Antony Walsh, Robin Johnson and Hannah Kaye discuss factors influencing
M&A deals
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Practice profile: Ambition meets focus to drive growth
Eversheds Sutherland’s Richard Moulton, Eric Knai, Amanda Partland, James Trevis and Stephen Nash outline how their firm’s corporate group has gone from strength to strength
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Sponsored foreword: What’s next for M&A?
The key question at the present time is ‘what’s next for M&A’? Ever since the financial crisis, the M&A market has been strong, driven by a favourable economic backdrop, a large pool of liquidity and fundamental structural dynamics being driven by digitalisation and more recently by the move towards net zero. This strength in activity has only ever been seriously held back by the pandemic, which was – at least for M&A – a relatively short lived affair. At no time in the last decade have we faced as many headwinds as we do now, but how will the M&A market adapt?
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Sponsored briefing: The impact of ESG on M&A transactions
In recent years, environmental, social and governance (ESG) issues have become increasingly important to shareholders and boards, as the regulatory landscape has developed quickly in multiple jurisdictions, and the financial and reputational risks of non-compliance with ESG regulation and best practice have increased. Listed companies, large corporates, private equity funds and financial institutions are all now subject to increased ESG-related reporting and disclosure obligations, and are demanding greater transparency and standards from investee companies in ESG matters. ESG factors are also increasingly relevant to acquisition finance, with the growth of the sustainable finance market.
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Legal Business Awards 2020 – Law Firm of the Year
At last – the one you’ve been waiting for – we are delighted to reveal the Law Firm of the Year for the 2020 Legal Business Awards.
Only the most outstanding law firms over 2019 made the shortlist in this, our most prestigious award. Judges were looking for a firm that took the market by storm and achieved more than their direct competitors and peers. Achievements may include – but are not limited to – the successful development of new practice areas, expansion into new international or domestic markets, new client wins, the completion of a strategic merger or acquisition, improved financial performance, or a successful recruitment policy. The winner of this award is quite simply the best in the business right now.
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Winner – Eversheds Sutherland
Eversheds Sutherland emerged as a clear winner. Not only was the firm successful commercially, turning in strong financials and pointing to a number of major new client wins and panel reappointments for global giants, but it has also made a difficult transatlantic merger work under strong leadership; completed a strategic masterstroke with the spin-off of its alternative legal services arm; bolstered its ranks with some prominent lateral hires; and nailed its colours to the mast with firm targets for ethnic diversity.
Eversheds was the only firm in the top ten of the LB100 to record double-digit revenue growth for 2018/19, building on its 2017 transatlantic merger with a 14% revenue uptick to £890.2m while PEP rose 8% to £886,000. The US project has been a clear success and accordingly, the firm announced new office launches in Chicago and San Diego during 2019.
However, the decision to spin-off its alternative legal services business into a separate corporate structure, called Konexo, and open that up to outside investment to rapidly scale up was bold and innovative. When Eversheds’ New Law offerings were established in 2011, an initial revenue target of £10m was set. Now at £40m, Konexo is aiming to generate £100m within the next five years and was the only firm to set out its stall so clearly.
With financial success and strategic acumen in ready supply, Eversheds’ stock has simply grown, both in terms of GCs regularly citing the firm as a go-to adviser to Legal Business but also in terms of attracting noted talent from other firms. This was obvious in 2019 with a virtually unheard of lateral hire from Slaughter and May in Hong Kong – disputes partner Mark Hughes, while the firm boosted its credentials in the upper-mid-market corporate space considerably with the hire of Giles Dennison, the former UK head of corporate at Simmons & Simmons.
The firm also took the opportunity in 2019 to hold its hand up and point to its shortcomings in terms of promoting ethnic diversity. The firm was clear on its desire to do better and has committed to clear and measurable targets. By 2025 the firm wants 10% of its UK partnership to be comprised of BAME lawyers, with the figure currently standing at just over 5%. Throughout its UK workforce, including partners, the firm wants to hit 14% BAME representation by 2022, with the figure currently sitting at just below 12%.
Our congratulations go to Eversheds Sutherland, which thoroughly deserves its title of Law Firm of the Year.
