Legal Business

Not always an ‘easy journey’: Q&A with Jonathan Scott, outgoing HSF senior partner

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Leadership Herbert Smith Freehills
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Tom Moore talks to Jonathan Scott, senior partner and chair at Herbert Smith Freehills, about management, why he’s stepping down early and his worries over the reputation of English law.

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Why have you decided to leave your post early?

We get all the partners together once every two years and, if we ran the election after our November conference, there would be a preoccupation with who would be the next senior partner. If we’re going to spend that money getting everyone together, it’s not the best use of time to be talking about internal issues, so I made a decision, and I want to make it very clear that it was my decision with some internal resistance, that we would have the election beforehand.

Legal Business

Hunting titans: Quinn and HSF take lead as former Goldman Sachs bankers and UBS face off

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Litigation Herbert Smith FreehillsQuinn Emanuel Urquhart & Sullivan
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Unsurprisingly for a high-profile claim against a global investment bank, litigation heavyweights Quinn Emanuel Urquhart & Sullivan and Herbert Smith Freehills find themselves squaring up to each other today (1 December).

Decura, a financial services platform run up by three former Goldman Sachs bankers, is suing UBS after the Swiss financial giant shrunk its investment bank in a move that the claimants allege damaged a joint venture with Decura.

The claim was filed in July and the trial started at the UK commercial court before Mr Justice Burton today. Robert Hickmott and Sue Prevezer QC at Quinn Emanuel have been instructed by Decura, with Herbert Smith Freehills’ banking litigator Damien Byrne Hill defending the bank.

Decura was founded in 2012 by Goldman Sachs partner and member of the bank’s risk committee Vishal Gupta. The start-up established an exclusive outsourcing relationship with the Swiss bank to provide its clients with investment platforms.

Five months after the deal was signed, UBS launched Project Accelerate, which sped up a restructuring that saw the bank make almost 10,000 workers in the City redundant. Decura claims this ‘radical transformation’ had ‘a material adverse effect on UBS’s ability to market the exclusive business services’ and is seeking damages for the termination of the joint venture.

Decura also claims that to date, just £230,000 of revenue has been generated by the joint venture, with just five enquiries passed to Decura between June 2013 and February 2014. Decura had expected to generate around $200m in annual revenue once the business was up and running.

Decura stated in the particulars of claim: ‘Many of the products falling within the definition of Exclusive Business Services under the Agreement are no longer the focus of UBS IB (in particular structured and complex products on asset classes related to interest rates, credit, mortgages and commodities)…The number of relevant salespeople, in particular those who would formerly have been in a position to market exclusive business services, has substantially reduced.’

UBS, in its response on 10 November, said the claim was ‘deficient’ and ‘denies that Project Accelerate has affected its ability to perform its primary obligations under the agreement to market the exclusive business services’.

UBS added that Decura had acknowledged ‘there is no obligation’ on the Swiss-based bank to generate ‘a minimum amount of shareable revenue from sales of exclusive business services products to its clients’.

tom.moore@legalease.co.uk

For more on disputes work evolving after the banking crisis, read a summary of our recent round table discussion in Banking Litigation Insight: ‘The worst case scenario is £200m – litigation is containable’

Legal Business

‘A very different role’: Q&A with HSF’s new senior partner James Palmer

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Leadership Herbert Smith Freehills
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James Palmer (Profile) talks to Legal Business about being elected the first senior partner at Herbert Smith Freehills since the merger and what he will bring to the role.

Why do you think you were voted in as the first senior partner of HSF?

I think I’ve got a strong external profile and I’m very client orientated but it wasn’t a slam dunk. It wasn’t me a thousand miles ahead of everyone else and that didn’t surprise me.

How would you describe the race for senior partner?

There is a lot of positivity and unity within the firm at the moment. The election has been run in the best possible tone. It was civilised and professional.

The thing I’m very chuffed about is that the vote was evenly split around the world and not based on geographic lines. Mark Crean, who is a very good friend of mine, had a lot of support in London. I also had a lot of support in Australia. People don’t just relate to their geography.

Mark Crean is a top lawyer and it’s been quite surreal as I get on very well [with the other contenders for senior partner]. Allen Hanen and I met 18 years ago and I was a trainee under Tim Parkes 28 years ago and we are very close.

How executive is the role?

Jonathan [Scott] was elected as senior partner five years ago at Herbert Smith, when it was a very different role. We’ve rebalanced the position so it’s much more about chairing the partnership council. It’s more client facing now.

