people like Chris Coles – who started at Barclays in the late 1990s and created a leveraged finance business that came in the top four of the deal tables, which he should never have been able to get away with. I acted for Permira on a bid for Inmarsat and someone was explaining how you insured these satellites and no-one got it. Then Chris solved it. It was like watching George Best play football as he’s in the corner surrounded by five blokes and he’s going to get the shit kicked out of him, but the next time you see him he’s the other side of the five blokes with the ball at his feet. You go: “I’ve watched it – but I’ve no idea how you did that.”’
The absence of such established hands makes some veteran lawyers nostalgic, arguing the current breed of corporate finance bankers lack charisma and experience. That partly reflects a more complex market in which senior lenders have less dominance amid a multiplying array of non-bank institutions.
The replacements for this band of dealmakers are of a different style. More corporate certainly, with a little of the edges and personality sanded off for good or ill. There is less camaraderie between the bankers and lawyers regularly called upon to handle the City’s biggest deals, with lunches and round table negotiations now less prevalent for a generation of deal professionals more used to communicating via e-mail and conference call.
Recognising the changes in a more complex credit market, Legal Business conducted a series of over 20 interviews with finance lawyers and debt professionals to gauge the key dealmakers currently moving the market, and which bankers the most ambitious finance lawyers should be cultivating. The list extends not only to the US-based houses that are increasingly dominant in the City but also the European players aiming to stage a recovery and professionals working at buyout houses and private debt funds.
Having a fantastic year
If the players have changed, Europe’s credit markets have revived considerably over the last 18 months. The M&A market was busier in 2014 than in any of the three preceding years, propelled by a buoyant first half that saw the recovery of Europe’s leveraged loan market, with 133 deals worth €66.1bn allocated compared to 62 deals worth €44.4bn in the first six months of 2013, according to a recent report by Debtwire.
The most obvious development since the credit boom imploded is so stark as to barely need stating: the already muscular position of US investment banks has further strengthened at the expense of retrenching UK and European rivals. The vogue over the last two years for borrowers to tap US investors via bonds, private placements or term loans has further cemented that dominance.
Four of the top ten banks for syndicated loans backing European M&A were American: with JPMorgan in second place, Citi in third, Bank of America Merrill Lynch (BAML) in sixth and Morgan Stanley in seventh. Goldman Sachs, though ranked outside the top ten this year, is still cited by many as the pace-maker for top-tier finance deals alongside JPMorgan, and has arranged more high-yield packages to back European deals than any other bank this year.
Matthew Tobin, a banking partner at Slaughter and May, comments: ‘The UK banks are on the road to recovery but the key driver for deals involving European companies has been institutional money in the US that hasn’t been available in Europe. So even if they’re using JPMorgan in London, the backing is coming from the US.’
JPMorgan, which has arguably the strongest deal finance desk in London, has been vying with Deutsche Bank in the race to be the top corporate finance bank in Europe, in the view of many observers.
Stephane Zeghbib, who left Morgan Stanley to become vice president at fast-growing advisory boutique Zaoui & Co, comments: ‘US banks are more dominant than they were pre-crisis. JPMorgan, Citibank and Bank of America Merrill Lynch are being more aggressive with financing, both on the quantum and on the terms than some of the European banks. However, Deutsche and Credit Suisse remain leaders in some products.’
Ropes’ Allen cites JPMorgan’s role on media group Liberty Global’s purchase of Germany’s third-largest cable TV operator KBW from EQT as one of the most innovative acquisition financings he has seen in recent years. Bidding against private equity house CVC Capital Partners, which had an advantage due to its small presence in the media space and therefore having no potential competition concerns, Liberty was on the back foot, with EQT fearing that a sale to the group would lead to long delays with European antitrust authorities. To trump CVC, Liberty and banks JPMorgan, Credit Suisse and Deutsche Bank persuaded EQT to raise $3.19bn in debt, a sum nearly equivalent to the money Liberty was paying EQT for KBW and meant the proceeds of the sale would come through immediately. Liberty had the cash available through a high-yield bond with JPMorgan but there was a risk.
Mike Goetz, Ropes & Gray’s co-head of finance, comments: ‘Liberty used high yield and the flexibility they got with their finance meant EQT could get the money there and then, instead of waiting a year for competition clearance to come through. There’s a risk there if the deal fell through, but JPMorgan told EQT they would buy the debt off them as they were happy they could sell it.’