Highly Commended – DAC Beachcroft
DAC has well and truly turned things around after a period of drift, clearing nearly £40m of debt in the last four years. Revenue at the firm grew 6% to £243m in the year to 30 April 2019, building on an 11% uptick the previous year, and coupled with a 10% increase in profit to £52m. Profit per equity partner similarly increased 8% to £570,000.
It has been an expansive period for the firm. In 2019, it lured across a five-partner City insurance team from Norton Rose Fulbright while also launching in Paris and Belfast. Meanwhile, in January of this year, the firm doubled its Madrid presence after securing a tie-up with three-partner insurance boutique Asjusa.
Tougher governance and a more commercial outlook under managing partner David Pollitt and senior partner Virginia Clegg means the future looks bright for this City institution.
Other nominations
Addleshaw Goddard
Back in 2014, not many – if any – would have predicted Addleshaw Goddard would boast one of the highest percentage growth rates in profit per equity partner (PEP) across the Legal Business 100 over the next five years. But with PEP increasing 13% to £730,000 in the 2018/19 financial year, it has risen an impressive 87% over that time.
Harbottle & Lewis
The firm has enjoyed a particularly strong run of form over the last five years and 2019 was another exceptional year, with revenue up 8% to £38.5m – double what it was six years ago. The increase in top line hasn’t occurred at the expense of profitability – the firm ranks 14th in the LB100 across key metrics.
Kirkland & Ellis
Described by Legal Business as ‘an evolutionary force in a raw Darwinian sense’, the world’s highest-grossing law firm and one of the fastest-growing firms continues to polarise opinion, not only because it struck out on its own but also because its success has further exposed the soft underbelly of many top-tier firms in New York and London.
Osborne Clarke
One of UK law’s success stories of the past five years is undoubtedly Osborne Clarke, which has increased its top line 89% since 2013/14 to £268.5m, the second-best five-year performance in the UK top 100 – off the back of its international expansion. Although its PEP growth stalled in 2018/19, it has risen 37% since 2014 to £703,000.
Travers Smith
This City outlier marked a tenth consecutive year of revenue growth in 2018/19 with an 11% increase in turnover. Revenue at the firm grew to £162.5m for the 2018/19 financial year – good for growth of just under 70% over the past five years – while PEP hit £1.25m. Since 2009, Travers has grown from being a £64.5m business.
‘High levels of uncertainty’: Eversheds braces for testing times amid robust revenue and profit lift
While few global firms expect to emerge unscathed from the Covid-19 crisis, Eversheds Sutherland (International) has nevertheless followed many peers in reporting robust revenue and profit increases in the 2019/20 financial year.
The figures released on Thursday (30 July) for the non-US parts of the business struck a bullish tone, with revenue up a solid 8% to £592m from £548.8m last year and a net profit increase of 5% to £108.8m
Profit per equity partner (PEP) also saw a slight 2% uptick to £902,000 on the back of last year’s 9% uptick to £886,000.
Whereas chief executive Lee Ranson (pictured) was last year nervous of a market slowdown as a result of Brexit, what he called ‘the uncertainty barometer’ has now shifted towards gloomy thoughts of a pandemic fallout.
‘These are a good set of results which were delivered against a challenging global economic and geopolitical landscape, compounded in the last two months of the financial year by Covid-19,’ said Ranson in a statement.
‘Our strategy has continued to drive strong growth while allowing us to make a number of significant investments across the year, specifically in people, property and our core and client-facing IT offerings.
‘While the business has responded well to the challenges and uncertainty created by the pandemic, and adapted quickly to the changing priorities and needs of our clients, there is no doubt that the year ahead will be testing for us all given the high levels of uncertainty across the world,’ Ranson concluded.
The sentiment is one that would be circulating around the Square Mile if law firm leaders were not all stuck at home. With the pandemic appearing only on the tail end of the 2019/20 reporting period, it is anyone’s guess as to how it will pan out in the financials for the current year.
nathalie.tidman@legalease.co.uk
Competition, supply chains and act of God clauses – First considerations for GCs in their Covid-19 responses
Businesses have shown remarkable resilience through an era defined by increasingly rapid change. Innovation, diversity and agility have driven adaptability and resilience. But now such resilience is facing a far more severe test in the shape of the coronavirus pandemic sweeping through societies and economies. Yet well-led businesses identify themes and opportunities emerging even from this crisis.
