Legal Business

Linklaters and A&O join Magic Circle peers in associate salary race to attract US talent

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Associates Allen & OveryLinklaters

Linklaters and Allen & Overy (A&O) have joined Magic Circle peers Freshfields Bruckhaus Deringer and Clifford Chance to hike associate salaries in the US as competition to recruit top-flight lawyers heats up.

A&O said today (28 June) it would pay US associates a starting salary of $190,000 rising to $340,000 for associates in their eight year. The salary rises to $350,000 for lawyers in their ninth year and for senior associates.

A spokesperson for Linklaters also confirmed that its US associate remuneration will be at the same level of Cravath, Swaine & Moore and Quinn Emanuel Urguhart & Sullivan, which range from $190,000 to $340,000.

The move follows Freshfields last week announcing it would match the rates set by Milbank Tweed Hadley & McCloy two weeks previously, with Freshfields’ US associates now starting on $190,000 and rising to $330,000 in their eighth year.

Those salaries are slightly below those set by CC and now matched by Linklaters and A&O, which will see senior associates paid $350,000. Meanwhile, CC and A&O have implemented Cravath-matching summer bonuses starting at $5,000 for junior lawyers rising to $25,000 at the more senior end.

The latest pay rises come as City firms wrestle with fee pressure from core blue-chip clients, while proactive US firms continue to attract Magic Circle talent and inflate the market rate for the most sought after deal lawyers. With good growth predicted for Magic Circle firms this year, the associate pay increases could help steer some of the best junior lawyers in the direction of the established City players as US firms continue to stretch London salaries.

nathalie.tidman@legalease.co.uk

Legal Business

A&O lures FinReg head Penn back from Cleary as White & Case makes City funds play with partner hire

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Strategic recruitment Allen & OveryWhite & Case

In a surprise move, Allen & Overy (A&O) has taken back its erstwhile financial services regulation head Bob Penn from Cleary Gottlieb Steen & Hamilton after only two years away, while White & Case eyes the lucrative funds market with the addition of a new partner to its global banking practice in London.

Penn’s departure in April 2016 from A&O after 17 years to Cleary was a rare high-profile exit for the Magic Circle firm and a rarer-still  acquisition for Wall Street-bred Cleary.

He had been A&O’s head of non-contentious financial services regulation practice and is re-joining the firm as a partner. His start date is yet to be confirmed.

Penn joined A&O in 1999 and was made up to partner in 2007. His experience covers the full range of non-contentious financial services regulation, advising banks, asset managers, market infrastructure providers and financial institutions on national and international regulation.

With Penn’s return, the Magic Circle firm will have six regulatory partners in London, having hired Herbert Smith Freehills partner Nick Bradbury in 2016 and fintech specialist Ben Regnard-Weinrabe from the London arm of Paul Hastings earlier this year.

The financial services regulatory practice in London is led by Damian Carolan, with partners Etay Katz and Kate Sumpter making up the rest of the team.

Damian Carolan said: ‘[Bob’s] depth of experience is an invaluable addition to our team at a time when the volume, complexity and breadth of financial regulation has increased exponentially.  This is driving continued investment in the team to continue to support our financial services clients in facing sophisticated and evolving challenges.’

A spokesperson for Cleary said: ‘We wish Bob all the best for the future. Our financial services regulatory practice is an important global and cross-border practice. We will continue to support our financial institution clients across the world, with expertise from our offices in the Americas, Asia, London and the rest of Europe.’

Meanwhile, White & Case is persevering with its prolific recruitment drive with the addition of London partner Shane McDonald, who was previously senior vice president at Hudson Advisors, a fund manager with links to private equity firm Lone Star Funds.

At Hudson he was responsible for the financing of a large number of investments, including the acquisitions of non-performing loan portfolios and private equity portfolio companies.

Dual-qualified to practise in England and Australia, he was previously an associate at Ropes & Gray and, before that, at Freshfields Bruckhaus Deringer.

Eric Leicht, head of White & Case’s global banking practice, said: ‘White & Case offers sophisticated sponsors and financial institutions a compelling proposition as counsel of choice for leveraged finance transactions. Clients benefit from our unique blend of US, UK and European law capabilities across our established EMEA network, including our strength in “US products” such as high yield and covenant-lite Term Loan Bs.  Shane’s arrival supports our ambition to continue building on our reputation as preeminent leveraged finance counsel.’

