Madeleine Farman assesses the impact of another round of pay rises on the City market
As US firms continue to hike associate pay for UK lawyers, members of the City’s legal elite are getting increasingly coy over what they are offering their junior ranks… but are such tactics sustainable in the long run?
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I started at Paisner and then on qualification went off to Norton Rose. I joined Clifford Chance in 2000, which was the big global merger. They were a challenger in M&A. That’s why I chose them.
I started off at Midland Bank in Fleet Street opposite Freshfields. One of six trainees. Later I sent out 86 applications for articles. Four interviews and only one offer would pay my law school. That’s why I went to Paisner.
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They are already two of the most globalised law firms in the business, but CMS and White & Case have announced fresh international investment this week with CMS securing a new partner in the Middle East as the US-bred giant makes significant hires in Sweden.
Four months after completing the largest legal merger in UK history, CMS is continuing its expansion after signing a partnership with Riyadh practice Feras Al Shawaf.
The move expands CMS’s network in the Middle East and North Africa (MENA) region; managed by the Dubai central hub, the firm has more than 100 lawyers and offices in Algeria, Iran, Morocco, Oman, Turkey and association agreements in Lebanon and Iraq.
‘MENA is a dynamic growth region that is gaining importance for our clients and Saudi Arabia is the largest economy in the region,’ said Duncan Weston, CMS executive partner for global development.
CMS executive chairman Cornelius Brandi told Legal Business: ‘It is a structured co-operation, we will exchange information as far as we can and collaborate very closely. We have worked with Feras Al Shawaf for four or five years, discussions for a formal partnership started around the beginning of this year.’
Established in 1999 and formed of three partners, seven associates and a senior counsel, Feras Al Shawaf has relationships with a number of local government bodies, including the Saudi Arabian General Investment Authority, the Ministry of Commerce and Industry and the Capital Market Authority. The firm previously had a partnership with Trowers & Hamlins, which terminated after the departure of the City firm’s last associate in Riyadh in September 2011.
For CMS, the Saudi deal follows up on its expansion in Latin America earlier this year, when the firm added three new member firms from Chile, Peru and Colombia to its network.
Meanwhile, White & Case’s Stockholm branch has recruited Jan Jensen, the chair of Nordic leader Hannes Snellman, to head its private equity practice in the region. Jensen is joined by Hannes Snellman partner Shoan Panahi and associate Patrik Erblad.
For the Euro Elite firm, the departures are the second blow in the last few weeks, with Eversheds Sutherland acquiring the Finnish-based firm’s entire operation in Russia at the beginning of the month, including a team of 22 lawyers. Contacted by Legal Business, Hannes Snellman senior partner Johan Aalto confirmed that the lawyers would leave the firm later this year but declined to comment further.
White & Case has been fined £250,000 in the largest-ever sanction imposed by the Solicitors Disciplinary Tribunal (SDT) against a firm, as it said today (19 July) that the firm had breached conduct rules by acting recklessly in failing to identify a conflict of interest and failure to protect confidential information regarding a $2bn Ukrainian commercial dispute.
The Solicitors Regulation Authority (SRA) referred the case to the SDT after the High Court found in 2014 that the firm had failed to identify a conflict of interest and barred it from acting on the case.
On 31 January 2014, Mr Justice Field ordered that the firm cease representing a Ukrainian oligarch, Victor Pinchuk, suing Ukrainian tycoons Igor Kolomoisky and Gennadiy Bogolyubov.
At the time, a White & Case spokeperson said it was disappointed by the judgment but that the judge did not find that any actual breach of client confidentiality had occurred, according to media reports.
After considering all the evidence, the SRA and SDT ordered that White & Case pay £250,000, and partner David Goldberg £50,000, in an agreed settlement of the disciplinary body’s case.
The SDT, however, did not allege that the firm or Goldberg had acted dishonestly, nor did it pursue allegations of lack of integrity against either him or the firm.
The SDT found that the firm allowed work to be carried out without adequate steps taken to ensure that no conflict of interest existed, and without ensuring the confidentiality of information provided by clients was protected. In addition, the firm admitted to acting ‘recklessly’ in respect of the two matters.
The SDT said the firm had allowed instructions to be accepted to undertake further work for clients without causing adequate steps to be taken to ensure the confidentiality of information provided to the firm by clients was protected, and in so doing breached the SRA code of conduct and principles.
As the lead partner for the matter involved, Goldberg provided confidential information concerning the work undertaken to another partner in the firm involved in acting on a conflicting matter.
A firm spokesperson told Legal Business: ‘While it would not be appropriate to comment until the Solicitors Disciplinary Tribunal has published its judgment, we have been cooperating fully with the SRA and accept the orders which will be made by the SDT. We are committed to upholding the legal industry’s highest standards at all times, in all of the jurisdictions where we operate.’
The SRA’s previous highest sanction of a law firm was against Clyde & Co. in March, when the SDT fined the firm and three of its partners £80,000. Partners Christopher Duffy, Simon Gamblin and Nick Purnell were fined £10,000 each for breaching accounting and anti-money laundering rules after admitting allowing a client bank account to be used as a banking facility.
While the SDT judgment made on 18 July has yet to be published, the SRA has announced the decision today.
White & Case has again advised Polish telecoms group Play Communications and its shareholders, Novator and Olympia, this time on Play’s €1bn initial public offering (IPO) on the Warsaw stock exchange.
The IPO, which is the largest in the telecommunications sector in the past two years, values Poland’s second biggest mobile network operator Play at €4bn.
The company is controlled by Greek investor Olympia Development and Iceland’s Novator Partners. It has more than 14m customers.
