‘It’s like the rivalry between Fulham and Chelsea,’ notes one former Herbert Smith Freehills (HSF) partner of his old club’s oft-cited tension between corporate and disputes. ‘Fulham fans think of Chelsea as one of its biggest rivals. Chelsea fans think of Fulham as that nice team down the road.’
No prizes for guessing that it is corporate that represents the plucky underdog in this reading. At a glance, such a comparison seems uncharitable. HSF’s corporate team is ranked in The Legal 500’s second tier for premium M&A deals, alongside Allen & Overy and Clifford Chance; most peers still regard its City corporate team as the best outside the Magic Circle. The legacy Herbert Smith also has a history stretching back to the 19th century as one of London’s prominent corporate solicitors, long before its embryonic disputes team invented the modern City model of running litigation as a substantive business line in the 1970s.
Crunching the data bears out a positive reading… to a point. According to figures from Mergermarket, the firm advised on 511 European M&A deals worth a combined £466bn over the last five years to September 2018. That places HSF comfortably above the likes of Ashurst and Hogan Lovells, on £296bn and £367bn respectively. Nevertheless, the firm tracks behind Hogan Lovells on deal count, and pales in comparison to Linklaters and Freshfields Bruckhaus Deringer in both volume and value.
While only a biased observer can say the firm’s corporate practice has hit its stride since the banking crisis in the manner seen during the 1990s and pre-crunch 2000s, the last 12 months have had causes for cheer. The period includes high-impact mandates for marquee clients. Top of the list is Sky, which proved a fruitful source of work last year, with separate takeover bids from 21st Century Fox and Comcast worth £18.5bn and £22bn respectively. Stephen Wilkinson, HSF’s head of clients and sectors, is the well-established point man for the Sky relationship, which dates back more than 25 years.
Other highlight mandates included US securities head Tom O’Neill and equity capital markets chief Charles Howarth in March advising Energean Oil & Gas on its £330m listing. HSF was also active on a major retail deal at the end of last year, with well-liked London partners Alex Kay and Caroline Rae advising longstanding client Hammerson on its £3.4bn takeover offer of Intu Properties.
ʻOur disputes guys are very successful. A lot of people regard that as a problem. But for us it’s an ability to engage with clients.ʼ
Scott Cochrane, HSF
Ask anyone at the firm and talk of a rivalry between corporate and contentious is met with well-practised bemusement. Says HSF’s corporate head Scott Cochrane: ‘Our disputes guys are very successful. A lot of people, Legal Business included, regard that as a problem. But for us it’s an ability to engage with clients, it’s a relationship builder. It’s like your first day at secondary school, if you walk into the playground and you’ve got a brother alongside you, you feel a lot more comfortable.’
Veteran HSF watchers will smile at such comments given it acknowledges the firm has reverted to being a disputes-led institution. The second point is surely a false opposition: observers do not criticise HSF for having a top-tier disputes offering; it is criticised for failing to live up to its own
M&A rhetoric.
Take one obvious hole in its M&A offering – a painfully understated profile in the biggest growth sector of the last 20 years: private equity. The firm’s coverage here took a hit in August when London private equity head Mark Geday left for Morgan, Lewis & Bockius’ City arm alongside corporate partners Nicholas Moore and Tomasz Wozniak. Though the firm downplays the significance of the departures, its lack of presence in the sector is harder to spin. If nothing else, given its industry strengths, HSF should have surely made a play for sponsors targeting energy and infra buyouts (the firm cites work for The Blackstone Group and Macquarie Capital here). One Magic Circle private equity veteran says: ‘We don’t come across them on the PE side. In the last three months, we’ve signed 15 deals and we haven’t seen HSF on any of them.’
There are still plenty of warm words spoken of HSF’s 40-partner London deal team, widely conceded to be a polished corporate adviser to major plcs. Mike Flockhart received plaudits for sharpening the firm’s client service and nous, while senior partner James Palmer remains a highly formidable presence general counsel can call when they need pragmatism and judgement in spades. Chris Parsons and Gavin Davies further round out a bench of considerable talent and finesse. And while the post-Freehills repositioning in Europe could not be called a clear win, neither has it gone badly.
Yet the bottom line is that, in contrast to a disputes team that has thrived in a more competitive litigation scene, corporate has failed to make clear progress over the last five years. HSF charged ahead in corporate largely in markets in which larger rivals were sometimes having to turn down engagements – in leaner post-Lehman days, being a credible alternative when the Magic Circle is busy or conflicted just is not enough.
The real danger is the perception that has taken hold – with US rivals piling in alongside the Magic Circle – that HSF is no longer an obvious home for ambitious young deal lawyers. Fair or not, the firm’s strategy cannot long withstand a reputation of being the Fulham of City law.