Legal Business

Freshfields and Davis Polk win roles as Comcast eyes Sky with ‘superior’ £22bn bid

Posted on |
Dealwatch Davis Polk & WardwellFreshfields Bruckhaus Deringer

Broadcasting giant Comcast has instructed Freshfields Bruckhaus Deringer and Davis Polk & Wardwell as it looks to trounce an existing offer for Sky from Rupert Murdoch-owned 21st Century Fox.

Philadelphia-headquartered Comcast said in a statement today (27 February) that its ‘superior cash proposal of £12.50 per share represents a 16% increase in value over the existing 21st Century Fox offer for Sky’.

The proposed offer from Comcast implies an equity value of £22bn ($31bn), compared with a bid from 21st Century Fox in December 2016 to buy the remaining 61% of Sky it didn’t already own. That bid valued Sky at £18.5bn and £10.75 per share.

Advising the bidder, the London-based Freshfields team is being led by M&A partners Julian Long and Alison Smith, City competition partners John Davies and Michelle Davis and London employment partner Alice Greenwell.

Meanwhile, Davis Polk is also advising longstanding client Comcast with a team led by New York managing partner Tom Reid and including London corporate partner Will Pearce and New York corporate partner Brian Wolfe.

Davis Polk partners Michael Kaplan and Reuven Young (securities), Jason Kyrwood and Nick Benham (debt financing), Neil Barr and Jonathan Cooklin (tax) and Arthur Burke (antitrust) are also advising.

As lead advisers to 21st Century Fox, Allen & Overy’s team is led by co-head of antitrust Antonio Bavasso, corporate partner David Broadley and M&A partners Seth Jones and Simon Toms.

Also advising 21st Century Fox are New York corporate partners Howard Ellin and Brandon Van Dyke from Skadden, Arps, Slate, Meagher & Flom, as well as  Simpson Thacher & Bartlett partners Patrick Ryan and Sinead O’Shea.

Sky, meanwhile, is advised by Herbert Smith Freehills, with a team led by M&A partner Stephen Wilkinson.

News Corp made an £8bn takeover bid for Sky back in 2010, which was then retracted in 2011 while the phone-hacking trial was conducted. Regulatory concerns regarding media ownership have also been raised regarding combining Murdoch’s News Corp media giant with Europe’s largest pay-TV broadcaster.

HSF and A&O also led for Sky and 21st Century Fox in 2014, when Sky (then called BskyB) concluded a deal worth up to £7.4bn to buy European sister companies Sky Deutschland and Sky Italia from 21st Century Fox.

Brian Roberts, chairman and CEO of Comcast Corporation said: ‘Comcast intends to use Sky as a platform for growth in Europe. We already have a strong presence in London through our NBCUniversal international operations, and we intend to maintain Sky’s UK headquarters.

‘Adding Sky to the Comcast family of businesses will increase our international revenues from 9% to 25% of company revenues.’

nathalie.tidman@legalease.co.uk

Legal Business

US moves: Freshfields hires DoJ heavyweight while White & Case opens Houston office

Posted on |
Strategic recruitment Freshfields Bruckhaus DeringerWhite & Case

Freshfields Bruckhaus Deringer has enhanced its US antitrust bench with the hire of veteran Eric Mahr from the Department of Justice (DoJ), while White & Case has established its seventh American office in Houston.

Mahr, who joins Freshfields after serving as director of the well-respected antitrust division at the DoJ, has multiple decades’ worth of experience in antitrust litigation, including cartel follow-on litigation and merger disputes.

Prior to his tenure with the DoJ, Mahr spent 16 years in the antitrust practice of WilmerHale, during which he spent a significant amount of time based in Brussels doing merger review and cartel work before the European Commission. Mahr will be based in Freshfields’ Washington DC office.

US regional managing partner Peter Lyons commented: ‘When it comes to US antitrust litigators, there’s quite simply nobody else who offers the track record that Eric has, and nobody else who can offer our clients in the US and around the world as deep a level of hands-on knowledge.’

Mahr added: ‘Throughout my career, my two greatest interests – international antitrust and US litigation – have always been in some tension with one another; Freshfields provides the unique opportunity to finally bring them together.’

