The new boy – can Ryde & co keep Slaughters’ deal team on top?

The City’s top deal shop has a new corporate head. Legal Business meets Andy Ryde and asks if Slaughters can keep the M&A magic going.

For a state school lad from Nottinghamshire who self-mockingly confesses to still having the tiniest chip on his shoulder, it has been quite a journey. Slaughter and May partner Andy Ryde in March was named as the firm’s new head of corporate, leading what most neutral observers would see as, by some margin, the City’s top deal practice.

It’s not quite a rags to riches story – well not rags, anyway, but the 49-year-old lawyer is quick to ridicule his own initial fumbling attempts to acclimatise to the Square Mile and the culture shock for a young man ‘raw and unfamiliar with the City’. Ryde had to be discreetly told to read the Financial Times rather than The Sun.

Heading the City’s go-to deal team, London is now looking a lot smaller, with client conflicts limiting the scope for further serious expansion among bluechip companies headquartered in the UK, while the internationalisation of the M&A markets means Slaughters is increasingly looking to export its English law services abroad.

As such Ryde takes over from predecessor Frances Murphy at an interesting moment for the firm. Despite some well-concealed angst at Bunhill Row, a pronounced slimming of the firm in recent years, and a challenging 2011/12, overall, Slaughters has had a very credible post-banking crisis run. While many of its rivals have shifted focus away from the UK and surrendered market share – Slaughters celebrates its 125th anniversary with the strongest bench of M&A veterans in the City.

Yet the aforementioned international challenges are intensifying and in a multi-polar world Slaughters is forced to move further beyond its clearly-defined European ‘best friends’ network. Likewise, the commanding collective reputation of Slaughters’ elder statesmen of course raises questions around succession, while the enduring individualism of the firm’s partnership means ushering in change is a challenge at a firm where its most high-profile partner once described a management role as ‘counting paperclips’.

‘Why would you ever do this?!’

The initial draw wasn’t the life of a corporate lawyer, it was Slaughter and May itself. Having had a vacation placement at Allen & Overy, Ryde received an offer from Slaughters and accepted it immediately. It was 1987, the City boom was in full swing and the aspiring lawyer was startled to be offered ‘more than my Dad was earning at the time’.

Despite his determination, making it in the City at the time was not easy. ‘It was brutally hard work in the 1980s. When I arrived it was a culture shock – these serious people; big dogs doing deals.’

Initially working in property, Ryde used to watch Slaughters’ corporate lawyers working all hours in another building across the road and was baffled. ‘We used to look at them and the buzz they got [on deals] and just think: “You’re bonkers! Why would you ever do this?!”’

A stint in corporate quickly provided the answer. Working alongside some of the firm’s most prominent names, including Tim Freshwater and a fast-rising young partner called Nigel Boardman, Ryde was soon smitten. ‘You just fall in love with it. I was impressed with how the top lawyers had the clients’ confidence and had a whole lot more to contribute than just the law and that excited me. I’ve never been a dry lawyer. Never been a black-letter lawyer. I’ve always thought there was more than that. Seeing great lawyers, who have clients eating out of their hand because they say something which adds real value – I was impressed with that.’

Ryde was to go on to act for a broad range of clients, including Marks & Spencer (M&S), RSA, Regus, Cembra Money Bank, Direct Line, Bupa, GE Capital, Moody’s, Texas Instruments, Ladbrokes and Provident Financial.

With support from influential partners like Boardman and Murphy he was consistently busy through the lean years of the early 1990s and fairly confident regarding his chances of making partner. But not overly confident. ‘There’s a lot of mythology about how a single partner can give you the thumbs down and that’s it. The partners in my group were telling me to relax and that it was going well, but I knew it wasn’t so straightforward. I was genuinely in two minds [about whether he would make partner] when I got the call from [then senior partner] Giles Henderson to say I’d made partner. I’d invested so many months and years.’ Ryde had made equity partner at Slaughters at the age of 31, nine years after joining the firm.

‘It felt like a year’

Ryde was often touted as a young partner to watch and in the following years was a regular name on the busy deal flow emerging from Slaughters during the late 1990s’ M&A boom.

