Legal Business

Deal watch: Slaughters and Kirkland drill into giant $12bn offshore plc merger as Travers and Eversheds maximise L&G’s pensions buy-out

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Corporate Eversheds SutherlandKirkland & EllisSlaughter and MayTravers Smith

Slaughter and May and Kirkland & Ellis have led on the $12bn combination of UK Plc offshore drilling companies Ensco and Rowan Companies as Travers Smith and Eversheds Sutherland wrap up Legal & General’s £2.4bn buyout of Nortel Networks UK Pension Plan.

The drilling merger – an all-stock deal and a court-sanctioned scheme of arrangements – will see the shareholders of Ensco and Rowan own 60.5% and 39.5% respectively of the combined business.

Kirkland & Ellis clinched a significant win in UK plc land in advising Rowan with a team including City partners David Higgins, David Holdsworth and Dipak Bhundia. The deal was led out of Houston by corporate partners Sean Wheeler and Doug Bacon and included Dallas partner Ryan Gorsche and New York-based executive compensation partner Scott Price and tax partners David Wheat, Lane Morgan and Mike Carew.

Latham & Watkins is advising Rowan on antitrust aspects, with a team including corporate partner Michael Egge in Washington, Brussels managing partner Lars Kjolbye, and London partner Jonathan Parker.

Meanwhile, Slaughters is acting for Ensco with a team led by corporate partners Hywel Davies and Christian Boney and including partners William Turtle (competition), Jonathan Fenn (pensions) and Mike Lane (tax).

Elsewhere, a Legal & General deal on Monday (8 October) saw the UK insurer complete a £2.4bn buyout of pensions relating to the now-defunct telecoms equipment provider Nortel.

The buy-out relates to around 15,500 pensioner members and around 7,200 deferred members of the pension scheme, which entered a Pension Protection Fund (PPF) assessment after Nortel went into administration in 2009, pending litigation and insolvency proceedings.

The Travers team advising the trustees was led by Dan Naylor and Susie Daykin and also included partner Peter Hughes. Advising Legal & General was an Eversheds team led by Hugo Laing.

Naylor told Legal Business that the deal represented the biggest ever PPF plus arrangement, in which the pension scheme members receive more options, via a member option exercise, and better benefits than the PPF compensation would have offered. A further transaction is likely to follow as more recoveries are made.

The deal is also the second biggest pension buyout ever, after the £2.5bn transaction with Legal & General relating to pensions of US-headquartered automotive supplier TRW in 2014.

Hughes and Naylor, the latter then an associate, were also part of the team advising the trustees of the TRW Pension Scheme, while Laing, then an associate at Clifford Chance, was part of the team advising Legal & General on that deal.

Another major deal this week saw Kirkland, Latham and Allen & Overy score key roles on the sale of shareholdings in fin-tech company FNZ to Canadian pension fund La Caisse de dépôt et placement du Québec (CDPQ) and private equity investor Generation Investment Management.

The deal sees Kirkland advise the sellers, FNZ and funds advised by HIG Capital and General Atlantic, led by London corporate partners Gavin Gordon, Carl Bradshaw and Tom McCarthy. A Latham team led by Michael Bond advised CDPQ and Jonathan Wood at Weil Gotschal & Manges advised Generation. Karan Dinamani at Allen & Overy advised the CEO of FNZ.

The acquisition is the first investment by CDPQ-Generation, the sustainable equity joint venture launched by CDPQ and Generation.  Kirkland has a nine-year relationship with FNZ, having advised on HIG Capital’s initial investment in 2009, General Atlantic’s investment in 2012 and FNZ’s recently announced deal to acquire European Bank for Financial Services (ebase) from comdirect bank.

nathalie.tidman@legalease.co.uk

Legal Business

Kirkland continues inexorable rise with record 122-strong promotions round – including 10 in London

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Partnership promotions Kirkland & Ellis

In a move befitting of its unstoppable upward trajectory, Kirkland & Ellis  has scored a new record in partner promotions, making up a striking 122 partners, of which 10 are in London.

