Legal Business

Innovation alert – A&O becomes first top tier player to forge a contract lawyer service with launch of Peerpoint

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Innovation Allen & Overy
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For all the talk of innovation in the profession, experimentation with new models has so far been more evident at mid-pack players like Berwin Leighton Paisner (BLP) and Eversheds than elite London or New York advisers.

However, as Legal Business reveals today (25 November), Allen & Overy (A&O) has become the first top tier outfit to challenge that orthodoxy with the Magic Circle firm launching a high-end contract lawyer service for major clients.

The launch of ‘Peerpoint’ will see A&O-vetted freelance lawyers deployed to handle a range of fixed-term needs, including covering maternity leave or fulfilling secondment requests. The service will provide lawyers ranging in experience from the equivalent of a senior associate to partner level, drawing initially on former A&O lawyers who want to work flexibly.

The team currently has around 10 lawyers, and aims to grow to some 20 to 30 members in the coming weeks. Lawyers will be employed on a contract basis and paid the pro-rata equivalent of a full-time employee.

A&O has been trialling the model for months in a venture overseen by managing partner Wim Dejonghe (pictured). Peerpoint is viewed as potentially a major initiative for the firm, offering bluechip clients a wider range of service options while giving A&O more scope to draft in skilled resource at periods of high demand.

The division, which will be managed by head of business improvement Ben Williams, is currently in a soft launch period when its lawyers will only be drawn on by A&O itself but a successful rollout is set to see the service offered directly to clients.

Dejonghe told Legal Business: ‘The traditional law firm model is under pressure and lacks flexibility. In a low growth environment, peaks in client demand are far more variable, so we need greater flexibility in our model. We also want to provide an option for those high-calibre lawyers who enjoy the challenge of working with top tier clients without the added demands of working in a large law firm. Peerpoint enables us to do both.’

The venture echoes other alternative models of providing legal services such as BLP’s successful Lawyers on Demand division, which launched in 2007, and the US business Axiom, which provides services through experienced contract lawyers.

But Dejonghe said that A&O’s venture is different. ‘Our position is at the top-end of the market. We have access to high-quality clients and high-quality associates that are probably better than anyone else’s. This adds an additional model to the top end of the market and that is different to what already exists.’

The launch of a separately branded arm with a different model by one of the world’s leading law firms will be seen as underlining a more imaginative approach from City advisers at a time when clients are pressing for value and new ways of working. The venture also reflects an increasing interest at major law firms in so-called ‘accordion’ staffing in which a leaner core team of permanent staff are supported by a larger, flexible group that can be deployed to meet temporary demand.

Dejonghe added: ‘We want to accommodate the new generation of lawyers. There are some excellent lawyers who would love to remain in the legal industry but don’t want to put up with what that entails in the classical model.’

jaishree.kalia@legalease.co.uk

See How to improve a law firm in 17 easy steps for an extended look at innovation in law

Legal Business

H1 2013/14: A&O discloses revenue rise of 7.5%

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Financial results 2013/14 Allen & Overy
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The first of the Magic Circle firms to disclose its 2013/14 half year (H1) results, Allen & Overy (A&O) has done so in reasonable style, starting the year with a 7.5% rise in revenues thanks in large part to strong performances in its litigation and finance practices.

H1 turnover at the 2,700-lawyer firm increased to £608m, marking a significant improvement on this time last year, when its 2012/13 H1 revenues dipped by 2.7% on the previous year from £582m to £566m.

While A&O, in keeping with the majority of City firms does not disclose its mid-term profits, managing partner Wim Dejonghe (pictured) told Legal Business that the results were ‘encouraging’.

The firm has attributed its recent financial success to an improvement in trading conditions in most markets, with particularly strong performances in London and across Asia Pacific. In terms of sectors, the litigation practice is said to be heavily engaged across New York, London and Hong Kong in dealing with fast moving foreign exchange probes over the past six months.

However the increase in finance work, particularly capital markets, has been a bigger surprise. A&O’s finance practice recently advised on the proposed recapitalisation of the Co-operative Bank and represented the export credit agencies and commercial lenders on the $5bn financing for the $9bn Nghi Son Refinery and Petrochemical Project in Vietnam.