Elsewhere in the US, White & Case (W&C) has launched a four-partner oil and gas office in Houston. Three of the new Houston partners, James Cuclis, Christopher Richardson and Charlie Ofner, have joined W&C from rival firms while the fourth, Saul Daniel, has relocated to the new outpost.

Cuclis joins from US firm Vinson & Elkins and will lead the new office. Richardson and Ofner both arrive from local Houston outfit Andrews Kurth Kenyon, while Daniel will relocate from W&C’s London office.

Philip Stopford, co-head of W&C’s oil and gas group, described Houston as ‘the global capital of the oil and gas industry, with more than 5,000 energy firms doing business in the metropolitan region.’

Dave Koschik, head of W&C’s US growth team, said the firm’s goal is to have at least 15 partners and 50 total lawyers in Houston across the core transactional practices of corporate, finance and projects.

tom.baker@legalease.co.uk

Legal Business

Can Freshfields limit the damage as Kirkland tempts PE heavyweight with $10m transfer?

Posted on |
Strategic recruitment Freshfields Bruckhaus DeringerKirkland & Ellis

Nathalie Tidman assesses the fallout as M&A veteran quits an unsettled City giant

Even for a market grown blithe to big-name M&A partners quitting for the dollar, Kirkland & Ellis’s recruitment of Freshfields Bruckhaus Deringer’s David Higgins just before Christmas sent a jolt.

Legal Business

A shock to the system as Freshfields heavyweight departs

Posted on | and
The News Leader Freshfields Bruckhaus DeringerKirkland & Ellis

Given that it has been so well telegraphed that the $10m lateral was coming to the Square Mile, the shock among City peers at the hire of Freshfields Bruckhaus Deringer private equity veteran David Higgins (pictured) has been, well, shocking. ‘Outrageous’, ‘obscene’ and ‘mildly appalling’ are among the reactions from peers. One hopeful partner at a US firm notes: ‘The clients won’t be impressed with that number splashed all over the news.’

But such sentiments are a naive reading of how the industry is evolving. Yes, if you think of a lateral as wrangling an immediate book of business, such a package suggests needing to preside over $30m within three years to be called a success on a conventional yardstick. That would certainly be a stretch – though not impossible given what some of the strongest City laterals have managed – but that is not the benchmark. Kirkland & Ellis has been stuffed with leveraged finance talent for years while lacking an unquestioned corporate A-lister. The hyper-productive Matthew Elliott delivered that when he joined from Linklaters in 2016, but his practice has a very precise real estate slant.

Legal Business

LLP accounts: Freshfields management team takes home £19.1m amid overall profit uptick

Posted on |
Financial results 2016/17 Freshfields Bruckhaus Deringer

The management team at Freshfields Bruckhaus Deringer took home £19.1m for the 2016/17 financial year, according to latest LLP accounts filed with Companies House.

This combined remuneration for the Magic Circle firm’s senior partner, managing partners and heads of global practice groups is a 6% increase on the previous year’s £18.1m package.

For this accounting period, the management team includes senior partner Edward Braham, managing partner Stephan Eilers and former co-managing partner Chris Pugh, who officially stepped down from the role in August 2017. Freshfields’ LLP accounts do not divulge figures for the highest-paid member.

Total revenue for the year ending 30 April 2017 was £1.34bn, a 4.7% increase on last year’s £1.28bn, while operating profit saw a 6% increase to £416.7m from £392.3m the prior year.

The figure is a significant improvement on the 2015/16 financial year when Freshfields operating profit fell drastically by 24% to £392.3m from £514.2m, affected by a sharp increase in the firm’s pension provision. Freshfields had £76m of net cash compared with £96m the previous year.

This time last year, Freshfields’ Companies House filings stated turnover as £40m lower than its previously reported revenue figures for 2015/16, with the firm claiming exchange rates as the reason for the discrepancy. The firm posted a 0.5% revenue lift for the 2015/16 financial year, after it claimed a 7% turnover boost for the same period when it unveiled results last year.

The latest accounts show staff costs increased 10% from £584.5m to £642.5m, while overall staff numbers fell 2% from 4,622 to 4,543. The number of fee-earning staff fell by 4% to 2,420 from 2,511 the previous year, while there was a slight increase in the number of secretarial and support staff at 2,123, compared with 2,111 the previous year.