For many, such roles underline JPMorgan’s current status as the name to beat in European corporate finance on the advisory and finance side with the bank having advised on four of the top ten deals in Europe this year. UK M&A head Dwayne Lysaght is one of the City’s biggest names, having advised British engineering group Invensys on its £3.4bn takeover by French rival Schneider Electric in July 2013 and Virgin Media on its takeover by US cable giant Liberty Global for $24.1bn in February that year.
JPMorgan was AbbVie’s sole M&A adviser on its collapsed bid worth over $50bn for Irish pharma group Shire and had put an undrawn bridge facility together to finance the deal. Lysaght, alongside managing director James Robinson and industry head Laurence Hollingworth, advised in London.
Mike Flockhart, a finance partner at Herbert Smith Freehills, comments: ‘JPMorgan are having a fantastic year in UK M&A. They’ve got an incredibly strong franchise, and they’ve really leveraged that to get involved in a lot of the capital markets deals too. A high percentage of deals we’ve worked on this year have involved JPMorgan, including the AbbVie-Shire proposal. By being close to their clients and providing broking services, JPMorgan are naturally in a good place when transactions come along.’
JPMorgan also lined up alongside the resurgent Deutsche Bank and Société Générale to provide $15.6bn in financing, $4bn in loans and an $11.6bn bridge loan that will be refinanced through the bond market, to Germany’s Merck in September for the purchase of US lab group Sigma-Aldrich.
Ray Doody, who heads a 50-strong European acquisition and leverage finance team at JPMorgan, is arguably the most influential deal finance professional in the City today. Doody, who famously helped to finance the Glazer family’s acquisition of Manchester United and can regularly be seen in the executive box at Old Trafford, lined up alongside bankers at Deutsche Bank and Goldman Sachs on Numericable’s record-breaking finance package earlier this year. Doody and JPMorgan’s head of EMEA loan and high-yield capital markets, Kristian Orssten, are ‘the two key players in the market’, agrees one Magic Circle head of banking.
EQT’s Yu, likewise, cites Orssten as one of the few individuals able to shape the market, alongside Credit Suisse’s head of leveraged finance Mathew Cestar and Goldman Sachs’ Denis Coleman, who was transferred to London in 2009 to co-head its leveraged finance business.
Doody’s group was further boosted by the arrival in 2011 of David Shaw from Barclays Capital.
Such is the bank’s dominance, that New York-based Thomas Cassin, head of JPMorgan’s high-grade loan capital markets and origination business, is cited as an increasingly influential figure for European deals.
A multi-storey library of rules – regulating finance in Europe
Brisbane citizens enjoyed an extra public holiday last month as the leaders of the G20 nations descended on the Australian city for its annual summit. At the top of the agenda was reform of global banking and finance regulations with the Financial Stability Board – the body set up by the G20 in 2009 to monitor and recommend reform of the global finance sector – attempting to co-ordinate international standards.
But, while US rules under the sweeping Dodd-Frank Wall Street Reform and Consumer Protection Act are in the latter stages of implementation and the UK is forging ahead with plans to ring-fence investment and retail banking, the EU has not acted so swiftly. With much political wrangling, a full suite of updated regulations is still in development while regulators are just getting accustomed to their new capabilities.
Some EU frameworks to boost financial stability are now in place but much of the detail is still to be decided. Etay Katz, partner at Allen & Overy, comments: ‘There is certainly an intensification of the regulatory relationship in Europe, but because the UK has been the major financial centre and was the major injured party it doesn’t look like the rest of Europe is doing a similar soul search.’
Aside from moral hazard reforms to ring-fence core banking or allow banks to safely fail, tougher capital rules of course remain a key area. One of the most progressed EU regulations is the Capital Requirements Directive IV (CRD IV) which implements Basel III and came into effect on 1 January 2014 – though some provisions are being phased in up to 2019. However, even here the European Banking Authority (EBA) is still producing the Implementing Technical Standards, which will fill in the scheme’s detail as well as creating guidelines to converge supervisory practices across the EU.
The reach of CRD IV extends well beyond Basel III standards and the legislation looks to regulate pay and reporting standards. The ‘bonus cap’ has been one of the most worrying aspects for bankers. It has also been plain that many banks have sought out loopholes to circumvent the rules.