General counsel have the challenge of juggling (i) strategy – working with their boards on strategy and performance; (ii) legal issues and regulatory change; and (iii) team leadership and delivery (who, what, where, how). Identifying a framework and common themes can help decision-making.
One common theme of recent years and the current climate is protectionism. Globalisation and free market flows have shown remarkable resilience to Trump, trade-wars, Brexit and a global surge in populism. Yet the coronavirus is likely to have a far more dramatic impact with a tightening of who and what crosses borders.
Emerging from the crisis quickly and with a robust competitive position will need a clear vision for the future that is more agile, technologically advanced and, more profoundly, operated more ‘locally’ while maintaining a global view.
We are a couple of weeks into the protectionist measures already introduced by individual nations and the EU. Examples include:
- changes in foreign investment regimes such as that in Spain designed to shield its markets and Spanish companies becoming targets for foreign investors;
- trade restrictions – the European Commission prohibiting unlicensed export of certain personal protective equipment;
- last month’s Commission guidance calling on member states to screen FDI on strategic companies coupled with a reminder of other measures including public and health security grounds and the possibility of taking ‘golden shares’ that give controlling stakes.
Force majeure and managing your supply chain
The primary challenge for major companies is the lack of resilience of just-in-time business models. Short-term emergencies may have been factored into contractual arrangements but not severe curtailment. Businesses need to avoid knee-jerk reactions and be aware of wider implications of force majeure clauses such as the extra hurdles some jurisdictions impose for relief and the need to show causation and mitigation.
In some areas a more collaborative approach to supply chains is emerging, for example among the UK supermarket chains (supported by the relaxation of competition rules by the UK Government) and among automotive original equipment manufacturers.
Suppliers are considering retrenchment, reassessing business models and consolidating in key markets while cutting loose underperformers. Losing underperformers can alleviate cash out-flows but will invariably have consequences, possibly leading to the insolvency of the company closing; the need to fund to maintain supply; ransom requests or acquiring the business to maintain supply.
Whereas single point-of-failure assessments previously focused on organisations, it is likely we will see a geographic and regional assessment also needed. All these factors may lead to a near-shoring of supply.
Funding
Businesses are considering short-term needs. We are seeing a large number of clients:
- requesting waivers for actual and anticipated covenant breaches;
- drawing down available and seeking to extend facilities. Banks are being pragmatic and supportive, especially where the request is limited to breaches easily identified as a consequence of the virus. Businesses with the experience of managing through the 2008/09 crisis will appreciate the need for good relationships and communications;
- considering market fundraisings;
- looking to government financial support such as the Covid Corporate Financing Facility.
A focus on tighter cash management is likely to lead to a focus on core assets and ‘keeping the home fires burning’.
A fit for future legal team
We have seen client legal teams under huge strain. What may have been a luxury or important, but not urgent, has been forced. Measures such as remote and agile working, the use of technology in the widest sense, a critical assessment of shape, function, process, priorities and productivity have all been tested.
Initial responses were necessarily on protecting people and mobilising to agile working to safeguard our teams and their wellbeing while working remotely. But this will be a catalyst for furthering strategic objectives. The quantum leap to this new way of working will help drive progress with diversity, teamwork, resilience and sustainability. The status quo has been challenged.
The current crisis is a huge challenge to us all as we act to protect our businesses in an increasingly protectionist world. If we keep our focus and think strategically, our businesses and our legal teams can emerge stronger, better and fit for the future.
Keri Rees, partner and co-head of corporate and commercial at Eversheds Sutherland
‘No crown jewels’ but firms rally with coronavirus advice to steer clients through crisis
As cases of the coronavirus accelerate, law firms including Mayer Brown, Eversheds Sutherland, Allen & Overy (A&O), Mishcon de Reya, Hogan Lovells and Fieldfisher have established COVID-19 working groups to help clients.
The moves come after swathes of firms ordered employees to work from home in the City and around the world in an attempt to contain the spread of the disease, which has so far racked up 244,553 confirmed cases globally and claimed 10,031 lives. Cases in the UK have ratcheted up at an alarming rate, with 2,716 cases and 137 deaths reported at the time of writing, with the UK government poised imminently to impose a lockdown to stem the spread.