Clifford Chance (CC) and Allen & Overy (A&O) are the other Magic Circle firms to have published their LLP accounts so far.

CC’s 13-strong executive leadership team took home £16m for the 2016/17 financial year, up 7% on the previous year. The rise reflected only a slight per head increase on last year’s figure, where the 12-person executive received £15m.

CC’s overall revenue for the year was up 11% to £1.54bn from £1.39bn. However as the firm stated in its filing: ‘Excluding the effect of exchange rates, revenue growth compared to last year was 2%.’

Meanwhile A&O’s management team saw a collective remuneration hike of 16% to £15.8m compared with £13.6m the previous year. The firm recorded a £48.2m boost attributed to swings in the value of sterling, putting average profit per full partner at £1.51m, an increase of more than 25% on 2016’s PEP of £1.2m. Without the forex gains, PEP would have been £1.4m.

nathalie.tidman@legalease.co.uk

Legal Business

Buyout star David Higgins quits Freshfields for Kirkland in landmark $10m transfer

Posted on | and
Strategic recruitment Freshfields Bruckhaus DeringerKirkland & Ellis

Despite a recent overhaul of its partnership to reward top performers, Freshfields Bruckhaus Deringer has lost private equity heavyweight David Higgins to Kirkland & Ellis in one of the most expensive lateral hires ever in the City.

Higgins is set to join the US law firm as London co-managing partner in a deal worth around $10m a year, in one of the most significant UK departures ever from an elite London law firm. He will sit alongside finance playmaker Stephen Lucas on Kirkland’s core executive committee as its second London-based member.

Jeffrey Hammes, chairman of Kirkland, said: ‘Continued investment in our European business is a key strategic focus for the firm. David brings a combination of business leadership, commercial awareness and experience on top tier transactions which will enable us to continue to develop our European private equity platform.’

The announcement comes a few weeks after partners at Freshfields voted in favour of radical changes to the firm’s lockstep pay model aimed at hiking remuneration for top performers.

The move hands the Magic Circle firm more ammunition to retain top performers but did not stop one of its most prominent names in the City leaving for a US rival. Higgins had been widely touted internally to be in line for a 60-point deal under the shake-up, making him one of the few London-based partners to earn over the new 12-40 point ‘core’ ladder for most partners.

The 48-year old Higgins has long been viewed as a trophy hire for a number of US firms investing heavily in Europe’s booming private equity markets, reflecting the huge success of Freshfields’ top tier buyout team. Latham & Watkins was seen as a likely home for him. Latham, however, insisted that no discussions have been held.

The Kirkland deal is worth $10m annually, putting Higgins near the top of its equity structure and making it one of the most expensive lateral hires ever in Europe’s legal market. The deal is not, however, structured as a multi-year guarantee.

Freshfields partner Simon Marchant insisted in a statement that ‘the strength and depth of our private equity practice across M&A, leveraged finance, high yield and real estate is second to none’ and ‘David’s departure does not change that’. He added: ‘We are grateful for David’s contributions over his time with us and wish him well in his new role.’

While there will be relief that as yet Higgins has not departed alongside colleagues, any further losses in the Freshfields team, especially of playmakers like Adrian Maguire and Charles Hayes, would be a body blow to the firm. As it is, the departure of Higgins caps off a year to forget for the City giant marked by poor financial results and a high profile shake-up of its c-suite.

For Kirkland the move brings in a heavyweight M&A hand to complement its muscular London leveraged finance practice. Said one Kirkland partner: ‘We don’t hire people looking for a pension plan, this is a guy with the will to win; we don’t buy business, we are buying quality DNA.’ The departure also underlines the dramatic inroads being made in the City by more profitable US advisers, particularly in private equity, leveraged finance and funds.

Marco.cillario@legalease.co.uk and Alex.novarese@legalease.co.uk

For more see Legal Business’s recent analysis of Freshfields shake-up of its partnership and our recent cover feature on the partners quitting the Magic Circle for US rivals (£)

Legal Business

Comment: Ditching lockstep – better too late than never?