The cap limits variable pay to 100% of fixed pay or up to 200% with shareholder approval, Ashurst partner Rob Moulton says: ‘You can see the pan-European logic of not having a London market that can pay people more competitively than in Frankfurt and Paris – if that’s the way you want Europe to work.’
But that’s not the way the UK Government wants Europe to work, seeing greater importance for domestic agencies in regulating the sector. The bonus cap is illustrative of much of the European legislation being produced, with Whitehall at loggerheads with Brussels, and the complication of London being Europe’s finance capital at a time when the UK’s relationship with the EU has never been more politically charged.
That dynamic was made clear on the issue when the UK Government challenged the bonus rules in the European Court of Justice. Its argument was presented on 8 September, stating there was no Treaty basis for the power and that domestic regulators were better positioned than the EBA to make pay decisions. Judgment is expected in early 2015 and is not expected to be favourable to the UK, with the advocate general opining that the cap is valid. The court has also ruled, in what many saw as test cases for financial regulations, against the UK over short-selling regulations in January 2014, and rejected a challenge to the Financial Transaction Tax in April.
Meanwhile, more domestic prudential controls are being transferred, with the insurance industry receiving new regulation as Solvency II comes into effect in 2016 while this year has seen revision of the Markets in Financial Instruments Directive (MiFID), with a new framework (MiFID II) entering into force in July 2014 with implementation by EU members due by January 2017.
All this adds up to a heaving workload for the finance sector, with Slaughter and May head of financial regulation Jan Putnis saying, ‘think of a multi-storey library packed with rule books, that would be how you might represent what regulated firms now have to operate to when they do business in multiple countries’. Putnis adds: ‘It’s not enough just to read the rules, you have to know what they mean in practice. You can accumulate that know-how from a number of sources, but more than anything, just knowing people at the regulator, the people to ask on an informal basis.’
Regulators starting with E
Regulators, Katz says, ‘can make your life tremendously difficult in a way that is not written in the book and that, I find, is where the real burden in the relationship or equation is at the moment’.
To oversee the raft of legislation produced in Brussels a plethora of supervising bodies have been established across the continent, with London hosting the EBA, the European Securities and Markets Authority (ESMA) housed in Paris, and Frankfurt housing the European Systemic Risk Board, the European Central Bank (ECB), which has taken over supervision of systemically important Eurozone banks, and the European Insurance and Occupational Pensions Authority.
The ECB only came into its supervisory role last month, although it has already conducted comprehensive assessments on key European banks to identify systemic risks. This was handled by looking at banking groups’ capital ratios as a whole, rather than the parts just located within the Eurozone, a sign of regulators growing extra-territoriality. However, the switch from national regulators is expected to have a minimal impact with the central bank relying heavily on domestic bodies that were doing the role previously.
It is the more established European supervisors that currently impose the greatest workload for the finance sector. The EBA, which handles most of the banking prudential regulation and supervision for the EU, is a well-regarded organisation and well-staffed. In contrast, ‘ESMA appears to be struggling on achieving real lift-off on its long-term staffing’, argues Ashurst’s Moulton, and this could spell trouble for the industry with Ogier partner Niamh Lalor attesting, ‘there have already been significant delays in meeting deadlines’. Implementation of parts of the Alternative Investment Fund Managers Directive – legislation that even many critics of the finance industry see as fundamentally confused in its aims – has already been pushed back, while technical details fleshing out MiFID II are expected to miss their January 2015 target. Any changes to the timetable will reduce banks’ preparation time potentially making compliance more costly. Nevertheless, Mourant Ozannes partner Gavin Farrell sounds a more positive note, saying ‘they are fully aware of their constraints now and they are factoring them in by starting the review of third countries early’.
There is also a notable difference in supervisory style between the two authorities, with the EBA considered conservative and predictable, not wishing to destabilise banks when Europe’s economy remains fragile. ESMA, in contrast, is seen as more focused on getting the right outcome for the investor and therefore more likely to undertake sweeping market overhauls and ban products entirely. Although complying with EBA prudential rules may take up more time, it is this potential for ESMA to surprise that generates the most anxiety for regulatory lawyers to deal with.