Oliver Brettle, London-based member of White & Case’s global executive committee, said: ‘Our 2020 strategy includes a focus on profitable growth in London, and in the global financial institutions and private equity industries. Shane’s arrival propels us forward in all three areas, and he joins a strong banking team in both London and globally.’

nathalie.tidman@legalease.co.uk

Legal Business

Paul Hastings doubles up in the City as A&O loses global IP head to Kirkland

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Strategic recruitment Allen & OveryKirkland & EllisPaul Hastings

Paul Hastings pulled off two headline lateral hires in London in a week as the US firm strengthens its corporate offering in the City.

Private equity rising star Anu Balasubramanian was the first hire announced, as DLA Piper lost another key dealmaker in the City. The addition will be a major boost to Paul Hastings’ City corporate and private equity practice, with Balasubramanian bringing experience in an array of mid-market work, acting for sponsors such as ABRY Partners, Accel-KKR, Oakley Capital and Aurium Capital Markets.

Legal Business

Comment: A&O merger bid risky but US question can’t be delayed forever

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Comment Allen & OveryO'Melveny & Myers

‘It is an odd couple. I wouldn’t have put them together,’ is one take from a London peer to the news that Allen & Overy (A&O) has sought a $2.8bn union with O’Melveny & Myers. It is certainly a representative view.

Since news of the talks broke in early April, One Bishops Square has gone uncharacteristically coy. However, it is understood that management indicated earlier this year that it was talking to two, then unnamed, US firms. A&O, of course, has to tread carefully – getting a deal through the demanding audience of its London partnership with O’Melveny or any comparable firm is a big ask.

Despite A&O’s peer-leading run over the last decade, its management – which has been sounding out US firms outside New York for at least six years – will know that many of the beliefs of its London partners about potential US partners do not reflect current market realities.

A US marriage for A&O is walking a tightrope – it needs a US firm strong enough to make it worth the industrial amounts of trouble involved in a union but also with enough problems to actually consider it. That leaves a very small pool of suitors.

Realistically there is not a much better conceivable deal on the horizon for the Magic Circle.

O’Melveny is a strong West Coast player that has had a troubled ten years, while A&O is at the top of its respective pecking order. The US firm was the 19th largest law firm in global revenue terms in 2007 – in 2017 it was down to 59th. It was also the second worst-performing practice for revenue growth in our Global 100 table over the previous five years, with revenues shrinking from $779m in 2012 to $725.4m in 2017.

The practice mix is also hardly glove-like. O’Melveny has historically majored on litigation, West Coast corporates, finance and the entertainment industry – not the neatest fit for A&O but acceptable. But it is the cultural challenges – and some believe O’Melveny’s lingering hopes of a union with Willkie Farr & Gallagher – that seem more problematic.

There is talk of a crunch meeting in June to thrash this out, though as Legal Business went to press there were already mutterings about opposition in A&O mobilising. While senior partner Wim Dejonghe wants to secure a US breakthrough before the end of his term, such an outcome is far from a foregone conclusion.

That said, much of the knee-jerk response against such a marriage in London fails to grasp how much the transatlantic tide has turned against the City elite over the last decade. Realistically there is not a much better conceivable deal on the horizon for the Magic Circle. The already-narrowing window to secure a substantive tie-up is closing. The London elite have at best three years – unless the global economy swings dramatically back in their favour – before the only serious deal they can get is being taken over.

It is hard to see how the Magic Circle can leave the US question hanging ominously over them. Either they take decisive steps to Americanise their businesses organically or accept more compromises to secure a high-risk merger. A&O feels that with nearly 400 US-qualified lawyers it is getting there but its expansion has been expensive and the US market is hardly standing still as London firms dither. But the Magic Circle must make key US decisions soon or risk the market taking the matter out of their hands.

alex.novarese@legalease.co.uk

Legal Business

The wheat from the chaff – Hustling start-ups meet City law

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Legal tech Allen & OveryDentonsMishcon de Reya

In a quiet east London street off the bustling Brick Lane, a few doors from a sign tagged ‘Vegan Hair Salon’ is a co-working space. You meet Gaz, the office’s bulldog, and work among Star Wars figurines, gaming consoles and an electric drum kit.