I would describe the role as more non-executive, I aim to spend around 25% of my time chairing the council. I register a lot of hours, so that’s a lot. The rest of my time will definitely be around advising clients and I’ll be continuing to look after the many multinationals that I already do.

The CEOs, Mark [Rigotti] and Sonya [Leydecker], run the firm and it’s no secret I’ve been a big fan of their leadership. The role of senior partner is more about pushing strategy. There was no one standing against Mark and Sonya with an alternative strategy so the senior partner election was a question of style and personality.

How do you weigh up your new management role with your client work?

I was still very client facing when I was head of corporate for two and half years [beginning in 2010] and I will be now. I’m the formal relationship partner for BP and that will continue. All of my clients are aware that I’ve been made senior partner and I will continue working with all of them. I’ve never worked on my own with any client during my 15 years as a partner, I’ve always enjoyed working as a team so I’m planning to keep those teams involved.

Why did Jonathan Scott retire from the role early?

We’ve got a partnership conference in Madrid coming up this month and Jonathan wanted a successor to be named before that.

tom.moore@legalease.co.uk

Legal Business

A relief result – Turf war avoided as Palmer defeats Crean in HSF senior partner battle

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Leadership Herbert Smith Freehills
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London-based corporate partner James Palmer has triumphed over Sydney-based Mark Crean to become the next senior partner at Herbert Smith Freehills.

A vote among the 453-strong partnership at Herbert Smith Freehills (HSF) on Friday (7 November) saw Palmer elected as senior partner for a three-year term. He will take up the role on 1 February, with current incumbent Jonathan Scott set to step down from the role three months early and enter retirement after 35 years at the firm.

Palmer will also become chairman of the firm’s 11-lawyer partnership council, which has responsibility over the firm’s strategy, partner retirements and remuneration. He will be one of the three most influential figures at the firm, alongside joint CEOs Sonya Leydecker and Mark Rigotti, who were elected to serve three-year terms from 1 May 2014. Australian Crean is currently senior deputy partner.

The senior partner role has evolved from the executive chairman brief the title characterised at the legacy Herbert Smith. Palmer has indicated he will still spend more than half of his time in active client work as the dual chief executives now carry out significant amounts of HSF’s management.

Palmer told Legal Business: ‘The thing I’m very chuffed about is that the vote was evenly split around the world and not on geographic lines. Mark Crean, who is a very good friend of mine, had a lot of support in London. I also had a lot of support in Australia. People don’t just relate to their geography.

‘I’ve got a strong external profile and I’m very client orientated but it wasn’t a slam dunk. It wasn’t me a thousand miles ahead of everyone else and that didn’t surprise me.’

The first ballot closed on Wednesday 5 November, when London head of litigation Tim Parkes and EMEA managing partner Allen Hanen were eliminated from the race. Hanen made the final two in the previous race to become senior partner, losing out to Scott in 2009.

Down to just corporate partners Palmer and Crean, who faced off this summer in the race to make the firm’s partnership council after the firm’s election structure pooled the firm’s UK and Australian partners into one vote, with the slimmer partnership council excluding UK partners from a spot for a European partner, Palmer garnered support from across the litigation group and historic Herbert Smith offices.

Corporate heavyweight Palmer joined the firm in 1986 and made partner in 1994. He was a vocal supporter, aided by his position as head of corporate, of Herbert Smith’s merger with Australian firm Freehills on 1 October 2012.

Palmer, who was Herbert Smith’s head of global equity capital markets between 2005 and 2010, has been without a management role since the merger. Since then, he has helped to push the profitability of firm’s core corporate group in London – made up of around 35 partners – to around £1.1m per partner, nearly double what it was in 2010/11.

In the last 12 months Palmer has advised US pharma AbbVie on its collapsed $55bn takeover of Irish drug maker Shire and TSB Banking on its IPO and separation from Lloyds Bank. He is also the relationship partner for BP, which he helped to advise on the Gulf of Mexico disaster.

Challenges lie ahead, with morale among the corporate group at a low following recent deequitisations among the partnership and the exit of another senior litigator to Debevoise & Plimpton, with the firm’s Asia managing partner Mark Johnson leaving for the US firm, where he will reunite with former Herbert Smith partner Kevin Lloyd and Tony Dymond.