But it was in 2004 when he reached real prominence, having been called upon to advise High Street bellwether M&S on its defence of a £9.1bn hostile bid from Philip Green, a dramatic piece of corporate theatre that captivated the City and proved one of the most memorable battles of the 2000s.

The bid, which was effectively launched on 27 May 2004, raged for six weeks in the spring and early summer, frequently appeared across City pages of newspapers and famously brought Slaughters into direct conflict with its closest direct rival, Freshfields Bruckhaus Deringer.

Ryde was a key part of M&S’ defence team that included Boardman, M&S’ incoming chief executive Stuart Rose, then general counsel (GC) Graham Oakley, Citibank’s Robert Swannell, who is now M&S chairman, and Morgan Stanley dealmaker Simon Robey.

Aside from the pressure and publicity, the bid was the M&A equivalent of Ali/Foreman in 1974 with the M&S camp deploying a barrage of creative tactics to draw out Green and turn the offensive back on the predator.

‘When you’re the target of a hostile takeover, it’s easy to be beleaguered and feel the world’s against you but we went the opposite way and tried to turn the fire onto Philip Green and his advisers,’ recalls Ryde. ‘We turned a takeover bid from a very difficult situation where people thought M&S was ready to raise the white flag into an attack that put us on the front foot.’

One such strategy came when it was apparent there were leaks from the M&S camp and parts of Rose’s missing diary found its way into the hands of the press. There was a security issue at the retailer’s labyrinthine headquarters on Baker Street but unable to prove any allegations against Green’s camp, the M&S team devised a novel plan to highlight the suspected intrusions.

Ryde recalls: ‘Data protection legislation at the time said that for a fee of £10 you were entitled to send a notice to anyone asking if they held data on you and why, and they had to respond to it. So we sat there in Stuart Rose’s office, paper-clipping £10 notes to 300 letters that went out that night to Philip Green and all his contacts. We also sent them to each head of compliance at the investment bank, who descended on the bankers, and boxes were seized and people were interviewed. As a result, the press became aware and drew their own conclusions. At no stage did we allege wrongdoing, but it was a warning shot that we know was taken seriously.’

There were many other aggressive tactics in a complex and comprehensive defence strategy that surprised the City and legal community. In short, the M&S camp left no stone unturned. This included going up against the Financial Services Authority (FSA), which launched an investigation into Rose amid allegations that he had knowledge of Green’s pending bid when he acquired shares in M&S on 7 May 2004 (Rose was cleared by the FSA on 8 July). Rose’s reputation was again called into question when he was supposedly overheard telling Rosemary Thorne, then finance director at Bradford & Bingley, that he was part of Green’s bid. M&S published a letter in the FT accusing Green’s adviser and backer Goldman Sachs of being complicit in the false allegations against Rose, again startling the City.

While such tactics robbed Green’s bid of momentum, Slaughters’ boldest manoeuvre and perhaps the determinative point in the contest came in squaring up against Freshfields, Green’s initial lead corporate counsel on the bid.

Freshfields, while not primary corporate lawyers to M&S, had previously acted on litigation matters and had advised on arrangements relating to its Per Una fashion range that had a material impact on the valuation of M&S. Slaughters warned Freshfields that it was in conflict and should stand down but its old sparring partner apparently believed it was bluffing. Slaughters had actually been involved in previous comparable wrangles that hadn’t gone as far. This time it followed through. A High Court injunction on 2 June forced Freshfields to stand down in the most public way, with Ashurst hastily drafted in.

Ryde reflects: ‘The Freshfields thing was very awkward. Lots of our partners here know lots of partners at Freshfields. We have huge respect for them. It’s a shame that two firms had to have such a high-profile issue but we had no choice, they shouldn’t have been acting. It was perhaps the single most important aspect of the bid as it was M&S showing its teeth and that it wouldn’t surrender. Freshfields had 50 lawyers on the deal and they all stood down and in the two weeks that followed, before the new lawyers [from Ashurst] had limbered up, there were a lot of mistakes made.’