Mayer Brown has set up a global response team spearheaded by the management committee and office managing partners and launched a COVID-19 web portal and blog to provide answers to frequently emerging questions from clients. Tools include a global travel navigator facility with a heat map of regions affected and various restrictions there.
Speaking to Legal Business, Sally Davies (pictured), Mayer Brown’s London managing partner, said: ‘There has been so much information coming out on coronavirus and we have been sending multiple alerts out to clients. We wanted to consolidate everything in one place and make it easy to navigate.’
Davies said the response was largely crisis management and advisory at this stage, and expects further down the line client questions will turn to recovering money from the government as well as restructurings. The management committee and office managing partners are having daily calls on the coronavirus and have established and email group and WhatsApp group to quickly share knowledge and information.
‘There are questions over what a complete lockdown might mean. Can buildings and businesses be accessed at all? Can contracts be terminated or put on hold? What do the provisions which deal with force majeure and epidemics mean? Who pays for the delays and losses? As well as advice on business rates for large empty offices and employment issues around home working.
Eversheds has augmented its existing firm-wide working group with a global working group to deal with any litigation-related client requests around the coronavirus.
The group includes 13 partners: Jessica Neuberger (UK), Greg Falkof (Paris), Matthew Taylor (UK), Simon Brooks (UK), Paul Taylor (UAE), Michael Bahar (Washington DC), Meghana Shah (New York), Matt Gatewood (Washington DC), Tim Hill (UK), Mark Yeadon (Hong Kong), Joos Hellert (Germany), Yuri Wehrmeijer (Netherlands) and Remi Kleiman (Paris).
Paul Worth, co-head of global litigation, told Legal Business: ‘The global working party was set up to ensure a consistent approach. Just in the UK we have 600 people and 500 lawyers in my group so we wanted to make sure there weren’t hundreds of slightly nuanced responses to, for example, questions around force majeure. We wanted to ensure a joined up approach to make sure we had a clear understanding of client needs.’
Worth says that the firm is using webinars to tackle questions on M&A, real estate litigation, contract termination and force majeure: ‘We are not giving away the crown jewels but are offering high-level advice to clients.’
Worth added that that the firm was producing a global guide to force majeure across 40 jurisdictions to respond to the single biggest issue lawyers are being asked about, taking just a fortnight to produce where it normally can take months.
Worth draws parallels with the foot and mouth disease crisis of 2001 in terms of the types of issues that will likely emerge. ‘We advised the government on many millions of pounds of contract disputes connected with foot and mouth. I expect the coronavirus could lead to disputes around the allocation of government funds and resources. What clients need now is different from what they will need in six months’ time when the impact on global economies will automatically create opportunities for disputes.’
Elsewhere, Fieldfisher has responded with a one-stop-shop to offer commercial, employment, corporate and disputes advice in one place.
Ranjit Dhindsa, head of employment at Fieldfisher, told Legal Business: ‘The hub has expanded into having all the different advice you may need in one place. It has employment lawyers, commercial contract advice, litigation advice, insolvency lawyers, if your business can’t survive. What we have done is forget about expertise in isolation. When a board is in crisis you want the whole picture.’
Latham & Watkins has similarly established a task force, A&O a working group, Mischcon a cross-firm COVID-19 team, Hogan Lovells a hub to assess the potential impacts as well as multiple tools covering areas such as supply chain disruption, and Cooley a coronavirus resource hub to provide clients with advice on the pandemic.
Revolving doors: Ashurst appoints planning co-head as Eversheds bolsters its City commercial practice
In a slower week than usual for City laterals, Ashurst appointed a co-head of its planning team as Eversheds Sutherland made hires in London and Hong Kong and Clyde & Co lost a partner in Edinburgh.
Ashurst hired real estate partner Claire Dutch as co-head of the firm’s planning team in London. She joined from Hogan Lovells where she was head of the planning team, focusing on planning law, highway law and heritage law. Dutch also has experience in managing major regeneration projects, including energy and waste projects.
Meanwhile, Eversheds hired partner Simon Lightman to its commercial practice from Morgan, Lewis & Bockius in London.