The overall tally across the Chicago-bred firms 14 international offices is an increase on last year’s mammoth round, which saw 97 new partners created, with 13 minted in the City.

In keeping with Kirkland’s successes in transactional work, four of the new London partners are M&A and private equity lawyers, with Tom Bartram, Dipak Bhundia, Melanie Johnson and Tom McCarthy promoted.

The other City partners are James Esterkin (real estate finance), Philip McEachen (financial services regulatory), Andrea Renold (investment funds), Mike Robert-Smith (antitrust/competition), Michael Taufner (capital markets) and Jennifer Wilson (technology & IP transactions).

The rest of Kirkland’s promotion round have been made up in the firm’s international offices spanning Boston, Chicago, Dallas, Hong Kong, Houston, Los Angeles, Munich, New York, Palo Alto, San Francisco, Shanghai and Washington DC.

The 2,200-lawyer US firm has an unusual model in that it makes up large ranks of salaried partners before considering promotions to its tightly-held equity. Operating a fast track, associates can make salaried partner six years after qualification – bucking the wider trend of pushing back promotions.

The firm had 359 equity partners at the end of the 2016 financial year, and 461 salaried partners. Those making it to equity benefit from one of the world’s most profitable law firms where plateau earnings now top $10m. The latest promotion round means that Kirkland has made up 390 partners in the last four years – compared to an entire global partnership of 394 at Freshfields Bruckhaus Deringer.

This year the entire magic circle made up 89 partners in total, eclipsed by Kirkland. Kirkland’s ten City promotions is the same number as Linklaters this year, more than Clifford Chance and double the number promoted by Allen & Overy and Freshfields Bruckhaus Deringer in their home market.

Finance partner Neel Sachdev told Legal Business: ‘Our accelerated career track offers our young lawyers a transparent and meritocratic path to partnership.  We aim to empower our lawyers with partnership so they have the opportunity to be client facing and lead deals in the market at an earlier stage in their careers.  This also allows us to see how they operate as partners and to help nurture those skills.

‘We are increasingly competing for young talent with other industries such as tech companies and private equity firms, not just the traditional careers of doctors and accountants. The offer of a real prospect of partnership early is attractive to talent and we are seeing ambitious lawyers elect out of firms with no realistic prospects of partnership at that stage,’

David Higgins, corporate partner and co-managing partner of the London office, added: The message at Kirkland is that we are all about empowering our talent. It is an optimistic approach that inspires energy and confidence in the culture. It’s about keeping and nurturing our talented lawyers so that everyone benefits.’

The promotions are on the back of a particularly outstanding year for the juggernaut, which in the 2017 financial year hiked revenues by more than $500m to overtake Latham & Watkins as the world’s highest-earning law firm, with revenues surging to $3.165bn.

The firm stormed ahead with a 19% hike in revenues against $2.65bn the previous year. Profit per equity partner (PEP) also surged nearly 15%, to $4.7m from last year’s $4.1m, making it one of the world’s most profitable law firms. At the time, headcount rose year-on-year by 13.5% to 1,997 lawyers, while revenues per lawyer increasing to 5.2% to $1.585m.

The pace-setting performance underpinned by booming private equity and leveraged finance markets underlines a 20-year ascent that has seen the thrusting US law firm expand dramatically beyond its Illinois roots to become a potent force in New York and London.

The firm has certainly made its presence felt on both sides of the Atlantic in recent months, never more strikingly when it in December hired Freshfields Bruckhaus Deringer private equity veteran David Higgins with a market-setting $10m package.

Other major London hires have included Linklaters’ real estate M&A rainmaker Matthew Elliott in 2015 and Freshfields’ restructuring partner Sean Lacey last May. The firm hit the headlines again in January when it enlisted Cravath, Swaine & Moore M&A star Eric Schiele in New York.

