Legal Business

Paywars III – City elite caught between rock and hard place

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The Issue Freshfields Bruckhaus Deringer

The news last month that Freshfields Bruckhaus Deringer was to push through the highest real-terms pay rises by a major City firm for a decade is a significant moment for the London legal market.

The decision to hike its associate pay scale, raising its benchmark rate for newly-qualified solicitors from £85,000 to £100,000 is a bold and expensive step for the City giant. Back-of-the-envelope calculations suggest such a move, which will put Freshfields well ahead of its Magic Circle peers, comes at an annual cost in the region of £10m.

Legal Business

Associate pay war, anyone? Freshfields sets new Magic Circle standard by raising NQ pay to £100k

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Salaries Freshfields Bruckhaus Deringer

Marco Cillario assesses the City-wide implications of Freshfields’ decision to dramatically hike associate salaries

A decade after leading the way in resetting downwards the going rate for City associates, Freshfields Bruckhaus Deringer in May set a new standard for Magic Circle firms, raising its newly-qualified (NQ) salaries from £85,000 including bonuses to a symbolic £100,000, with bonuses on top.

Legal Business

Deal watch: Seats at the table for Travers, Skadden and Gateley as Pret acquires EAT and Oliver’s chain collapses

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Dealwatch Clifford ChanceFreshfields Bruckhaus DeringerGateleySkadden, Arps, Slate, Meagher & FlomTravers Smith

Two opposite developments in the UK high street have seen City and US firms advise as food chain Pret A Manger acquired rival Eat and high-profile British chef Jamie Oliver’s restaurant business went into administration.

Also keeping City insolvency practitioners busy was the news today (22 May) that British Steel has been put into compulsory liquidation.

Skadden, Arps, Slate, Meagher & Flom advised Pret as it agreed to acquire all of Eat’s 94 shops for an undisclosed sum, with plans to turn most into ‘Veggie Prets’.

The US firm’s team was led by London corporate partners Richard Youle, Katja Butler and Linda Davies. Freshfields Bruckhaus Deringer partner Alex Potter is advising Pret on antitrust.

On the other side of the table, Travers Smith’s head of private equity and financial sponsors Paul Dolman led the team advising Ardian, Horizon Capital and the other selling shareholders of Eat.

‘I acted for Horizon when they acquired Eat [in 2011] and we have acted for them ever since, so we were the logical people to advise on the sale,’ Dolman told Legal Business. ‘Travers has in-depth expertise in this sector.’

The deal sees Travers’ and Pret’s paths cross again after the City firm advised previous owner Bridgepoint on the £1.5bn sale of the food chain to JAB Holding Company one year ago, with a team including Dolman and private equity partner Ian Shawyer.

Under Bridgepoint’s ownership the company, founded in London in 1986, expanded its presence in the UK and US, and launched in France, China, Dubai and Singapore, quadrupling its revenues to £879m. It now counts over 500 shops in nine countries.

Eat was founded in 1996 and bought by Horizon in 2011 with plans to build hundreds of shops. But it has struggled in recent years and reported pre-tax losses of £17.2m in the year to end of June 2018.

Meanwhile, Daniel French, an insolvency partner at listed firm Gateley, is leading the team acting alongside administrator KPMG after Oliver’s business became the latest victim amid difficult times for the UK high street.

Jamie Oliver Restaurant Group will see 22 of the 25 eateries it operates close, resulting in 1,000 job losses.

This is the second prominent high-street insolvency Gateley has acted on this year. The firm also advised KPMG on the administration of Patisserie Valerie in January.

Elsewhere, Clifford Chance (CC)’s insolvency team is advising as British Steele entered compulsory liquidation, putting its 5,000 employees at risk of redundancy.

The government’s official receiver has taken control of the company and together with Big Four accountancy firm EY is looking for a buyer, while it continues to trade normally.

CC’s restructuring head Philip Hertz and partner Iain White are leading the team advising on the process.