It has blackboard walls and is suspiciously empty on a Friday afternoon given the barbecue outside. Equidistant from the corporate hub at Liverpool Street and the ‘scene’ of Shoreditch High Street, music plays.

Legal Business

A&O merger bid risky but US question can’t be delayed forever

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The Issue Allen & OveryO'Melveny & Myers

‘It is an odd couple. I wouldn’t have put them together,’ is one take from a London peer to the news that Allen & Overy (A&O) has sought a $2.8bn union with O’Melveny & Myers. It is certainly a representative view.

Since news of the talks broke in early April, One Bishops Square has gone uncharacteristically coy. However, it is understood that management indicated earlier this year that it was talking to two, then unnamed, US firms. A&O, of course, has to tread carefully – getting a deal through the demanding audience of its London partnership with O’Melveny or any comparable firm is a big ask.

Legal Business

SRA admits to A&O Weinstein probe as MPs turn up the heat on regulator for ‘cosy’ interview with City giant

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Legal affairs Allen & Overy

City heavyweight Allen & Overy (A&O) is under investigation by the Solicitors Regulation Authority (SRA) for its conduct in the Weinstein saga, the regulator’s chief executive has admitted to a Parliamentary committee.

The investigation into the firm’s handling of the non-disclosure agreement (NDA), drafted by A&O employment partner Mark Mansell for Hollywood film producer Harvey Weinstein, came to light today (25 April) as the Women and Equalities committee questioned SRA boss Paul Philip during an evidence session.

This was the second Parliamentary hearing in as many months as part of an investigation into the use, and potential abuse, of gagging orders in sexual harassment cases.

A&O had in 1998 acted for the producer after Zelda Perkins, who had worked at Weinstein’s company, Miramax, alleged knowledge that Weinstein had sexually assaulted a colleague at the company. Weinstein denies that he engaged in non-consensual sexual acts.

The SRA last month issued a warning notice reminding lawyers of their responsibility to ensure that, among other things, these agreements are not used to prevent the signatory from reporting to the regulator or the police in the event of alleged sexual misconduct, shouldn’t prevent the person having a copy of the NDA or making a protected disclosure and shouldn’t be used to prevent the person from co-operating with a criminal investigation.

These were all criticisms levelled against Mansell and the NDA he drafted at the previous Parliamentary evidence session. But today, the select committee heard that the matter was referred to the SRA last November and the regulator decided to take no action.

‘How on earth can you sit here today saying all those warm words when you’ve got here [the Weinstein NDA], right in front of your nose, the clearest example of the things that breach your warning notice, that you’ve said yourself is professional misconduct?’ questioned Philip Davies MP of the SRA boss.

‘Outside of this room, you see a big law firm and you don’t decide to take any action against them? How can you… look us in the eye about this particular issue when you’ve singlehandedly done nothing?’

Maria Miller MP, paraphrasing a letter from A&O’s Mansell to the committee not published with the other evidence, said Mansell wrote that the firm and its compliance officer had met with the SRA to discuss the issues but that, following the meeting, the SRA communicated it did not intend to take any further action, without providing more information.

Miller flagged a possible contradiction around the SRA’s involvement, having contacted the regulator yesterday.

‘The slightly contradictory information is that there might be an open case,’ said Miller. ‘We’re therefore quite concerned that either Allen & Overy are unaware of this or, I would hate to think, that they’ve misled the committee.’

Philip then admitted A&O was currently under investigation. He added that the SRA spoke to A&O and the compliance officer on 28 November but ‘decided at that point in time we would wait to see what further information came to light. Further information subsequently came to light and we opened up the case.’

When questioned, Philip also admitted that the SRA had not asked to see a copy of the NDA at the time of the November meeting when making that decision.

‘I suspect at the time the issue was whether or not taking action against the law firm was proportional, given the age, but given the seriousness of concerns I think at that point in time we should have asked them for it [the NDA], I agree with you.’

Detailing the meeting with A&O and the compliance officer, Philip said: ‘They very usefully gave us lots of information about the types of procedures you would expect to be in place at a large law firm in relation to this type of thing today, but this matter happened 20 years ago.’

But Davies observed: ‘It leaves a taste in the mouth… that the SRA and its relationship with solicitors is like some sort of cosy old boys network kind of thing, where they’re scratching each other’s backs and not really taking anything seriously.’