The appointment of Palmer, one of Herbert Smith Freehills’s lead US relationship partners, will also be significant in stoking expectations that the firm will look to push on to secure a US merger in the medium term.

tom.moore@legalease.co.uk

Subscribers can see ‘Consumed’, for this month’s cover feature on the merger and aftermath

Legal Business

The Friday Edit: Glory days for HSF obsessives and Baker Mac to phase out last legacy of franchise pay

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Comment Herbert Smith Freehills
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Somehow the week has flown by so it’s already time to welcome readers to The Friday Edit, our informal take on the notable legal events that happened since Monday. For subscriber content, click here for full access to Legal Business or email ‘mark.proudley@legalease.co.uk’ for more information.

Analysis of the week: Consumed

November’s cover feature – Consumed – is an in-depth assessment of the background, fortunes and fall-out of the high-stakes 2012 union of storied City firm Herbert Smith with Australian leader Freehills. Covering the unhappy run-up to the deal as Herbert Smith’s City deal team buckled in the wake of the banking crisis and the firm was beset by strategic indecision and performance problems, the tense debate over the merger, the subsequent fallout and attempts to galvanize a global power, we find a finely balanced equilibrium. The deal remains somewhat divisive with strong arguments in its favour and for Herbert Smith to have gone on alone. However, the combined firm has so far weathered a very substantial run of departures with considerable resilience. Much of the union’s prospects still rest on if the legacy firms can bridge very different cultures and effectively reboot Herbert Smith’s partnership in more pro-active form – a huge task that the firm has only begun.

Further highlighting the sensitivities over the firm’s post-merger direction, HSF is this week deciding on the new senior partner to replace Jonathan Scott in what will be a key decision in defining its future. Subscribers can see Consumed – Can burning ambition from Down Under recast Herbert Smith for the global stage? This open access comment The cost of culture draws some further conclusions.

Stories of the week: More HSF and Bakers extends its globalised partner pay model

While our HSF-related coverage dominated our website this week, including this report on its senior partner election and a significant departure today (7 November) of Asia head Mark Johnson, Legal Business this week published news of a major shake-up of partnership at Baker & McKenzie, which will see the global giant emphasise region-wide remuneration over office-based pay. The delicate move reflects the 15-year march of the Chicago-bred institution to forge what was once a loose network into a closely aligned global force. However, this will need to be managed carefully to avoid disenfranchising more profitable offices such as London. Also widely read on Legal Business’s website this week was news of Hogan Lovells’ plans to implement its own low-cost hub in Birmingham.

Quotes of the week:

‘I want to make clear that Linklaters is committed to real estate. We have been misunderstood.’

Linklaters’ Andy Bruce pledges that Silk Street is still the home of proper real estate lawyers, Back in the Game

‘The US government and the British government made some very good decisions in the days immediately after Lehman. And people have since rather taken those calls for granted – it did not work out as badly as it looked like it would. As a City lawyer, you had a ringside seat when there were pretty hairy moments in 2008 and they fixed it.’

Hogan Lovells’ Matthew Cottis offers a banking veteran’s perspective on the politics of bailouts, Life During Law

‘We are so much stronger than we were five years ago. The world is more competitive and you’ve got to have a group of people who want to compete. I am competitive. If we don’t win a bit of work, that’s fine, as long as we did our best to do it. If we don’t try our hardest and we lose, it drives me completely up the wall.’

Herbert Smith Freehills’ James Palmer puts the case for a more proactive post-merger HSF, Consumed

Top posts:

Consumed – Can burning ambition from Down Under recast Herbert Smith for the global stage?

‘One man one vote‘: HSF set to vote for new senior partner as Jonathan Scott decides to step down early

Comment: The cost of culture – HSF finds mega-mergers always come at a price

‘We will continue to review and innovate in this area’: Baker & McKenzie overhauls pay structure in Europe and Asia

Nearshoring: Hogan Lovells hires ten-strong associate team and acquires new office space for Birmingham venture

alex.novarese@legalease.co.uk

Legal Business

A symbolic blow as Debevoise hires HSF’s Asia head as senior partner race down to Palmer vs Crean

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Strategic recruitment Debevoise & PlimptonHerbert Smith Freehills
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Given the huge strategic weight being placed on the Asia network of Herbert Smith Freehills (HSF), the jewel in the international crown of the legacy City firm, the latest senior resignation to hit HSF will go down poorly.

Debevoise & Plimpton today (7 November) announced that it has hired Mark Johnson, the well regarded managing partner of HSF’s Asia practice, to bolster its position in the region’s contentious market. The hire comes almost a year since the New York law firm hired high-billing litigation partner Tony Dymond from HSF in London.