London has been one of Kirkland’s fastest-expanding offices, growing 61% since 2013 to 189 lawyers in 2017. The practice currently generates over $300m. New York headcount has increased 42% over the last five years to 503 lawyers.

nathalie.tidman@legalease.co.uk

For more on Kirkland’s trailblazing approach, read ‘Global 100: Wrecking ball – Inside Kirkland & Ellis’ creative destruction‘ (£)

Legal Business

Comment: For good or ill, Kirkland is now redefining high-end law

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Comment Kirkland & Ellis

Though I’ve always known that soul-of-a-law-firm cover features are the biggest draw for our readers, the response to our Kirkland & Ellis epic in July has been striking. Not since ‘Branded’ two years ago exposed the state of King & Wood Mallesons’ European business has a piece in these pages provoked such an intense reaction. Our team did a good job but that also reflects the hold the K&E phenomenon has taken over the industry’s imagination. Having covered the law for a good number of years, I cannot think of a firm that has attracted such strong emotions split between appalled detractors and the growing band battered into submissive admiration.

The critics loathe the outfit in part for upending some accepted notions of how global law firms are supposed to excel. But most of the distaste springs from the potency of a challenge emerging from outside the profession’s established London and New York elites. Kirkland’s success, however, isn’t just about defying norms. In some areas, Kirkland took platitudes of focus, meritocracy and leadership and turned them into realities. Sometimes brutal realities but that’s reality for you.

Kirkland’s rise also speaks to the fact that the 30-year expansion of the private equity industry proved an unbeatable vehicle on which to hitch legal ambitions. Also fundamental has been a model utterly geared to the dramatic impact that talented, driven and entrepreneurial individuals can have with the right platform. Perhaps Kirkland’s ascent will prove the high watermark of law’s star culture before technology digitises magic into process. If not, rivals should accept there is more to Kirkland’s peculiar culture of excellence than bling and sharp elbows. Nowhere is that more obvious than in its dual tournament model of early associate advancement, the closest Kirkland has to a secret sauce. After locking in talent with a quick crack at non-equity status – a contrast to many peers stretching out the partnership track – talent gets further vetted with the carrot of ultra-lucrative full equity.

Though many criticise the model, as a neutral observer I struggle to find its supposed flaws; Kirkland’s equity/fee-earner leverage isn’t even all that high. But then the legal industry has ignored mounting evidence that delaying advancement of the younger ranks is losing sizeable chunks of valuable talent because that suited older partners.

Even such assets do not make Kirkland unassailable. Fast-growth models are inherently prone to instability and easily store up problems for when expansion eventually stalls. The swirl of gossip surrounding the recruitment of Freshfields playmaker David Higgins has yet to die down; a flame-out in London would be damaging.

It is also easy to imagine problems with lean and robust leadership presiding over a bunch of divas when the handover of much-vaunted chief Jeffrey Hammes takes place. Managing the touted shift to a more consensual style will take some doing. Still, given its gravity-defying emergence over the last 20 years, it will require very good reasons to bet against them. For now, Kirkland is setting the agenda – global peers are merely following in its wake.

alex.novarese@legalease.co.uk

For more on Kirkland & Ellis please see ‘Wrecking ball – Inside Kirkland & Ellis’ creative destruction’

Legal Business

Deal watch: City high-flyers land jumbo £4.4bn BA pension deal as Blackstone’s buying spree continues

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Allen & OveryClifford ChanceEversheds SutherlandKirkland & Ellis

City heavyweights Allen & Overy (A&O), Clifford Chance (CC) and Eversheds Sutherland have landed key roles on Legal & General’s £4.4bn buy-in of the British Airways pension scheme as advisers cash in on a brace of Blackstone deals.

UK insurer Legal & General is taking on £4.4bn of historic pension liabilities relating to the Airways Pension Scheme (APS) in a bulk annuity designed to reduce risk in the scheme.