Elsewhere the transactional market remains slow but the firm pointed to its high profile roles advising GlaxoSmithKline on the £1.35bn disposal of its nutritional drinks brands Lucozade and Ribena to Suntory Beverage & Food, and Novartis on the $1.7bn sale of its transfusion diagnostics unit to Spanish company Grifols.

Dejonghe said: ‘We expected a strong performance in litigation, but the one that really outperformed my expectations was capital markets.

‘South East Asia has always been a strong market for the firm, but I was pleasantly surprised by our results in China and Hong Kong, considering the growth in those markets has slowed down and many players have now entered the market; there are now 254 law firms in China.’

Dejonghe added that work has slowed down in Continental Europe while recovery in the US has been healthier.

‘These results put us in a very strong position at the half-year given that many markets around the world are only showing early signs of recovery,’ he added. ‘They also underline that our strategy continues to deliver and that our global footprint provides an ideal hedge to the varying conditions in the global economy. We will continue to remain focused on our competitiveness to ensure that we can build on what has been a very encouraging first half.’

The results come as the H1 results revealed so far have told a positive story, with Clyde & Co, Gateley, Trower & Hamlins and Weightmans all turning out an increase in revenue as Olswang’s H1 revenue  jumped by 15% and Field Fisher Waterhouse saw a spike of 7% in its turnover.

jaishree.kalia@legalease.co.uk

Legal Business

Pharmaceutical boon: A&O, Proskauer and Osborne Clarke advise on $1.68bn Novartis hive off

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Corporate Allen & OveryOsborne ClarkeProskauer Rose
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The buoyant pharmaceuticals market threw up yet another high-profile healthcare deal this week, as Swiss giant Novartis announced the sale of its blood transfusion diagnostics unit to Barcelona-based Grifols for an estimated $1.68bn, with Allen & Overy (A&O), Proskauer Rose, and Osborne Clarke (OC) all securing advisory roles on the transaction.

Basel-headquartered Novartis was advised by A&O’s M&A head Eric Shube in New York, who previously advised the company on its near $52bn acquisition of a majority stake in NYSE-listed eye-care company Alcon, the largest acquisition ever undertaken by the pharma group.

On the other side, Proskauer advised Grifols, with New York-based corporate partners Peter Samuels and Daniel Ganitsky heading the deal. Samuels’ client portfolio in healthcare also includes Andrx Corporation, where he advised on its $1.9bn merger with Watson Pharmaceuticals (now Actavis).

Grifols also turned to Osborne Clarke’s Spanish arm, with head of life sciences & healthcare Tomás Dagá and M&A partner Raimon Grifols heading the team, alongside partners David Miranda (finance), Silvia Steiner (antitrust), and Núria Martín (capital markets).

Grifols previously worked with the healthcare company, of which he has also been a secretary since 2001 according to Reuters, on its €37m acquisition of a 60% stake in biotechnology firm Progenika in May this year.

This latest transaction, which requires customary regulatory approvals, is expected to be completed in the first half of 2014.

The deals comes in a week that also saw Irish biopharmaceutical giant Shire instruct US firm Davis, Polk & Wardwell in relation to its $4.2bn purchase of rare disease pharmaceutical company ViroPharma, which is being advised by Skadden, Arps, Slate, Meagher & Flom.

Data recently compiled by Bloomberg shows there have been 44 acquisitions of speciality drug companies for more than $500m in the last three years, with Industry specialist firms reaping the rewards, including Global 100 firms Covington & Burling and Latham & Watkins, which recently won key roles on Salix Pharmaceutical’s $2.6bn acquisition of speciality pharma company Santarus, announced last Thursday (7 November).

sarah.downey@legalease.co.uk

Legal Business

Clifford Chance handed a major role for the Co-operative Bank as A&O faces conflict

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Clifford Chance (CC) has been handed a role advising the ailing Co-operative Bank on its recapitalisation due to a conflict of interest at Allen & Overy (A&O) as the bank prepares to float next year.

CC capital markets partner Iain Hunter and insurance and corporate partner Hillary Evenett are advising the bank on its recapitalisation after A&O’s dual role as adviser to the Co-operative Group and its banking arm came under question in light of bondholder action that will now see a group of hedge funds take over a 70% stake in the bank.

