Habitually viewed as the poor relation to its unparalleled banking and finance practice, Allen & Overy (A&O)’s corporate team has stepped up in recent years, the culmination of a decades-spanning campaign to forge a top-tier name in M&A.
Richard Browne, co-head of corporate, stresses the level of growth the 161-partner practice has seen, having increased its fee income by 50% in the last decade. ‘In the dark ages when I started, A&O’s corporate practice was not the best. It was a banking and finance firm. That is no longer the case at all. Corporate has become the same size as the banking business. It is incredibly profitable, with top-tier work and clients.’
A&O managing partner Andrew Ballheimer strikes a similarly bullish note: ‘We are in the top handful of firms for volume and value of deals and have been for a number of years. The corporate practice is a major piece in terms of income and profitability. It turns over a lot of money.’
The firm as such makes much of its sustained push to build out its bluechip client roster, citing recent inroads with names like BT and Marks and Spencer (M&S). A&O claims to have more FTSE 100 clients than M&A pacesetters Freshfields Bruckhaus Deringer and Linklaters and most peers grudgingly concede A&O has had a good run lately, sentiments borne out by Mergermarket figures. In 2019 (up to 3 September), A&O has acted on 133 deals with a value totalling $93bn of European M&A transactions. While not matching equivalent value as Freshfields’ $158bn across 109 deals, A&O surpasses Linklaters in value and deal count (Silk Street clocked up a slightly more subdued $92bn across 105 transactions).
A more reliable three-year view provides more context. For the full year in 2017, A&O acted on 223 European deals worth $112bn, compared with Linklaters’ $214bn across 219 deals and Freshfields’ $234bn and 184 deals. A similar pattern is evident in 2018, with Freshfields and Linklaters generating materially higher average deal value but with A&O managing a very credible $239bn combined value across 263 ranked transactions.
Detractors will note that A&O’s largest M&A deal this year was a secondary role advising Thomson Reuters, the minority shareholder of Refinitiv, on its proposed $27bn acquisition by London Stock Exchange Group, while Freshfields picked up the lucrative buy-side role. The A&O partners leading were Richard Evans, Alasdair Balfour and Bob Penn.
‘When I started, A&O’s corporate practice was not the best. That is no longer the case. It is incredibly profitable.’
Richard Browne, Allen & Overy
Reflecting other substantive mandates, and the current boom in take-privates, is a role advising UK aerospace supplier Cobham on Advent International’s proposed $5.17bn offer, with Browne leading.
On the sell-side, a team including Annabelle Croker, Gillian Holgate and Stephen Lloyd is currently advising WPP on its $4bn sale of a majority stake in market research firm Kantar Group to Bain Capital. The firm also points to a major role for regular client Asahi on its acquisition of Carlton & United Breweries, the Australian arm of brewing giant Anheuser-Busch InBev, for $11.3bn. The team included London veteran Richard Hough and Matthew Appleton.
Browne also advised M&S on its joint venture with Ocado Group and a rights issue with Slaughter and May acting on the other side (which handily took M&S regular Slaughters out of the running). A&O leveraged a longstanding relationship with M&S group general counsel (GC) Nick Folland to secure that notable win.
The firm’s market-leading Dutch practice also helped it in September secure a lead role on the €95bn float of tech investor company Prosus and owner Naspers in Euronext Amsterdam, this year’s largest float in Europe. The role, estimated to generate €3.8m in fees for A&O according to the prospectus, saw the firm handle Dutch and US law.
All in all, even though a neutral observer would say A&O remains at a distance from regularly securing the lead corporate roles on £10bn-plus bids, this is a team of range and quality. Progress has likewise been in the right direction, even if pace has been steady rather than startling.
Stars and flights
If the critique is that A&O’s deal rankings remain inflated by secondary roles on marquee bids, the other familiar claim is that this is a team lacking the kind of star individuals befitting a global M&A outfit. Certainly, the departure of high-profile Alan Paul in 2012 highlighted for some the lack of undisputed heavyweights in corporate. ‘No one’s star shines particularly bright’ and ‘a lot of journeymen’, are representative claims. A&O inevitably responds that it focuses on team spirit and depth over individual charisma but that is never an entirely satisfying line when operating at this level of the game.
Within a wider corporate practice of 41 partners in London, the firm says it fields 26 focusing heavily on major bids. Of this group, roughly half are frequently fielded on public M&A, including partners like Browne, Evans, Hough, Appleton, Croker, David Broadley, Seth Jones, Dominic Morris, Jeremy Parr and Duncan Bellamy. Private equity coverage has also substantially improved since the 2013 recruitment of Stephen Lloyd from Ashurst.
If A&O has range and credibility but lacks partners with a huge following, the exception is equity capital markets head Broadley, widely praised both in and outside the firm as its standout name at the senior level. Seth Jones, meanwhile, is widely tipped as coming into his prime, having made partner back in 2011 and polished his CV with a two-year stint as secretary of the Takeover Panel.
The urbane Richard Cranfield, while now largely in an ambassadorial role as corporate chair, still holds considerable sway in the firm, while Browne has been an entrepreneurial figure as department co-head. And, to be fair, A&O is acknowledged to do better than most peers at living up to the team spirit pitch.
‘We are in the top handful of firms for volume and value of deals.’
Andrew Ballheimer, Allen & Overy
But discussing individuals inevitably brings up the threat that the discord triggered by A&O’s marathon merger bid with O’Melveny & Myers, which was finally abandoned after more than 18 months in late August, will cost it some key operators. The talks were known to have been unpopular with a group of prominent London corporate partners.
There was an ominous sign in September when A&O saw two significant departures from the team, with Simon Toms and George Knighton quitting for Skadden, Arps, Slate, Meagher & Flom.
Certainly, the departures will sting. The pair were well-regarded internally, with Toms one of A&O’s most productive partners. Toms was trusted with advising on the firm’s largest European deal of 2018, acting for 21st Century Fox on its $51.5bn takeover bid for Sky and the subsequent sale of its 39% stake in Sky to Comcast along with Broadley and Jones. Toms also had useful links with News International, having worked there as GC from August 2011 to April 2012. Interviewed several days before news of his departure broke, Toms was cited as ‘extraordinarily busy and working on a huge number of deals’.
Knighton, meanwhile, is credited with advising Virgin Money on its $2.2bn merger with Clydesdale Yorkshire Banking Group and was seen as a popular team player.
The pair, who are also understood to have talked to Weil, Gotshal & Manges, were unpersuaded of the case for an O’Melveny marriage. Worse, for months there have been reports of experienced M&A partners with their CVs at the ready, on the understanding that they would quit if the US merger went ahead. The O’Melveny deal may be history but starting the ball rolling on such discussions can easily result in loyalist partners departing once the process gets underway. For A&O, which rarely loses partners in London, further senior departures in corporate will be most unwelcome if it is to maintain the steady gains it has amassed in the M&A world.
Aiming to get back on the front foot, there is much talk now of renewed investment in France, Germany and Asia. Management will also want to show that it can step up the pace of investment with the distraction of the merger now behind it. In truth, A&O remains rather too fond of professing to have already arrived at a destination that it has done well to have gotten within shouting distance of but which remains just out of reach.
It will take fresh focus and ambition to finish the journey if A&O is serious about truly joining the City M&A elite. Browne at the least makes the right noises: ‘There’s always room to grow and be relevant to the right clients. We want bigger corporate relationships and we plan to invest and grow.’
That’s the spirit.