It was a high-risk strategy that Ryde had personally backed with some anguished reflection. ‘I would have been hurled from my second floor office had we not won that injunction because if we had failed, the City would have said “dirty tricks from M&S”. But also, with Slaughter and May going up against Freshfields in such a controversial way, I would have been hurled from the window had we lost.’

Green abandoned his bid on 14 July. A decade on it is still hard to find another bid that has matched it for drama and intrigue. Ryde reflects: ‘It felt like it was about a year of work but it was just six weeks in all. It was just the most exciting bid you could ever get involved in and I dined out on it for many years.’

SLAUGHTER AND MAY: LISTED CLIENTS v PEERS, 2009-14
	Number of stock market clients		Number of FTSE 100 clients
Law firm	Aug 2014	Aug 2009	Aug 2014	Aug 2009
Slaughter and May	122	107	32	25
Herbert Smith Freehills	92	85	17	18
Linklaters	87	81	30	25
Freshfields Bruckhaus Deringer	71	50	22	17
Allen & Overy	62	50	20	17
Clifford Chance	40	43	11	6
Source: Adviser Rankings

The sherry solera system

The M&S episode, of course, not only helped make Ryde’s reputation, but demonstrates many of the enduring qualities that Slaughters is increasingly hoping will keep it distinctive in a shifting legal industry.

In particular, Slaughters’ more traditional, bat-for-your client approach to service is increasingly at odds with its peers in an era in which major City law firms will not challenge investment banks and divide clients rigorously into hierarchies.

This approach famously saw Slaughters fall out with banking clients – most publicly when it sued Merrill Lynch for Unilever’s pension fund in 1999. Similar issues emerge semi-regularly.

It is a powerful message Ryde is understandably intent on drumming home to clients. ‘The client comes first and if that means you’ve got to go to war with an investment bank then you do that,’ says Ryde. ‘This is the ethical thing to do – even where it is in the interests of the firm to compromise and play it down. We always say: “Whoever our client is, they get our full backing and total loyalty.” Some firms have a platinum list of clients. We don’t agree with that. Whether you’re using us for the first time and it’s 20 minutes of work or you’re GlaxoSmithKline, you get everything from us.’

While such a message involves playing to Slaughters’ traditions, in other areas Ryde will be hoping for a continued evolution of the firm’s offering. That will mean a renewed push internationally – reflecting a 15-year march the firm has made to get its brand out globally (see box, ‘Going global’).

Ryde is also clear that Slaughters can widen its franchise, both in terms of doing more work for mid-market companies and handling a broader range of work for bluechip clients.

He recalls the decision to take the role. ‘It wasn’t something I was looking for and in the month leading up to it I told people I wasn’t that keen – and I meant it. A lot of people said: “Come on, Andy, it’s you.” That’s the initial reaction all our partners have as we don’t like people self-promoting and looking for roles or status.’

It will be an interesting shift in tone for the firm in having the down-to-earth Ryde marshalling the practice. Ryde, who will have substantial fee-earning commitments alongside the management role, strives to maintain his interest in sports and music, including watching Watford FC matches and attending Bring Me the Horizon gigs with his daughter. ‘I’ve always made a rule that I will make social engagements during the week and stick to them if I can, otherwise you become a boring person. No client is going to want to work with you aged 50 if all you talk about is knotty points of law.’

Peers predict that Ryde will be forthright in pushing for change. One corporate partner at a top-ten UK law firm comments: ‘Andy is aggressive in his position on things. He has taken a strong position on conflicts of interest and he’s irritated a few people, including banks and others.’

Rivals sometimes argue that Ryde does not have the same reputation as Slaughters names like Boardman, William Underhill or Stephen Cooke. Though Boardman himself speaks warmly of Ryde – support that will aid his tenure as department head – interviewing a series of Slaughters partners it remains clear that many remain dismissive of the importance of such roles and are resistant to any loss of personal autonomy.

A related issue for Ryde to wrestle with will be how the firm addresses succession, given that it is now heavy with elder statesmen – a notable shift on its 1990s vintage when it only had a handful of partners over 55.

The firm has already made some strides in this direction, ushering in dual partner contacts for the majority of clients. Boardman argues this is an important evolution for the firm as an assessment he conducted found that clients are typically lost in a two-year period after a partner contact hands over.