The Co-op has been in negotiations after it emerged in June that its bank had a £1.5bn capital deficit due to non-performing loans.

CC’s role comes after Shearman & Sterling secured a significant victory for the bondholders led by Silver Point Capital and Aurelius Capital Management, under which they take a controlling stake in the bank instead of the 25% first on offer. Shearman’s financial regulatory head Barney Reynolds, corporate partners Laurence Levy and Jeremy Kutner, acquisition finance partners Anthony Ward and Clifford Atkins and bankruptcy partner Soloman Noh led on the deal.

CC has advised the Co-op in the past, including on its £750m acquisition of Lloyds Banking Group branches. That deal involved the Co-op taking over 632 branches of Lloyds Banking Group for £350m up front with an additional contingent payment of £400m depending on performance. Evenett also led in that instance alongside corporate partner Mark Poulton.0

CC was initially called in by the Co-op to handle a shareholder relationship agreement between the bank and the Co-op Group in early October. The role has now been extended to cover other contractual provisions, an under-writing agreement and a review of other documentation. CC is viewed as strongly placed if as expected the bank conducts an initial public offering next year.

A&O will continue to advise the Co-op led by partners Mark Sterling and Richard Slynn, who were both unavailable for comment at the time of writing. The Magic Circle firm continues to advise both the group and the bank, though one adviser said that A&O’s dual role will be under further scrutiny after the reorganisation of Co-op closes in December, when 70% of the bank’s ownership goes to bondholders.

Other advisers on the deal include Linklaters, which has been involved in the project since May. The City giant had initially advised a syndicate of lending banks to the Co-op Group and has subsequently undertaken several other substantive roles for financial advisers and pension trustees. Addleshaw Goddard has provided support for the Co-op on data rooms and intra group documentation between the bank and group.

Given the change of ownership of the bank, a new general counsel (GC) is set to be appointed to start before the end of November. The Co-op has indicated that the roles of all advisers to the group and banks will be reviewed by the new bank GC and Asher. The reorganisation of the group is also set to lead to the creation of two separate in-house legal teams.

david.stevenson@legalease.co.uk

Legal Business

Gordons and A&O on Morrisons panel as L&G cuts roster

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Adviser reviews Allen & OveryGordonsMorrisons
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One of the UK’s largest supermarket chains, Morrisons, last month finalised its first-ever legal panel, with Allen & Overy (A&O), Ashurst, DAC Beachcroft and Eversheds among the firms selected. Selection was overseen by the company’s recently appointed general counsel Mark Amsden.

Forty firms made the long list, which was whittled down to a shortlist of 22. There are 14 firms on the panels. Amsden divided the panel into six categories: employment, property, personal injury, licensing and regulatory as well as one panel covering ‘everything else’ – corporate, commercial, litigation, pensions and intellectual property. One more panel covers Scotland, with DWF and MacRoberts selected.

Legal Business

A&O brings salaries into line with big four rivals as starting lawyer pay hits £64k

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Allen & Overy (A&O) has announced a salary increase for its associates, bringing the firm in line with its key City peers.

For a newly-qualified (NQ) lawyer, pay will rise to £64,000 from £61,500, for one year post-qualified experience (PQE), salary rises to £69,500, two year PQEs goes from £74,500 to £78,500 and three year PQEs will earn £89,000, against £86,000 currently. The news was first reported on the legal site RollOnFriday.

A&O was the only Magic Circle firm not to increase its salaries earlier in the year. With the latest rises, starting pay at London’s top five firms now ranges from £63,000 to £65,000, with Freshfields Bruckhaus Deringer currently offering the highest starting salary.

The rises come despite relative gloom in the UK corporate markets and criticism from some clients at being asked to pay high charge-out rates for junior lawyers. The Legal Business 100 this year found that revenues were up 8% to £19bn though this was mainly due to mergers and growth outside the UK. The Magic Circle largely saw flat revenues during 2012/13.

However, in real terms salaries for City lawyers have fallen considerably since 2008, when many top law firms were paying around £66,000 for newly-qualified lawyers, and some UK law firms have also phased out strict lockstep compensation for associates in favour of more flexible merit driven models. There have also been signs of returning confidence among commercial law firms since the spring.