Johnson leaves HSF after 20 years as a partner at the legacy City firm, during which time he oversaw the opening of Herbert Smith’s disputes practices in Singapore, Jakarta, Bangkok, Beijing, Seoul, Shanghai and Tokyo. Johnson first moved to Hong Kong in 1987 and has built a successful practice advising on shareholder disputes, regulatory investigations and commercial litigation. He is well versed in dealing with the increasingly active Hong Kong Securities & Futures Commission, the Hong Kong Monetary Authority and the Hong Kong Stock Exchange. Johnson becomes Debevoise’s fourth partner in Hong Kong.

Lord Goldsmith QC, chair of European and Asian litigation at Debevoise, commented: ‘Mark has a long and successful track record in the Asia market and has built an impressive reputation as a leading white collar and regulatory lawyer. His addition adds further weight to our global white collar and regulatory defence practice and ensures we continue to have market-leading teams in the world’s major financial hubs.’

Johnson added: ‘Now it’s time for a change and a new challenge. Joining a team with such an existing global pedigree was an attractive proposition, as was working to help continue to grow the firm’s capabilities in Asia.’

Johnson is the 61st partner to leave HSF since July 2012, when the merger between Herbert Smith and Australian leader Freehills was voted through. The 450-partner global law firm saw a wave of departures in the wake of the merger, primarily from the legacy City firm, reflecting mixed views on the union but the pace of departures had slowed considerably.

HSF joint chief executive Sonya Leydecker commented: ‘Mark has made a significant contribution to the success of our pre-eminent disputes practice and the growth of the firm across Asia. He leaves behind a strong legacy.’

HSF is currently deciding between candidates to replace Jonathan Scott as senior partner in what will be a significant appointment for setting the firm’s post-merger direction and culture.

The contest is now down to a two-horse race between City corporate partner James Palmer (pictured), often regarded as the firm’s top M&A lawyer, and Australian partner Mark Crean.

The result is expected today with considerable pressure building for Palmer to secure the role given sensitivities that the legacy Australian firm is increasingly driving the post-merger firm at the expense of Herbert Smith partners. However, Crean did defeat Palmer earlier this year in an election to the firm’s partnership council.

tom.moore@legalease.co.uk  

Subscribers can see ‘Consumed’, for this month’s cover feature on the merger and aftermath

Legal Business

Dealwatch: Lathams, Linklaters and HSF lead on $700m Dealogic sale

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Corporate Herbert Smith FreehillsLatham & WatkinsLinklaters
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Lathams & Watkins, Linklaters and Herbert Smith Freehills have all won roles advising on The Carlyle Group and Euromoney Institutional Investor’s acquisition of Dealogic.

The Washington DC based private equity giant agreed to acquire the software and data company Dealogic for $700m, alongside two other co-investors – online information and events group Euromoney, and, co-founder and former CEO of Capital IQ, Randall Winn.

Latham & Watkins’ cross-border team advised Carlyle, led by London corporate partners Mike Bond and Richard Butterwick, and Washington DC corporate partner David Brown, with advice on financing matters by fellow Washington-based partners Jeffrey Chenard and Scott Forchheimer, and London partner Dominic Newcomb. Herbert Smith Freehills advised Euromoney with partners Mark Bardell and Howard Murray.

Linklaters advised Dealogic with London senior corporate partner Charlie Jacobs leading the team alongside corporate partner Nick Rumsby, and Scott Sonnenblick out of New York.

Barclays Capital and JP Morgan provided financial advice to Carlyle, while Investec acted as financial advisor to Dealogic, and Gleacher Shacklock acted for Euromoney.

Carlyle will be the controlling shareholder in Dealogic with its equity for the transaction coming from its $13bn US buyout fund Carlyle Partners VI. Dealogic’s long-serving chief executive Tom Fleming will continue in his leadership role.

Euromoney will acquire 15.5% of the equity of Dealogic for $59.2m, funding the investment through the sale Capital DATA and Capital NET, valued at $85m, and which Dealogic and Euromoney have jointly operated since the 1980s. In addition to its $59.2m share, Euromoney will also receive $4.6m in cash on completion and a further $21.2m of zero-coupon preference shares issued by Dealogic.