The party line – which largely stands up to closer scrutiny – is that the Slaughters’ tradition of mature partners bringing in work and freely distributing works well in this regard. ‘I call it the sherry solera system where you take the drop and pass it down,’ says Boardman [referring to a process of ageing liquids often used in the production of sherry, port wine and Madeira so the finished product is a mixture of ages]. ‘That’s not particularly changed.’

Boardman also gives short shrift to claims that Slaughters’ M&A team is underweight in terms of partners in their 30s and 40s – citing Ryde and Jeff Twentyman as among the top operators in the City. Of the younger generation of partners, the much-touted Roland Turnill, Adam Eastell and David Johnson are frequently mentioned. Other young names to watch include Richard Smith, Rebecca Cousin and Paul Dickson.

Still, the concerns about bringing forth the next generation can’t quite be dismissed and there are known to be some partners uncomfortable with the extent to which the firm still relies on the 63-year-old Boardman as its corporate talisman and intensely focused business-winner. It is also not unusual for partners to privately express unease that it is harder to develop heavyweight M&A tacticians with boardroom gravitas in an era of complex deal structures weighted down by data rooms, interminable due diligence and arguing over warranties.

Boardman is heavily involved in the firm’s major relationships and is often requested by clients on the firm’s biggest deals. This was the case when Vodafone sold its 45% stake in Verizon for $130bn late last year, with the communication giant’s GC Rosemary Martin bringing in Boardman to lead the mandate with Turnill in what was undoubtedly a coup, even for Slaughters. The deal came to Slaughters in large part because of tax work it had undertaken for Vodafone.

One senior Magic Circle partner offers a balanced take on Slaughters’ future: ‘If you ask people who the next generation are, no-one will give you the same four names – which is a strength and a weakness as it means you’re not overly reliant on just a few people. For a firm it’s not healthy to have someone [like Nigel Boardman] that strong.’

Underhill reflects on the changing of the guard: ‘Professionals spend their career trying to convince their clients that they are essential and then at a certain point they realise that they will have to leave the firm and slip out of the door and no-one will really notice. That’s really hard.’

With Underhill expected to think about succession in several years, Boardman has indicated that he will go on, conceding to a loose retirement target of 75 when pressed. Ryde laughs: ‘Nigel always tells me: “I’ll be here longer than you.” When you’re that good, the job is enormously rewarding. I expect Nigel to go on keeping us all in check until he’s carried out in a box.’

‘Nigel’s the best partner at sharing his clients as he wins so many,’ Ryde observes before concluding: ‘We currently have more senior partners than we’ve had in the past but none of those are signalling that they’re about to go. We’re not expecting people to disappear tomorrow and give us a problem, we’re expecting a gentle phasing.’

Life’s moved on

Succession planning, international question marks and bouts of introspection aside, it is clear that Ryde has the luxury of taking over a practice in solid form.

The wobbles from two years ago now appear behind the firm and by most reckonings its market share has increased. Slaughters also faces a peer group that has downsized in the UK, at times transferring resources and key staff to foreign offices. While Freshfields’ is viewed as having sustained its place in Europe’s M&A market, Linklaters is generally felt to have lost a little polish in its public M&A practice in the wake of two major firm restructurings post-Lehman.

Slaughters has the largest share of FTSE 100 clients of any law firm, with 32 clients, according to the data provider Adviser Rankings, two ahead of nearest rival Linklaters, with a list that includes British business thoroughbreds M&S, Rolls-Royce and Royal Mail, as well as multinational concerns such as GlaxoSmithKline and Unilever.

Slaughters has also made the biggest leap in London during the last five years, having added seven FTSE 100 companies to its roster, compared to the five apiece at Freshfields, Linklaters and Clifford Chance (CC).

With its Magic Circle rivals often scaling back in London, Slaughters has gained ground in the City, adding 15 stock market clients since 2009 to widen the gap with its closest rivals. Its tally of 122 UK stock market clients amounts to more than Freshfields and CC combined on the Adviser Rankings’ methodology.