However, for many in the market, the real issue is not the extent of regulators’ powers or staffing issues but that governments need to show foreign supervisory agencies greater respect. The propensity of the EU, alongside other governments, to create rules with extra-territorial implications or supervisory bodies with wide remits like the ECB is placing an increasingly large workload on the global industry.
Moulton concludes: ‘There has to be a point when people realise the institutions of the world are being regulated to death and that’s not good for the world economy, that the regulators in the US, Europe and Asia are trying to do the same thing, get capital sorted, protect investors and clean up the markets – the politicians should recognise that.’
‘They’re all ex-Goldman’
Citibank, which had dramatically cut back lending in European M&A in 2010 and lost many of its debt professionals, has staged a considerable comeback, ranking third (behind Deutsche Bank and JPMorgan) in Dealogic’s most recent league table for M&A-related syndicated loans in Europe during the first ten months of the year – handing out $15.34bn. David Basra, the head of debt financing for EMEA, is cited by many as the standout name in London.
Littleton Glover III, or ‘LG3’ in the industry, has been at Goldman Sachs for nearly 15 years and heads the leveraged finance origination team for EMEA after a stint overseeing the technology, media and telecoms section of that group. ‘He’s very powerful,’ says Allen, while lawyers across the City cite Coleman and Thomas Turner as other key individuals.
A banking partner at a top-tier firm comments: ‘In the large cap space, US banks are increasingly pre-eminent and Goldman’s levfin team is on most of the bigger deals. BAML is an increasingly important player but it’s not as big as Goldman yet. You have to remember that in New York there used to be Bear Stearns and Lehman Brothers taking a chunk of that market, but now you are seeing four banks wrapping up most of the deals.’
While Goldman, JPMorgan and Citibank are seen as outpacing BAML, the influential Toby Ali became the sole head of leveraged finance at BAML this summer after David Ross stepped down as co-head. Ali’s greater responsibility is touted by some as a positive step for BAML, with the bank currently recruiting for its acquisition finance team.
European Acquisition-Related Syndicated Loan Bookrunner Ranking |
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| Rank | Bookrunner | Deal value ($bn) | Number |
| 1 | Deutsche Bank | 28.78 | 20 |
| 2 | JPMorgan | 19.02 | 14 |
| 3 | Citi | 15.34 | 8 |
| 4 | BNP Paribas | 12.84 | 25 |
| 5 | Barclays | 10.92 | 11 |
| 6 | Bank of America Merrill Lynch | 10.7 | 8 |
| 7 | Morgan Stanley | 9.72 | 8 |
| 8 | Société Générale | 7.15 | 10 |
| 9 | Credit Suisse | 6.71 | 12 |
| 10 | The Royal Bank of Scotland | 6.35 | 7 |
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Source: Dealogic
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Last men standing
For all the undoubted progress of US houses, Deutsche Bank and Barclays still remain huge forces across Europe, with both banks drawing on substantial operations in the US. Deutsche had made deep cuts two years ago but the bank has cleared the majority of litigation against it in the US and has more than quadrupled its syndicated loan value during the first ten months of the year to $28.88bn, according to Dealogic’s latest ranking figures.
The German giant hired Karl-Georg Altenburg in February from JPMorgan, where he was chief executive for Germany, Austria and Switzerland, and made him co-head of the bank’s EMEA corporate finance alongside Miles Millard, who also runs the bank’s capital markets and treasury solutions (CMTS) business.
The move is viewed as part of a renewed push in leverage finance, with Deutsche Bank’s CMTS unit merging with investment banking to create a more powerful division. The bank also promoted Adam Bagshaw, who runs the bank’s EMEA financial sponsors group, to co-head of UK investment banking. Corporate banking and securities, which includes high-yield, syndicated loans and leveraged buyout, accounted for 44% of group revenue in the third quarter of 2014.
This year has also seen the return to prominence of major French banks, with BNP Paribas and Crédit Agricole two of the seven top-25 banks to increase their market share in global syndicated loans in 2014. BNP Paribas sits fourth in the European rankings for the year to date, having lent $12.84bn in syndicated loans to back M&A, nearly four times more than the same period in 2011. Gilles Vanel, co-head of leveraged finance at BNP Paribas, is cited as its standout name in Paris.