A&O and Eversheds are advising the trustees, with A&O’s team led by insurance partner Philip Jarvis and counsel Kate McInerney. For their part, Anthea Whitton and Francois Barker are heading the Eversheds team.

The CC team advising Legal & General is being led by corporate partner Katherine Coates and pensions partner Sarah McAleer.

The deal also covers existing longevity reinsurance contracts of roughly £1.7bn entered into by APS via a captive insurer with Canada Life Reinsurance and PartnerRe, which were incorporated into the buy-in arrangement. Closing of the deal will mean that APS is now 90% hedged against all longevity risk.

‘This deal is very significant in the market and part of a trend of which there are push and pull factors,’ one City partner told Legal Business. ‘On the push side, there are trustees out there looking to de-risk and on the pull, market conditions are making deals like this economically viable transactions.’

APS was established in 1948 and it was closed to new members from 31 March 1984. The scheme had 24,196 members, of whom 1.4% were active members, 3.6% deferred members and 95% pensioners.  At the end of March 2018, APS had assets totalling £7.6bn.

Elsewhere, the blistering private equity market saw A&O win the mandate to advise private equity giant Blackstone on its €1bn acquisition of a majority stake in Baltic bank Luminor. The deal involves funds managed by Blackstone and other institutional investors acquiring a 60% stake in the bank, with Nordic banks Nordea and DNB each retaining a 20% stake.

A&O’s private equity partner Karan Dinamani led on the deal – the Magic Circle firm’s inaugural deal for Blackstone on the buyout side – which builds on a long-standing relationship acting for Blackstone’s lenders on real estate transactions.

Commenting on the frothy PE market, Dinamani told Legal Business: ‘A lot of private equity players are looking to acquire right now and the London market is roaring. The fact that a private equity player is acquiring a majority in an European Central Bank regulated bank makes the deal interesting and complex.’

With €15bn of assets, Luminor was created in 2017 through a combination of Nordea and DNB’s operations in the Baltics.

Meanwhile, a £1.5bn deal that saw Blackstone Property Partners and Telereal Trillium acquire Network Rail’s commercial business estate sealed roles for Kirkland & Ellis, CC, Eversheds and Gowling WLG.

CC and Eversheds acted as legal advisors to Network Rail, with CC’s team comprising partners Franc Peña, Angela Kearns and Adrian Levy and Nick Bartlett leading for Eversheds.

Kirkland and Gowling advised buyers Telereal and Blackstone, with the Kirkland team led by corporate partner Michael Steele and including corporate partner Carlos Gil Rivas. Mike Twinning led the Gowling team.

The portfolio includes 5,200 properties, the majority of which are converted railway arches.

The sites are being sold on a leasehold basis, with Network Rail retaining access rights for the future operation of the railway. The proceeds are being put towards the UK railway upgrade plan.

nathalie.tidman@legalease.co.uk

Legal Business

For good or ill, Kirkland is now redefining high-end law

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The Issue Kirkland & Ellis

Though I’ve always known that soul-of-a-law-firm cover features are the biggest draw for our readers, the response to our Kirkland & Ellis epic in July has been striking. Not since ‘Branded’ two years ago exposed the state of King & Wood Mallesons’ European business has a piece in these pages provoked such an intense reaction. Our team did a good job but that also reflects the hold the K&E phenomenon has taken over the industry’s imagination. Having covered the law for a good number of years, I cannot think of a firm that has attracted such strong emotions split between appalled detractors and the growing band battered into submissive admiration.

The critics loathe the outfit in part for upending some accepted notions of how global law firms are supposed to excel. But most of the distaste springs from the potency of a challenge emerging from outside the profession’s established London and New York elites. Kirkland’s success, however, isn’t just about defying norms. In some areas, Kirkland took platitudes of focus, meritocracy and leadership and turned them into realities. Sometimes brutal realities but that’s reality for you.