The Magic Circle firm was previously among the advisers in one of the largest UK insolvencies to hit the construction industry in recent years, when construction giant Carillion collapsed in January last year.

marco.cillario@legalease.co.uk

Legal Business

City paywars: a history lesson – Freshfields hikes hark back to era of Magic Circle domination

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Magic Circle Freshfields Bruckhaus Deringer

The news this week that Freshfields Bruckhaus Deringer was to push through the highest real-terms pay rises by a major City firm for a decade is a significant moment for the London legal market.

The decision to hike its associate pay scale, raising its benchmark rate for newly-qualified solicitors from £85,000 to £100,000 is a bold and expensive step for the City giant. Back-of-the-envelope calculations suggest such a move, which will put Freshfields well ahead of its Magic Circle peers, comes at an annual cost of more than £10m.

This takes us right back to the market-churning pay rises of 1999/2000 and 2007/2008, a period of utter domination in Europe for the Magic Circle when their decisions clearly defined the market. After the banking crisis, the circa-£66,000 starting rate at elite London firms was reset downwards to £60,000 in 2009 (led again by Freshfields). For the next decade, real term pay rises have been modest… until now.

Not only will this put intense pressure on Freshfields’ rivals to respond, but it nails the City giant’s colours to a clear strategic mast, strongly suggesting a turn in the direction of the US legal model, with lower leverage and smaller and more focused pool of associates. Lawyers in support departments will be feeling unease, unless we see more watering down of the associate lockstep model (which would be fine).

Certainly, the economics of this decision must force Freshfields to further sharpen its practice, a debate that has been internally gathering much force. Given the supposed fundamentals of Freshfields’ global elite aspirations, that logic is inarguable. The camp at Fleet Street arguing for Freshfields to stop trying to split the difference between two contradictory strategies will feel they have won a notable tactical victory.

In truth, the wider London elite cannot continue to allow such a huge disparity in the pay scales they are offering against major US rivals; when firms like White & Case and Kirkland & Ellis are offering compelling platforms for junior lawyers and often better promotion prospects, it has been plain for some time that the game was up .

Such moves also increase the pressure for City leaders to expand their LPO-style delivery arms to handle the increasing areas of work their associates are priced out of, and refer more work to mid-tier law firms. That is how the market should logically evolve anyway.

If Freshfields’ move on salaries helps the highest levels of City law to face some of evolutionary realities they have ducked for the last five years, they will have done their peers a favour. Not that they’ll get any thanks.

alex.novarese@legalbusiness.co.uk

Legal Business

Shades of 2007: Freshfields sends NQ salaries soaring above £100k to head off talent threat from US rivals

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Trainee retention Freshfields Bruckhaus Deringer

Freshfields Bruckhaus Deringer is fighting the war for talent by becoming the first Magic Circle firm to raise its pay for newly-qualified (NQ) solicitors to £100,000.

The £15,000 salary uptick is symbolic, given the pressures imposed on the City elite by US competitors in recent years. There will also be a discretionary bonus on top of the new NQ salary.

The move also gives Freshfields the edge on its Magic Circle peers. Slaughter and May last year upped its NQ salary from £80k to £83K to match peers Linklaters and Allen & Overy (A&O), while Clifford Chance (CC) increased its NQ salary to £91k including bonuses.

A Freshfields spokesperson said: ‘We have increased associate salaries with effect from 1 May. Our pay offering is a critical part of our talent strategy and reflects our continued commitment to attracting and retaining the very best talent in the legal market. We regularly review our compensation and benefits across the firm with this in mind.’

Freshfields last month redoubled its promotion efforts, making up to partner 22 lawyers, of which eight were in the City. The round was a significant lift from the previous year, when only 12 lawyers were promoted to partner, including five in the City.

Those promotions were a sign of a wider trend, with A&O, CC, Freshfields, Linklaters and Slaughters collectively making up 120 partners in 2019, a significant 35% increase on the 89 promoted at the Magic Circle last year.