While BNP Paribas has been more active in Europe, Barclays is still the most influential European bank in the City. Barclays’ US and Asian arms are stronger than that of its French rival, ensuring that it ranked fourth globally for syndicated loans with $34.61bn handed to corporates in the first ten months of the year.
There is little doubt that the regulatory cloud hanging over Barclays – which led to the 2012 exit of chief executive Bob Diamond in the wake of the Libor scandal and an ethical re-positioning under new chief executive Antony Jenkins – has impacted on Barclays’ aggressive push in institutional finance. However, Barclays is still regarded as by far the strongest major UK performer since the banking crisis, with bailed-out RBS and HBOS (now part of Lloyds Banking Group) – previously two of the most prominent players in deal finance – having substantially retrenched.
Stephen Cooke, head of Slaughter and May’s M&A group, comments: ‘You’ve seen more of Barclays than you would have expected to over the last five years and they’ve been using their leverage as a lender to lever themselves into advisory and broking relationships.’
Some cite the rise of Credit Suisse and its enhanced position in the City over the last two years as having pushed RBS and Lloyds down the pecking order as it looks to build out its City team. (The legacy HBOS business, of course, suffered a hugely symbolic reverse when Peter Cummings, one of the most prominent bankers during the boom years, was handed a lifetime ban and fined £500,000 by the Financial Services Authority.)
RBS and Lloyds lack someone with the reputation of Credit Suisse’s Marisa Drew, one of the pioneers of high-yield in the City, having arrived from the US at the turn of the millennium when the product was still struggling to gain traction with European borrowers. Now, Drew is co-head of the global markets solutions group at Credit Suisse, and leading the firm’s push in the City.
By consensus, RBS has scaled back its efforts in the deal finance market to focus more on UK mid-market deals. In addition, the promotion of the highly regarded former head of UK leveraged finance Alison Rose to chief executive of RBS Commercial and Private Banking is viewed as weakening its position. RBS leveraged finance veteran Paul Bosson retired from the bank after 25 years this summer and the brand created by celebrated bankers like Leith Robertson, who retired in 2009 as deputy chief executive of global banking and markets, has waned.
Lloyds has also seen a talent drain and was last year hit by the exit of Neale Broadhead to CVC Credit Partners, where he will originate and execute credit facilities for European midcap companies.
CC’s Johnson says: ‘Lloyds Bank and RBS have scaled back their corporate finance divisions more than any others in the City, mainly due to political pressure as those considered bad loans three years ago are now looking pretty profitable.’
Another banking partner at a top ten UK practice adds: ‘The one positive for Lloyds and RBS, relegated to the mid-tier, is that the likes of Commerzbank, Rabobank and ING have also fallen by the wayside.’
European Acquisition-Related DCM bookrunner Ranking |
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| Rank | Bookrunner parents | Deal value ($bn) | Number |
| 1 | Deutsche Bank | 5.21 | 14 |
| 2 | JPMorgan | 4.98 | 13 |
| 3 | Goldman Sachs | 4.58 | 15 |
| 4 | Barclays | 4.41 | 10 |
| 5 | Credit Suisse | 3.24 | 9 |
| 6 | BNP Paribas | 3.21 | 10 |
| 7 | Morgan Stanley | 2.96 | 9 |
| 8 | Crédit Agricole CIB | 2.68 | 6 |
| 9 | The Royal Bank of Scotland | 2.39 | 8 |
| 10 | Société Générale | 2.37 | 12 |
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Source: Dealogic
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Out of the shadows
If the conventional players have changed their pecking order since 2007, jarring changes in the credit markets over the last three years have helped further shake up market dynamics and introduce different kinds of participants.
The credit squeeze at last created what has been falsely predicted for years: the emergence of a substantial high-yield bond market in Europe, as non-investment grade borrowers turned to the capital markets to make up for retrenching bank debt.
The finance market has been rebounding in some sectors since 2013, with frothy borrower-friendly terms increasingly dominating in Europe as US investors’ appetite for debt reshaped the market, supported by a relative lull in the Eurozone crisis and a seemingly endless stretch of ultra-loose monetary policy.
This development, of course, further stoked a wider Americanisation of Europe’s credit markets as borrowers moved to tap yield-hungry investors, often US investors. It also stoked the vogue for US-style covenant-lite and covenant-loose debt in European deals. Such trends obviously increased demand for New York law-backed structures in European deals.