David.stevenson@legalease.co.uk

Legal Business

Law Society reaches out to City firms with hire of A&O’s Denyer

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Strategic recruitment Allen & Overy
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The Law Society has not always seen eye-to-eye with its City firm contingent but the hire of Allen & Overy’s (A&O) global markets partner Stephen Denyer, who is leaving the Magic Circle firm to join the representative body as City and international head, may go some way towards building a bridge between the two camps.

Despite moving across from private practice Denyer, who is charged with developing relationships with larger firms, already has form in this kind of role.At A&O, his main role was to develop and strengthen a network of independent law firms to deliver advice in over 100 countries where the firm has no offices, or where A&O lawyers face a regulatory bar. He was also the face of the firm for regulatory and professional bodies like the International Bar Association.

Other ambassadorial roles held by Denyer during his time at A&O include international development partner between 2007 and 2009, and co-managing partner of the firm’s Italian offices in 2003. He also had a ten-year stint as regional managing partner with responsibility for the firm’s Continental European offices in 1997, and headed the Frankfurt office for two years in 1998 and the Warsaw office from 1995 until 1997.

Denyer will relocate from Frankfurt to London in the Spring next year to start the new role, said to have been created to meet the body’s increasing global reach and growing membership, which currently includes 17,000 City solicitors.

City firms have often criticised the Law Society for a lack of ability to understand their needs – distinct from the high street practitioners that the society also represents – preferring instead to lobby through the City of London Law Society. However, many of the long-running areas of real contention, such as the society’s restrictive interpretation of the rules on conflicts of interest, have been adopted by the Solicitors Regulation Authority.

A&O commented: ‘Stephen Denyer will retire from Allen & Overy at the end of the financial year to take up the position of Head of City and International at the Law Society of England and Wales. We would like to thank Stephen for the contribution he has made during his time at Allen & Overy and wish him all the best for the future.’

jaishree.kalia@legalease.co.uk

Legal Business

Glaxo reviews advisers as A&O & CC take lead roles on £1.35bn Ribena and Lucozade sale

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Adviser reviews Allen & OveryClifford ChanceGlaxoSmithKline
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As GlaxoSmithKline (GSK) reviews its preferred law firms in a decision that could see the healthcare giant create a formal panel, Allen & Overy (A&O) has won the lead role to advise on its £1.35bn sale of drinks brands Lucozade and Ribena to the Japanese consumer goods company Suntory Beverage and Food (Suntory).

A&O won the deal after a series of GSK’s preferred firms pitched for the role. The corporate team at A&O will include partners Edward Barnett and Andrew Ballheimer, with assistance from senior associate Nigel Parker and associate Matthew Appleton, alongside anti-trust partner Alasdair Balfour and employment partner Mark Mansell.

Clifford Chance is advising Suntory, led by corporate finance partner Joel Ziff, who will work alongside fellow corporate partner Robert Crothers and lead associate Katherine Moir, as well as IT partner André Duminy.

Slaughter and May is widely regarded as GSK’s go-to corporate firm, having previously advised on a string of major deals including last year’s £650m investment to increase its stake in its India and Nigeria subsidiaries; its acquisition of Maxinutrition from Darwin Private Equity in 2010; its agreement with Pfizer to create ViiV in 2009; and a €515m acquisition of the marketed product portfolio of UCB.

However, GSK also operates a list of preferred firms for its legal advice and is discussing whether to set up a formal panel. According to a GSK spokesperson the details will be confirmed at the end of this year.

A&O corporate partner Edward Barnett says: ‘We are proud and delighted to have worked with GSK on this strategic transition and contributed to achieving GSK’s stated aims of diversifying these iconic brands, provided appropriate value was realised for shareholders.’

The sale comes after GSK decided to increase its focus around a core portfolio of healthcare brands, with a particular emphasis on emerging markets, following a strategic review of Lucozade and Ribena in February this year. Annual sales of the two brands were approximately £0.5bn in 2012.