Legal Business

Global 100: Wrecking ball – Inside Kirkland & Ellis’ creative destruction

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Global 100 2018 Kirkland & Ellis

They said rapid growth is hard if you are already big. Last year it hiked revenue 19% from $2.65bn. They said profitability is about focusing on quality over growth. As it became the highest grossing law firm in the world, fee-earner headcount surged 13.5% to over 2,000 and profit per equity partner (PEP) was up nearly 15% to $4.7m. They said a sprawling international footprint is essential if you want to secure high-end mandates. It has just 14 offices – only five outside the US – and generated $3.165bn in 2017. They said global law firms need bank clients. It is famously dismissive of banks and their onerous panels.

Perhaps the most intriguing aspect of Kirkland & Ellis’ meteoric rise over the last decade is how it turned BigLaw’s playbook on its head. The Chicago-bred giant has not only outperformed the profession’s elites in London and New York but challenged the very assumptions underpinning the legal industry’s decades-spanning pecking order.

Legal Business

Who Represents Who: The data behind the story

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Kirkland & Ellis

Kirkland & Ellis’ Fortune 100 representation

Everyone knows Kirkland has strong ties with financial institutions, but you don’t get to be the world’s largest firm without strength in depth across other practice areas. Here’s how they represent the Fortune 100 in those.

Legal Business

‘Hungry and energetic’: Kirkland taps rivals to launch second Texas base in Dallas

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Strategic recruitment Kirkland & Ellis

Kirkland & Ellis is building on the rapid growth of its Texas operations with the opening of a second office in the US state.

The Chicago-bred giant announced on Wednesday (11 July) it would open a new eight-partner base in Dallas, hiring six lawyers from US rivals including Jones Day M&A partner Michael Considine.

The Dallas opening follows the rapid expansion of the firm’s Houston outpost, which launched in 2014 with a handful of lawyers led by 35-year-old star Andrew Calder, who was hired from Simpson Thacher & Bartlett. Four years on, the Houston office now counts 140 lawyers.

Considine will be joined in the Dallas office by a team of corporate lawyers focusing on the energy sector.

Jones Day associate Alex Rose, Weil Gotshal & Manges counsel Kevin Crews and Winston & Strawn associate Dilen Kumar will join Kirkland as partners, as will senior associate Thomas Laughlin and counsel Lanchi Huynh, both from Vinson & Elkins.

‘We were looking for hungry, energetic people who are really talented and have a ton of energy around them,’ Calder told Legal Business.

Tax partner David Wheat and corporate partner Ryan Gorsche, who joined Kirkland’s Houston office earlier this year from KPMG and Weil respectively, will also relocate to the new Dallas premises in Bank of America Plaza, which can accommodate around 30 lawyers.

‘That’s only a temporary office space, we can always move somewhere else if we need to,’ said Calder. ‘We don’t have any specific target for growth, it will depend on clients’ demand.’

The Texas presence has helped Kirkland ride hugely on the boom of the energy market of late. The firm has around 225 lawyers working on energy transactions across Texas, New York and Washington DC.

Kirkland has been working with Dallas-based clients for some time, and Calder said it made sense to have a fixed presence in the city: ‘This extension of Kirkland to Dallas also allows the firm to benefit from that significant additional talent pool to service our Dallas and out-of-state clients.’

Dallas is Kirkland’s 14th office worldwide and its ninth in the States. Significantly for a firm with a reputation for being conservative when it comes to expanding its footprint, it comes just over a year after Kirkland opened in Boston in May 2017.

It is also the fourth office the firm opened since Jeffrey Hammes took over as chair in 2010. As well as the two Texan outposts, Hammes oversaw the opening of an office in Beijing in 2013.

The global juggernaut became the highest grossing law firm in the world after posting a 19% hike in revenues to $3.165bn in 2017.

marco.cillario@legalbusiness.co.uk