But, more subtly, the trend for investors and borrowers to get closer with less focus on intermediaries has underpinned the dramatic rise of direct lending from a new band of debt funds, which are taking up ground once dominated by banks (exactly how far this will go remains an intense point of debate). This comprises both specialist funds and unitranche providers as well as debt arms of diversifying buyout houses and other specialist funds.
The value of deals carried out by boutiques is climbing as different firms combine to create joint ventures. Ares Management tied up with GE Capital to create a funding vehicle that combines both companies’ balance sheet capacities and others in the mid-tier space are considering similar moves.
Philip Robb, head of direct lending at Hogan Lovells, comments: ‘The market is fragmented and that means we have 47 active clients, some of whose names we would not have even been talking about in the finance practice a few years ago, such as Ares, ICG, BlueBay, Centrebridge and KKR. They’re taking the place of banks and offering new products to leverage deals.’
Helen Burton at Ashurst adds: ‘Credit funds have made big inroads in to the mid-market over recent years, and offer a lot of competition to traditional lenders. English funds such as ICG have a good name and sure foothold in the market. There’s also a constant stream of funds, often with US heritage, moving in to the market and poaching bankers with a lot of market expertise.’
One banking partner in the City adds: ‘Max Mitchell at ICG is a star. ICG is such a big outfit with so many different funds under management so he has a lot of weight behind him. People are also expecting good things from James Burns at Crescent Capital.’
John Empson, the former head of European leveraged loan capital markets at JPMorgan, left the US bank in 2008 after 21 years of service to become head of debt in KKR’s capital markets division. Empson is frequently cited as a man to know. Lee Cullinane, regional section head of EMEA banking at White & Case, comments: ‘I worked with him when he was at JPMorgan, he initially went to KKR to handle their relationships with banks and now his role has expanded to spearhead KKR mez, which is a significant provider of debt. A number of people who moved to PE firms to enhance their links to major bankers have seen that role change and grow so that they’re not only dealing with their relationships with their own bankers but looking at the debt they themselves are doing. It’s poacher turned gamekeeper turned poacher again.’
Fast-expanding Jefferies, which has more than quadrupled the size of its European workforce in the last five years and typically offers loans of up to $1bn, made its first big foray into the region in 2012 when it arranged for the financing of Vista Equity Partners’ £1.27bn bid for UK banking software Misys. The two most prominent names at Jefferies in the City are also ex-JPMorgan bankers, with Michael Magliana and James Seagrave heading up its financial sponsors business. Aggressively expanding, Jefferies hired the influential Nicholas Rodolakis as managing director and European co-head of leverage finance origination in April last year and Cullinane describes him as ‘someone to know’.
GE has notably recruited heavily from Barclays, Lloyds and HSBC in the past five years, and one banking partner at a top-tier firm says that, although the ‘leveraged finance house pretty much pulled up stumps in 2006/07 and almost left the market completely, in 2008 they saw an opportunity and really invested’.
Howard Sharp, EMEA head of origination and sponsor coverage, is a prominent name at the lender and managing director in leveraged finance. Owen Verrier Jones is also well regarded. The banking partner adds: ‘Owen has been responsible for recruiting a lot of people. He is ex-Barclays and he’s built an excellent business and team.’
While most leading City finance teams have moved to cultivate this new breed of deal providers, Ashurst and Hogan Lovells have been particularly focused on building their links in the sector. Such ‘alternative credit providers’ are primarily active in the mid-market, though debt funds of the major buyout groups have the funds to put together larger deals.
While opinion remains sharply divided as to the extent that such private debt funds will reshape the market – with increasing oversight and regulation of major banking groups, the vogue for direct lending is rapidly going mainstream, and such participants look to be a permanent feature of the market.
All of which strongly suggests banking will become more corporate and less personal, and a good chunk of the entrepreneurial credit professionals that law firms would have once targeted will find a home at leaner and more nimble funds. If the contradictory world of international finance was once famously described as trying to make a utility and a casino co-exist, many bankers have decided that a utility just isn’t for them.
As de Rome concludes: ‘It’s a lot more regulated and hard to do business in the banks these days. A lot of junior people are frustrated by the type of work they’re doing and they see coming to a fund as attractive. Most of our competitors are US guys.’ LB
tom.moore@legalease.co.uk, michael.west@legalease.co.uk