Philip declined to offer any more detail about the investigation, saying it would be ‘inappropriate’ to discuss an open investigation. When questioned on the timeframe, Philip said: ‘A matter of weeks, perhaps months’.

nathalie.tidman@legalease.co.uk

Legal Business

‘A walk in the park’: Linklaters and A&O launch tech solutions to traverse the margin minefield

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Innovation Allen & OveryLinklaters

As increasing numbers of derivatives players face a scramble to comply with Initial Market (IM) regulations, Linklaters has become the second Magic Circle firm in as many weeks to launch a service promising to take the pain and expense out of overhauling derivatives documents.

Linklaters has today [25 April] unveiled ISDA Create – IM at the International Swaps and Derivatives Association (ISDA) annual general meeting in Miami. The platform has been developed by Linklaters using its own Nakhoda AI data tool and is backed by global trade organisation ISDA.

The product comes to market exactly a week after A&O announced its own Margin Xchange solution to the challenges looming around mass repapering of documents wrought by the need for initial margin (IM) compliance. A&O’s product is a collaboration with derivatives service providers IHS Markit and SmartDX.

Both the Linklaters and A&O platforms are designed to allow numerous counterparties – including buy-side, sell-side and custodians – to create and negotiate IM collateral documents completely online and cost-efficiently.

They are driven by changes to IM rules which are being implemented in phases under the European Market Infrastructure Regulation (EMIR), with significant numbers of derivatives players required to comply in the run-up to 2020.

The IM regulations follow the introduction last year of changes governing variation margin (VM), which A&O anticipated in 2016 with the creation of MarginMatrix, an automation tool which has proved to be a significant revenue-spinner for the firm. That JV with Deloitte was the first time a Magic Circle firm collaborated with a Big Four accountancy firm.

The IM roll-out started in February 2017, applying only to entities with derivative books over €3trn, with the scope widening to include those with a notional value of €2.25trn in September 2017. It will be broadened again in September 2018 to €1.5trn. Up until now, the changes have only affected around 35 major banks with the highest value of derivatives and banks are likely to be the only entities within scope until next September.

By then, however, entities will only need to have €750bn of derivatives, closing in again to €8bn in the final September 2020 phase of the roll-out. This will mean that not only banks, but hedge funds, major insurers and asset managers will fall within the scope of the regulations.

‘VM compliance was a complete headache but is a walk in the park compared with IM’, Paul Cluley, derivatives partner at A&O told Legal Business.

‘IM is more expensive for parties to comply with than VM and more complicated to put in place. The types of assets you may want to post as collateral tend to be a lot broader and the collateral has to held with third-party custodians – the likes of Euroclear, Clearstream, JP Morgan, Bank of New York and State Street – all with their own documents and their own way of doing things.’

‘Margin Xchange will allow amendments to be made in real time, with negotiating teams working in parallel. You can put permissions on your negotiators to restrict what changes they can and can’t agree to, giving control and governance over the negotiation,’ Cluley added.

Doug Donahue, New York-based derivatives partner at Linklaters told Legal Business: ‘The ability to search an entire portfolio of agreements for a specific data point in a matter of seconds using the ISDA Create-IM platform is a real advantage.’ He added that the platform could have a wider use beyond meeting the IM regulations requirements for uncleared derivatives.

ISDA has mandated Linklaters to act as its global counsel in connection with the industry consultation and drafting of its next generation IM collateral documentation, scheduled to be published later this year.

‘It’s a powerful tool that that can entwine risk management elements into the everyday workflow, ensuring a level of quality control and audit control that just cannot happen to the same degree in the paper world,’ said Donahue.

‘The technology allows you to collect very valuable resource management information that can be used by market participants for everything from identifying negotiation bottlenecks to determining the size of the team necessary for a project,’ Donahue added.

nathalie.tidman@legalease.co.uk

Legal Business

Fuse breaker: A&O brings ‘very different’ focus to second tech lab

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Innovation Allen & Overy

In the same week banking giant Barclays joined the rising tide of law-tech innovation spaces, one of the earlier movers, Allen & Overy, is rewiring its Fuse hub.

The firm announced Wednesday (April 25) the second cohort of companies which will join its tech innovation space in London from May, bringing what Fuse chairman and A&O partner Jonathan Brayne describes as a ‘very different’ focus since the first round in September.