This year, the group has also made up noticeably more women lawyers after an embarrassing 2018 for many. For its part, Freshfields promoted six women, equal to 27% of the new partner intake.

nathalie.tidman@legalease.co.uk

Legal Business

SRA releases full allegations against Freshfields partner Beckwith

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Legal regulation Freshfields Bruckhaus Deringer

The Solicitors Regulation Authority (SRA) has today (3 May) published the full list of its allegations against Freshfields Bruckhaus Deringer partner Ryan Beckwith.

In the published allegations, which follow a case management hearing at the Solicitors Disciplinary Tribunal (SDT) last week, Beckwith – who has been placed on indefinite leave by Freshfields – is alleged to have attempted to engage in sexual activity with an intoxicated junior member of staff in an abuse of seniority at an event organised by the firm.

The SRA referred the case to the SDT in late June 2018. The allegations are as yet unproven, with last week’s case management hearing adjourned until 17 June. The SRA said it would not comment further at this time due to the proceedings being live.

The allegations focus on two instances (and can be read here): that Beckwith kissed or attempted to kiss Person A (the SDT has imposed reporting restrictions on their identity), over whom he was in a position of seniority, and that he initiated and/or engaged in sexual activity with the same person. Both he and Person A were allegedly intoxicated at a celebratory event organised by the firm for its partners and employees, and the statement says that Beckwith knew or ought to have known that the Person A gave no indication the approach was wanted, and that he knew or ought to have known his conduct was an abuse of his seniority or authority.

With regards to the second instance, the SRA adds that Beckwith knew or ought to have known that Person A was heavily intoxicated to the extent that she was vulnerable and/or her judgement was impaired; that she had not invited him to her home; and that he knew or ought to have known that she had not allowed him into her home with a view to sexual activity taking place.

In a statement, Freshfields’ senior partner Edward Braham said:  ‘A partner of the firm is the subject of Solicitors Disciplinary Tribunal (SDT) proceedings and is on indefinite leave. Given the ongoing proceedings, to which we are not a party, it would be inappropriate to comment further on this case.’

He added: ‘The firm takes all complaints extremely seriously. When this complaint was reported to us we instructed an external law firm to conduct a thorough investigation and we took actions in the light of the report’s findings.

‘We want a culture that is welcoming and allows our people to flourish, and we work hard to achieve that. We are running a firm-wide programme to ensure our values and behaviours are consistently experienced across the firm, and I am confident that we will continue to achieve change where it is needed.’

Beckwith has instructed criminal law partner Nick Brett of Brett Wilson, while the SRA is being represented by Capsticks partner Daniel Purcell. Beckwith was one of five promoted in the City to partner in 2012 as part of a 20-strong round.

hamish.mcnicol@legalbusiness.co.uk

Legal Business

Freshfields partner on indefinite leave ahead of disciplinary tribunal hearing

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Freshfields Bruckhaus Deringer

Freshfields Bruckhaus Deringer partner Ryan Beckwith is set to appear before the Solicitors Disciplinary Tribunal (SDT) next week having been placed on indefinite leave by the firm.

The Solicitors Regulation Authority, (SRA) which referred the case to the SDT, is yet to publish the allegations but said it would do so in the next few weeks. An early-stage case management hearing is set to take place Friday 26 April.

The Magic Circle firm confirmed Beckwith was on indefinite leave but declined to comment on the reason.

A Freshfields spokesperson said: ‘We are aware of the publication regarding a hearing before the Solicitors Disciplinary Tribunal involving a partner at the firm, who is on indefinite leave. The matter is subject to proceedings and we are unable comment further.’

Restructuring and insolvency partner Beckwith has instructed criminal law partner Nick Brett of Brett Wilson, while the SRA is being represented by Capsticks partner Daniel Purcell, according to a hearing document.

Beckwith was one of five promoted in the City to partner in 2012 as part of a 20-strong round.

He was on the Freshfields team for the collapse of UK construction giant Carillion, advising PwC as the manager of the liquidation last year.