Lightman has experience in commercial, technology and data transactions with a focus on restructuring and renegotiation of legacy outsourcing arrangements as well as outsourcing deals and procurements. He has acted for customers and suppliers in the financial services sector as well as retail, telecommunications and aviation.
Eversheds also appointed Shepherd and Wedderburn’s banking and finance litigation head to its Edinburgh office.
Frood advises on personal injury, professional negligence, fraud and contentious trust. He has worked with retail banks, building societies and major clearing banks as well as with funders, insurers, auditors and advisers.
These appointments follow a number of recent lateral hires in the litigation & disputes practice including litigation partner Mark Hughes in Hong Kong in October, commercial dispute resolution partner Claire Stockford in London in July and real estate litigation partner Tekla Fellas in London in March.
Partner and head of the technology group Simon Gamlin told Legal Business: ‘We’ve been looking to grow our technology practice particularly in London for the last 18 months. Simon’s practice covers general commercial and technology transactions and that includes traditional IT outsourcing arrangements but also newer more disruptive technologies.
‘We have a steady flow of work in the financial services sector which Simon has expertise in, particularly in banking but he also offers opportunities across a range of other sectors particularly retail and telecoms,’ added Gamlin.
Partner and head of real estate dispute resolution, North at Eversheds Damian Hyndman told Legal Business: ‘Alastair provides us with a great opportunity to consolidate and expand our litigation offering in Scotland. He shares our drive and ambition. He is a talented all round litigator with a particular reputation for banking, finance and insolvency litigation, which complements our existing senior team well. He has demonstrated an ability to successfully grow teams, show strong leadership and he fits in well with the firm’s culture, which is incredibly important. We think his strong personal brand and reputation will help us to grow our global brand in Scotland.’
In another reversal for Clydes, partner Calum Mathieson has left the firm’s Edinburgh office to join Plexus Law. Mathieson acts on complex and large loss employer, public and product liability claims on behalf of insurers and has experience in managing health and safety prosecutions on behalf of corporate insurers.
Mathieson told Legal Business: ‘Plexus is a forward thinking, progressive firm. I’m here to concentrate on developing some of the relationships I already have with a number of insurers.’
‘Partners from Kennedy’s moved across this year and I’ll be working with them in terms of developing the good connections Plexus already has, particularly in the London market,’ added Mathieson.
Elsewhere, DLA Piper added Stephen Wong to its litigation and regulatory practice in Hong Kong. Wong joined the firm from Stevenson, Wong & Co where he was a partner since 2015. Wong has experience in regulation and corporate matters, particularly in regulatory and criminal investigations in connections with commercial crimes.
Head of DLA’s litigation and regulatory practice in Asia Kevin Chan commented: ‘Stephen’s hire is part of our continued investment in the regulatory space in Asia. Our clients increasingly require solutions which help them meet their compliance obligations, as well as manage risk. Stephen’s skillset and experience will be a valuable asset to our team, and will enable us to deepen our relationships with existing and new clients.’
Finally, Paul Hastings added capital markets partner Chaobo Fan from Freshfields Bruckhaus Deringer to its Hong Kong office. Fan has a particular focus on securities offerings, mergers and acquisitions and has experience advising Chinese companies on their listings on the Hong Kong Stock Exchange.
Chair of Paul Hastings Seth Zachary commented: ‘We’re meeting our clients’ demand for help with increasingly complex, multi-jurisdictional transactions. The arrival of top talent like Chaobo adds further depth to our capital markets practice in Hong Kong, one of the world’s premier listing markets.’
Goodwin and Eversheds make bold corporate plays amid hopes of increasing City transactional firepower
Goodwin Procter and Eversheds Sutherland both made significant corporate hires in November, with the pair recruiting Kirkland & Ellis partner Carl Bradshaw and Simmons & Simmons former head of UK corporate Giles Dennison respectively.
For Goodwin, the hire of Bradshaw comes during an expansive period for the firm, particularly in private equity. He brings nine years of experience from Kirkland – four of which were as partner – and a practice that focuses on cross-border private equity deals; leveraged buyouts; carve-outs; public-to-privates; consortium deals; and co-investments.
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