Under the agreement, Suntory will acquire global rights to the brands with the exception of Nigeria, where GSK Nigeria will continue to manufacture and distribute Lucozade and Ribena under licence from Suntory. The transaction is expected to be completed by the end of the year, subject to regulatory approvals.

jaishree.kalia@legalease.co.uk

Legal Business

Training contracts: A&O cuts 2015 intake by 15% and reveals retention rates alongside HFW and Olswang

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Trainee retention Allen & OveryHolman Fenwick WillanOlswang
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Allen & Overy’s (A&O) decision today (15 August) to reduce its trainee intake by 15% in 2015 will be closely watched by City rivals, many of which are also considering whether to cut their trainee numbers in light of diminishing newly-qualified (NQ) roles in the medium term.

The top five LB100 firm, which achieved a modest turnover growth of 1% this year to £1,189m, is cutting its trainee numbers from 100 to 90 in 2014, followed by a further drop to 85 in 2015. A statement from the firm said the decision was taken in order to ‘match [its] expectations of NQ jobs in the medium-term.’

Graduate recruitment partner Richard Hough, added: ‘We aim to recruit for the long-term as well as providing a high quality training contract.

‘Managing our intake numbers means that we aren’t just offering our trainees excellent training and experience, but also a strong prospect of a long-term career with the firm after qualification.’

The announcement comes as A&O is also the latest and last Magic Circle firm to release its trainee retention rate, posting a figure of 72%.

A total of 45 out of 51 applicants have been made offers and 39 accepted a permanent position with the firm. This signals a dip on last autumn’s results, when the firm retained a total of 46 out of 58 trainees, giving it a retention rate of 79%.

This round the firm has posted the lowest retention rates of any Magic Circle firm, as Linklaters, Slaughter and May, Clifford Chance and Freshfields Bruckhaus Deringer all released figures upwards of 80%.

However, David Campbell, partner and training principal, said: ‘The job market for NQs continues to be tough but we are pleased to have been able to offer jobs to so many of our trainees. A number of this year’s intake decided not to accept offers, so our retention rate is lower than we expected.’

Elsewhere, Holman Fenwick Willan has taken on 100% of its trainees, while at the other end of the spectrum only 54% of Olswang’s qualifying trainees have been given a position at the firm after seven of 11 were offered a permanent position and six accepted the offer.

sarah.downey@legalease.co.uk

Legal Business

Resurgence in debt and equity capital markets sees Allen & Overy claim top spot for issuer and manager roles

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Finance Allen & OveryClifford ChanceSimpson Thacher & Bartlett
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Allen & Overy (A&O) has topped Thomson Reuters’ table of legal advisers on global debt and equity capital markets work for the first half of 2013, landing roles on 456 deals.

The Magic Circle firm came out in first place for both manager and issuer roles, advising on 350 and 106 deals respectively.

Clifford Chance, which held the top spot this time last year for issuer roles, has fallen into second position followed by US rivals Simpson Thacher & Bartlett in third, Skadden, Arps, Slate, Meagher & Flom in fourth and Sidley Austin in fifth. Linklaters came in joint eighth position, down from fifth place at the half year in 2012, however for manager roles it claimed second place, advising on 234 deals.

Philip Smith, a capital markets partner at A&O told Legal Business: ‘It’s been an incredibly busy period since October last year until about three weeks ago. A combination of huge volumes in the emerging market space combined with a resurgent European high yield market have driven volumes. The uptick in equity markets has also driven increased activity in the equity-linked market.’

In high yield the firm has recently expanded its team by making Jeanette Cruz up to partner and high profile debt capital markets deals have included advising the Co-operative Group Limited and The Co-operative Bank on a plan to fill a £1.5bn capital deficit led by Alistair Asher, who joined the Co-op as General Counsel at the start of the month.

Boyan Wells, former head of A&O’s capital markets group and now a member of the global board, told Legal Business: ‘The past year has been one of a high level of issuance and we are delighted to have played a large part in that.’

The combined debt and equity capital markets activity was valued at $3.4tn in the first six months of the year, which is 5.9% higher than the first half of 2012. As for continued growth in the area, Wells remains cautious, commenting: ‘Market reports suggest that market level will continue to be high but only time will tell.’

 

david.stevenson@legalease.co.uk