Earlier this month it emerged that a solicitor at Allen & Overy (A&O) had been recommended for prosecution by the SRA over a controversial non-disclosure agreement (NDA) drafted for film producer Harvey Weinstein.

A&O was dragged into the spotlight a year ago, after it was revealed the City firm had drafted an NDA for Weinstein in 1998 after Zelda Perkins, who worked at the producer’s company Miramax, alleged Weinstein had sexually harassed a colleague.

nathalie.tidman@legalease.co.uk

Legal Business

Apollo hamstrung as Freshfields helps Berry complete eleventh-hour bid for UK plastics group

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Corporate Freshfields Bruckhaus Deringer

Freshfields Bruckhaus Deringer successfully advised US manufacturing company Berry Global as it completed a late bid for UK-headquartered RPC Group, after private equity house Apollo Global Management cornered itself with a best and final offer.

The £3.43bn Berry bid only slightly surpassed the previous £3.3bn bid from Apollo, but was approved in early March by RPC’s board. Apollo made its final bid for RPC in a no-increase statement, leaving out the necessary caveats to return with an improved offer.

Legal Business

Life during law: Claire Wills

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Life During Law Freshfields Bruckhaus Deringer

I’ve been 27 years at Freshfields. I’m not sure where the time has gone.

It’s International Women’s Day on Friday [8 March]. Thinking about my career in that context, when I was starting out, the biggest issue for me was that I was from Liverpool.

Legal Business

Freshfields mints eight partners in the City in renewed 22-strong global promotion round

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Partnership promotions Freshfields Bruckhaus Deringer

Freshfields Bruckhaus Deringer has promoted 22 lawyers to partner, including eight in London, amid a stronger promotion round for the Magic Circle firm.

This is a significant increase on last year when the firm made up just 12 lawyers globally and a mere five in the City. It is also an increase on 2017 when the firm promoted 18 lawyers globally and six in London.

The City cohort includes Tom Clark and Oliver Marsden as new disputes partners, and Roger Schofield, Aled Batey and Vanessa Jakovich as new transactional partners. The renewed commitment to London will be welcomed, particularly after the firm suffered another difficult exit with buyout star Adrian Maguire decamping to US leader Kirkland & Ellis in January.

Of the cohort, 27% – six women – were promoted, a marginal increase on last year. Global transactions received the most promotions as a practice area, with an additional 12 lawyers being made partner. Disputes, meanwhile, received five additional partners. Global transactions also received the lion’s share of the promotions in the City, with five partners being made up, compared to two in disputes. Meanwhile two partners were promoted in the US, with transactional duo Paul Humphreys and Sebastian Fein being made up in New York.

Interestingly – and a reflection of the importance of risk and compliance within a large global law firm – one of the promotions occurred outside of the core practice groups in a support field. Chief legal officer Jonathan Kembery, who oversees a team responsible for advising the firm’s 5,000 lawyers and staff on regulatory, compliance and legal matters, was also made partner.

The promotions will be effective as of 1 May 2019.

thomas.alan@legalbusiness.co.uk

Freshfields partner promotions 2019:

Antitrust, competition and trade
Ninette Dodoo, Beijing

Tone Oeyen, Brussels

Dispute resolution
Tom Clark, London

Jelle Drok, Amsterdam

Oliver Marsden, London

Moritz Pellmann, Frankfurt

Kim Rosenberg, Dubai

Global transactions
Aled Batey, London

Guillemette Burgala, Paris

Frédéric Elens, Brussels

Sebastian Fain, New York

Paul Humphreys, New York

Vanessa Jakovich, London

Marvin Knapp, Hamburg

Sabrina Kulenkamp, Frankfurt

Francesco Lombardo, Milan

Keir MacLennan, London

Cyrus Pocha, London

Roger Schofield, London

Legal
Jonathan Kembery, London

People and reward
Christel Cacioppo, Paris

Tax
Bosco Montejo, Madrid