White & Case’s team was led by private equity partner Ian Bagshaw and corporate finance partner Jill Concannon. London-based partners Jonathan Parry in capital markets, Prabhu Narasimhan in tax, Martin Forbes in private equity, Nicholas Greenacre in employment and Warsaw-based capital markets partner Marcin Studniarek also advised for Play.
Bagshaw said the firm’s lawyers in London and Warsaw had advised on a ‘complex and successful IPO that will allow the company to continue its exciting growth journey’.
Concannon told Legal Business: ‘This all about the high yield to IPO. We got this up and running in ten weeks from high yield to pricing which is extremely unusual. The only reason we were able to do that is we had a high yield prospectus that was basically 90% there which put the company in the starting block so that they could hit the ground running and hit the summer window – something we wouldn’t have been able to do without it.’
White & Case has advised Play on a number of deals since 2014. In 2014, Play returned to White & Case on its €415 million senior PIK toggle notes offering, with a team led by Concannon, capital markets partner Rob Mathews and Bagshaw.
The firm also advised Play earlier this year on term loan facilities and a revolving credit facility of up to zł7bn, led by Bagshaw and Forbes.
Latham & Watkins advised the underwriters, JP Morgan Bank of America Merrill Lynch and UBS Investment Bank, with a team led by corporate partner Brett Cassidy and capital markets partner Olof Clausson.
The tie-up will create one of the five largest container shipping lines in the world, with 230 vessels and a combined turnover of around $12bn.
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Skadden, Arps, Slate, Meagher & Flom and White & Case advised HgCapital as it led a consortium of investors purchasing €4.64bn of stakes in Norwegian software company Visma, in one of Europe’s largest ever software buyouts.
US buyout firm KKR is selling its entire €1.59bn stake in Visma, while private equity firm Cinven is selling 40% of its Visma holdings.
Private equity partners Richard Youle and Katja Butler, left White & Case last month to join Skadden in anticipation of the deal’s announcement.
White & Case remain advisers to Hg on the debt component of the deal, with a team led by London’s banking partner Colin Harley and Brussels’s antitrust partner Pontus Lindfelt.
The investor group includes Intermedia Capital Group (IGC), Montague, the Government of Singapore Investment Corporation (GIC) and Visma’s management team.
KKR is advised by Simpson Thacher & Bartlett, alongside ABG Sundal Collier, Morgan Stanley, EY and OC&C, while Freshfields Bruckhaus Deringer, in a team led by Adrian Maguire and Victoria Sigeti, advised Cinven.
Ropes & Gray advised new client ICG, led by private equity partner Helen Croke and finance partner Malcolm Hitching, who led on the debt aspects of the deal.
Linklaters advised Montagu with a team led by financial sponsors co-head Alex Woodward.
Oslo-headquartered Visma provides mission critical accounting, resource planning and payroll software to small and medium-sized businesses in the Nordic and Benelux region.
Before the deal, Hg, Cinven and KKR each owned a third of Visma. Following the deal, Hg will hold 41% of Visma, Cinven will retain a 17% share, while Visma management will hold 7%. The rest of the consortium will hold minority stakes.
Hg initially invested €114.8 million in Visma in 2006, completing a public-to-private de-listing from the Oslo stock exchange valuing the business at £382m at that time. HgCapital subsequently continued to hold a stake in the business over the following eight years, before re-investing again in 2014, alongside both KKR and Cinven, each holding 31.3% of the company at that point.
Between 2006 and 2016, Visma’s revenues grew at a compound annual rate of 17. The company completed more than 120 bolt-on acquisitions over the same period and improved operating margins from 15% to 25%.
Schjødt is advising HgCapital on Norwegian aspects of the deal and Wiersholm for Visma and the management team.
Private equity firms have been increasingly interested in software companies in recent years.
In a major blow for White & Case’s City private equity practice, EMEA private equity co-head Richard Youle will join Skadden, Arps, Slate, Meagher & Flom, ending his long-running pairing with partner Ian Bagshaw. The duo has known each other since they were at Eversheds in the 1990s.
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White & Case’s City growth strategy is seeing results with the US firm and Freshfields Bruckhaus Deringer winning places advising Alfa Financial Software on its planned float on the London Stock Exchange. The initial public offering (IPO) is expected to value Alfa at more than £800m.
The float of the company, which specialises in software for the asset finance industry, will be the largest UK tech listing in the past two years. Alfa’s clients include Bank of America, Barclays and Mercedes-Benz.
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Hogan Lovells’ UK newly-qualified (NQ) lawyers pay has risen 5%, as the firm increases junior associates’ salaries.
NQ pay jumped £3,500 to £71,500, while first year trainees’ salaries rose by £1,000 to £44,000. Second year trainees have also received a £1,000 increase to £49,000.
The changes came into effect on 1 May.
Lawyers with one year’s post-qualification experience (PQE) at Hogan Lovells have their pay determined by a merit based pay model with broad salary bands.
A firm spokesperson told Legal Business the mechanism ‘ensure[s] that we are able to take into account an individual’s performance when determining salary within the relevant salary band.’
‘In addition, our lawyers have the ability to earn significant bonuses based on chargeable hours and/or a discretionary bonus.’
Earlier this month, White & Case announced its London associates would receive a significant pay increase, with the US firm awarding its NQs a £15,000 pay hike to £105,000 for 2017.
White & Case lawyers with one year-PQE received a 16% raise from £95,000 to £110,000, while two year-PQE salaries increased by the largest percentage, up 19% to £120,000.
Shearman & Sterling were the first to announce UK pay increases this year. Shearman’s NQ pay rose by 10.5% from £95,000 to £105,000, with mid-level associates receiving a 9.5% bump in their pay from £126,000 to £138,000. The start of its senior associate salary band has risen by 5.6% to £165,000, from last year’s £156,000.