Mergermarket figures also demonstrate Slaughters maintaining a strong position against far larger rivals. And by consent, such figures generally understate Slaughters’ position in the market.

Legal Business’s annual in-house lawyer survey, which drew on responses from 436 major clients, offers another reminder of the firm’s commanding reputation with clients active in the UK. The firm was the top-ranked adviser for pragmatic commercial advice and strong service delivery ahead of international challenger brands such as DLA Piper and the rest of the Magic Circle, and the second highest ranked for high-end advice, just behind Linklaters, a firm three times its size.

Carillion GC Richard Tapp attests to the flexibility of Slaughters’ approach and willingness to work collaboratively with other advisers: ‘One of the things that’s always been apparent is that it has always been prepared to do innovative things. It’s the most innovative law firm we have. It is certainly not the most expensive firm in the market because of the way it does things. It runs its teams very efficiently.’

Tapp also backs up the contribution of Slaughters’ deal veterans: ‘Underhill is outstanding among a group of first-rate lawyers. Lawyers can solve business problems. William is a consummate professional who can bring all that together and not just be a concrete corporate lawyer. Because of the knowledge he has he can discuss tactics as well as the law. I have heard him described as the best investment banker in London and I wouldn’t necessarily disagree with that.’

Slaughters’ flexibility was in evidence again on its role advising Royal Mail on its initial public offering last year, which the firm accepted on a fixed fee – an approach the firm has long employed.

The firm’s increase in market share has come despite a notable slimming down of its ranks. The number of partners in the firm’s corporate group has dipped from 46 in 2009 to 40 in 2014. At associate level the cutback has been even more severe, with a 20% contraction in the corporate group between 2009 and 2014, with the number of lawyers in those ranks dropping from 132 to 106.

The reduction at the top is indicative of a wider wave of retirements in all teams, with ten senior partners having left the firm in 2013 alone, and the gap made in the corporate practice has not been bridged with partner promotions. The firm failed to make up a corporate lawyer in 2012 and 2013, and after two years of drought, some within the corporate group were disappointed when Susannah Macknay was the only corporate promotion in London this year despite a ten-strong round that made 2014 its biggest since 2000.

One Slaughters veteran comments: ‘People feel the environment a bit more and if you’re not as busy, because we’re such a collegiate firm, people think: “I’m not busy so I’d better piss off.” There was no plan to get the profits per equity partner up. Sometimes people are not as successful and if they’re older then maybe they think it’s time to go. It’s not a campaign like at other firms.’

Faced with a UK M&A market on life support, the firm has clearly diversified, both pushing more widely in the domestic space to capture smaller stock market clients, while assigning partners to 23 jurisdictions to pull more work into London.

Cooke comments: ‘Historically, we’ve largely been sticking to our knitting, which has been corporate Britain, and in corporate Britain we’ve done incredibly well. Over the last 25 years we’ve consolidated our position in the FTSE 100, FTSE 350 and smaller listed. That’s a great start, but it isn’t everything and we’ve got to make sure we get our fair share of international deals coming into the UK, and deals outside of the UK. That’s not just following our clients, which we’ve got a lot better at, but places like India and Europe where we’re deal counsel and we’ll pick on the appropriate resources, which we can do better than anyone else as we don’t have to sell an underwhelming local office.’

If Slaughters has had more success than many would have expected in a prolonged period of a moribund M&A market and domestic economy, it is clear that the firm’s distinctiveness, relatively low cost base and less complex structure have considerable advantages over Magic Circle peers. The model can now be said to have been thoroughly market tested.

That the firm has shown such resilience is just as well – it is hard to imagine Slaughters sustaining its place in the market unless it can maintain a superiority in core areas over its global rivals that have a clearer sales pitch to bluechip clients. So far the feat has been pulled off.

But Ryde and co will have to keep getting the message out there. As Ryde reflects: ‘Life’s moved on, even for Slaughter and May. Top of the to-do list is to really drive our reputation as a global trusted adviser to clients. Lots of clients know and trust us but it’s saying to them: “We’re your solution for everything, all of your problems, wherever you are.”’ LB

tom.moore@legalease.co.uk; alex.novarese@legalease.co.uk