Incumbent companies Avvoka, Legatics and Nivaura will transfer from the first cohort to the second, and will be joined by Bloomsbury AI, Kira Systems, Neota Logic, Regnosys and Signal Media. The companies were chosen from 80 applicants – down slightly from last year’s 84 – and had pitched to the Fuse selection committee, which includes Amazon’s Alex Wong and Jordan Elsas, Funding Circle’s Robert Kerrigan, Index Ventures’ Hannah Seal and JP Morgan’s Oli Harris.

Brayne commented: ‘This cohort’s focus is very different to that of the first – there’s a strong AI theme here – but there’s the same sense of anticipation as when we opened our doors last September.’ Fuse head Shruti Ajitsaria added: ‘Opening for the second cohort has enabled us to keep abreast of the constantly changing legal tech ecosystem and we’re really pleased with the standard of the companies joining us next month.’

The second cohort also signals a move to working with more well-established companies, with Kira Systems and Neota Logic already well-known names in the law-tech space. Bloomsbury AI and Signal Media are AI companies without an explicit legal focus, while fintech company Regnosys hits a sweet spot between finance and law in that it focuses on regulatory compliance.

Nearly half of this year’s applicants had a focus on platform solutions, a quarter on workflow, and a fifth were reg tech businesses. About two-thirds of the applicants already have existing users, while 31% are at the prototype phase and 6% only a concept.

A&O says more than 5,500 people from within the firm, clients and others have visited Fuse since it opened last year . The touted benefit the space provides is the ability for the companies to work directly with lawyers and clients as end users to help refine their products.

Other firms with similar initiatives include Mishcon de Reya with MDR LABS early last year, and Dentons’ Nextlaw Labs and Nextlaw Ventures in 2015.

hamish.mcnicol@legalease.co.uk

Legal Business

Allen & Overy makes up just two women partners in scaled back global promotion round

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Partnership promotions Allen & Overy

Allen & Overy (A&O) has made up only two female lawyers to partner as part of a 20-strong round unveiled in the same month the firm vowed a renewed drive towards gender diversity.

The latest promotions fall below the scaled-up 2017 partner promotion round of 24 in which 10 were made up in London. Only four lawyers in London have been promoted to partner this year, as corporate and banking saw the lion’s share of the promotions.

Earlier this month, A&O opened a so-called ‘hub’ office in southwest London’s Vauxhall to facilitate remote working as part of a gender diversity push. Senior partner Wim Dejonghe simultaneously set a target for 30% of partnerships candidates to be women, starting by 2021.

Despite these ambitions, only London banking lawyer Hannah Valintine and Singapore-based litigation lawyer Sheila Ahuja were promoted. The other London promotions are Andrew Cork in corporate, John Kicken in international capital markets (ICM) and James Freeman in litigation.

Corporate and banking made up the majority of the global round, with six partners promoted in each, while litigation saw four made up. One lawyer was promoted in real estate. Singapore gained five new partners, New York and Amsterdam two apiece, with Brussels, Casablanca, Dubai, Hamburg, Seoul, Madrid and Perth one each.

Other Magic Circle promotion rounds include Freshfields Bruckhaus Deringer’s five lawyers in its London partnership, while Linklaters increased the size of its promotions round for the fifth year in a row, adding 27 lawyers to its partnership. Partner promotions have elsewhere generally been mixed so far this year.

Allen & Overy’s partner promotions in full:

  • Jonathan Heeringa, Amsterdam – international capital markets
  • Jasper de Jong, Amsterdam – corporate
  • Frederiek Adams, Brussels – corporate
  • Antoine Haddad, Casablanca – banking
  • Yacine Francis, Dubai – litigation
  • Christian Hilmes, Hamburg – real estate
  • Henry Sohn, Seoul – banking
  • Hannah Valintine, London – banking
  • John Kicken, London – international capital markets
  • James Freeman, London – litigation
  • Andrew Cork, London – corporate
  • Ignacio Hornedo, Madrid – corporate
  • Brian Jebb, New York – corporate
  • Simon Clark, New York – banking
  • David Jenaway, Perth – litigation
  • Sheila Ahuja, Singapore – litigation
  • Chris Bishop, Singapore – banking
  • Scott Lovell, Singapore – banking
  • Tim Beech, Singapore – international capital markets
  • James Mythen, Singapore – corporate

nathalie.tidman@legalease.co.uk