Posted on |
Comment Freshfields Bruckhaus Deringer

‘Lockstep in its current form has to go. It’s just not working.’
Legal Business, June 2015

‘The current incarnation of lockstep is an overly restrictive model that was a child of its time…. The failure to substantively adapt the model… has increasingly threatened to shatter a system that still delivers considerable benefits.’
Legal Business, October 2013

***

Forgive me, readers, because I am not going to be saying anything over the next 450 words that I have not already said before but I am this time going to say it louder, because the message has not gotten through.

With news last month that Freshfields Bruckhaus Deringer has voted through wholesale reform of the lockstep partnership model the firm has raised to the level of religion, you could argue that top London law firms are at last realising the needs of a fundamentally-changed industry.

That is doubtful. Freshfields – a firm that did not introduce lockstep until the 1970s – managing the preceding 230 years fine without it – clung on far too long before adopting a package it should have introduced two years ago.

Linklaters, Clifford Chance (CC) and Allen & Overy, meanwhile, have ushered in more modest shake-ups – most credibly and coherently last year in the case of Linklaters. A very charitable view of CC’s record on this issue over the last 17 years would be that it was just plain bad.

It has been blindingly obvious for years now that the peculiarly compressed and restrictive model of lockstep forged over three decades ago was now out of step with the shifts in the global legal industry since the banking crisis. Yet London law firms that once ran rings around global rivals in tactical agility and daring have repeatedly put off the inevitable. That stance has sent a clear and damaging signal to many of their best partners about their aspirations and the extent to which their agendas were defined on the basis of seniority rather than contribution.

Lockstep’s supporters will argue that it brings huge benefits in aligning teams, delivering the institution to clients and making firms take quality control in the partnership seriously. These considerable virtues are all worth retaining but the notion of preserving an exact model forged for a completely different era had become untenable.

Even now having gotten through new regimes at Linklaters and Freshfields that on paper should do the job – particularly if Freshfields makes good on its expectations of pushing profit-per-point well over £50,000 – questions will remain over whether London’s elite can use the tools they have introduced. If Freshfields tries to save face by routinely holding partners to a 14-year track, what it has just voted through will not only be insufficient, it will prove actively counter-productive.

Two years ago, London’s top firms – having been through a sustained period of restructuring and reshaping – looked primed for dramatic revival. It did not happen. If they are not to squander their assets and achievements they cannot afford such complacency.

alex.novarese@legalease.co.uk

For the full story on Freshfields, please see: A dramatic break with lockstep for Freshfields but will it be enough to galvanise the City giant?

Legal Business

A dramatic break with lockstep for Freshfields but will it be enough to galvanise the City giant?

Posted on |
Salaries Freshfields Bruckhaus Deringer

Nathalie Tidman assesses the Magic Circle firm’s high-stakes partnership shake-up

‘Freshfields has overhauled its partnership for two reasons – to mollify restive partners in leveraged finance and private equity – and to make it moderately easier to recruit in the US,’ notes one former partner. ‘It’s insufficient for both of these purposes.’

Legal Business

Dealwatch: 2017 closes out with slew of energy, tech and transport deals

Posted on |
Dealwatch Freshfields Bruckhaus Deringer
    • Freshfields Bruckhaus Deringer and Slaughter and May advised UK’s ‘big six’ energy providers Npower and SSE on the merger between their domestic retail operations. Freshfields corporate partners Simon Marchant, Julian Pritchard and Andrew Craig advised SSE, along with competition partners Deirdre Trapp and James Aitken. Slaughters corporate partners Richard Smith and Tim Boxell led the team advising Npower parent company Innogy, alongside competition partner Lisa Wright, financing partner Ed Fife, IP/IT partner Rob Sumroy, tax partner Gareth Miles, and pensions and employment partners Charles Cameron, Padraig Cronin and Daniel Schaffer. Best-friend firm Hengeler Mueller also advised Innogy, led by corporate partners Andreas Austmann and Thomas Meurer.

Legal Business

Ditching lockstep – better too late than never?

Posted on |
The News Leader Freshfields Bruckhaus Deringer

‘Lockstep in its current form has to go. It’s just not working.’
Legal Business, June 2015

‘The current incarnation of lockstep is an overly restrictive model that was a child of its time…. The failure to substantively adapt the model… has increasingly threatened to shatter a system that still delivers considerable benefits.’
Legal Business, October 2013

***