The transaction, which is expected to close by the end of 2014, is structured as a leveraged buyout by Dealogic and is subject to customary regulatory approvals.

jaishree.kalia@legalease.co.uk

Legal Business

Comment: The cost of culture – HSF finds mega-mergers always come at a price

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Legal mergers Herbert Smith Freehills
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This month’s cover feature on Herbert Smith Freehills (HSF) looks in hindsight like the end of an informal trilogy on storied London firms agreeing high-stakes mergers, following earlier pieces on Hogan Lovells and Ashurst.

Taken together, patterns and contrasts emerge. The legacy Herbert Smith, Lovells and Ashurst were all wrestling with similar cultural and strategic issues ahead of their unions as they struggled to compete against larger and more driven rivals.

But in many ways the existential question about what kind of firm they wanted to be looks to be the most fundamental point: all three London firms had partnerships not ready to be as competitive and goal-orientated as the Magic Circle – that was probably a bigger issue holding them back than profits per equity partner or lack of global footprint.

All three turned to mergers as much to reboot their culture and find a renewed sense of purpose as to extend networks and fortify balance sheets. All three have found the experience wrenching. These processes may ultimately be positive but none of the three are yet anywhere near concluding that journey.

But what of HSF itself? The deal is so finely balanced, it remains hard to call. Neither Lovells nor Ashurst had a status quo worth preserving but Herbert Smith could have credibly continued alone. The firm had lost its nerve due to the combination of some poor management, ducked decisions and a torrid post-Lehman period for its corporate practice. At this weakened moment, it rushed into a union.

The reasoning was understandable – if a City player was going to tie up with a big Australian partner, Freehills was the one and the superb practice fit and proactive commercialism of its suitor were very considerable assets. On paper, HSF looks far more potent than Ashurst or King & Wood Mallesons and is potentially a market leader in Asia.

But it’s not that simple. While Herbert Smith has not always made as much of its unmatched disputes pedigree as it should have over the last 15 years, the objections of its litigators to the Freehills deal carry some weight.

Herbert Smith’s organic growth was robust not only in the post-2008 period but stretching back even further. In 2000 the firm earned £167m. By 2012 – even after a troubled 2011/12 – that figure was £480m. It’s striking that the firm was so unsettled despite outpacing peers by a considerable margin on income growth.

There were profitability and leadership issues so there is a strong argument that the firm should have put its house in order before a major deal, especially when the alternative was committing to a suitor that would drag down its profitability.

Still, such issues are largely academic now – HSF must look forward. It has weathered a run of notable departures with considerable resilience and for now appears to have settled its business and morale. Its international push in the US and Germany could be going a lot worse and its deal team is regaining momentum, alongside a continued run of respectable form from its disputes practice.

The trade off must surely now be that the Freehills figures who are increasingly shaping the firm’s future contribute their energy and ambition in return for HSF shifting focus away from a slowing Australia market and further back towards the global stage. Otherwise, HSF will be wrestling with the cultural fall-out of this union for a long, long time.

alex.novarese@legalease.co.uk

Subscribers can click here to read ‘Consumed’, the full-length cover feature on Herbert Smith Freehills’ post-merger fortunes

See ‘After Charlie’s War‘ for earlier coverage of Ashurst and ‘The Daily Grind‘ for Hogan Lovells

Legal Business

Consumed – Can burning ambition from Down Under recast Herbert Smith for the global stage?

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Australia Herbert Smith Freehills
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With the fall-out from the merger of Herbert Smith and Freehills subsiding, the emerging global challenger needs to galvanise its business under new leadership. Will the Australian suitor’s ambition provide the jolt needed or has Herbert Smith been absorbed?

‘I couldn’t talk about this over the phone,’ said one senior partner at Herbert Smith Freehills (HSF), with a glance over his shoulder. What could not be recounted electronically was the surprising news that HSF veteran James Palmer – widely regarded as the firm’s top City deal lawyer – had recently missed out on a place on its partnership council, the firm’s main oversight body.

Legal Business

The cost of culture – HSF finds mega-mergers always come at a price

Posted on |
Legal mergers Herbert Smith Freehills
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This month’s cover feature on Herbert Smith Freehills (HSF) looks in hindsight like an informal trilogy on storied London firms agreeing high-stakes mergers, following earlier pieces on Hogan Lovells and Ashurst.

Taken together, patterns and contrasts emerge. The legacy Herbert Smith, Lovells and Ashurst were all wrestling with similar cultural and strategic issues ahead of their unions as they struggled to compete against larger and more driven rivals.