Spencer Baylin, Clifford Chance’s recently-appointed London private equity head, discussed his ambitions for the practice with LB as we garnered views from peers on how the market is faring.
In December, CC lifer Baylin stepped up to the role soon after the high-profile loss of Christopher Sullivan to Paul Weiss’ M&A practice amid the US elite firm’s aggressive drive to build a top-tier corporate practice.
Sullivan’s departure came as a shock to most, as CC’s PE practice had been relatively impervious to market forces, with the last big-name departures dating back several years, including former head of PE David Walker, who left in 2013 and partner Kem Ihenacho who left the year after, both joining Latham & Watkins.
Despite Sullivan’s departure, Baylin told Legal Business he remains confident: ‘We are obviously sad to see Chris go because he’s part of the CC family and we were surprised. It’s been ten years since a PE partner left Clifford Chance for another firm, so somebody doing it is actually pretty surprising, but it has to be quickly back to business – focusing on our clients and team.’
Under the leadership of global PE head Jonny Myers, the firm’s London private equity practice comprises 11 partners, 45 associates and 12 trainees. It sits as part 700 lawyers globally focused on PE clients and 1,450 working for private capital clients. ‘London sits as a key component of a much broader focus on private capital clients and private equity,’ says Baylin.
CC’s recent mandates led by Baylin include advising private equity client Permira on its acquisition of a majority stake in Acuity Knowledge Partners from Equistone Partners Europe and advising Partners Group on the sale of public sector cloud software company Civica, both closing last year.
‘We have long standing and growing relationships with our clients. We usually have two or three PE partners per client and then a great team alongside them which focuses on that client entirely. This only deepens client knowledge and longevity,’ Baylin explained.
Just this month, long-time private equity partner Neil Barlow (with support from Baylin), guided Alter Domus, a technology-driven fund administration company, to secure a significant investment from international private equity firm Cinven, valuing Alter Domus at $5.3bn.
On what sets apart CC from the rest of the market, Baylin said: ‘One thing that perhaps distinguishes CC from some of the other international firms is our core focus on private equity, which has always been at the centre of what we’ve done, while other firms have had much more of a corporate/M&A focus, of which private equity forms a part. Private equity is at the core of what we do.’
Baylin told LB that the firm is looking to promote another two London-based PE partners, which would bring the firm up to a total of 13 partners in May. ‘In terms of strategy, we’re doubling down on our focus on clients – enhancing and growing those relationships, as well as bringing in more partners and promoting more fantastic associates through to partnership,’ he added.
Looking at the legal market in the City, the Magic Circle is clearly feeling the pinch from Paul Weiss’ talent poaching spree of late. Alongside Sullivan, CC also lost acquisition finance partner Taner Hassan, who previously co-headed the banking and finance team. Linklaters also saw the exit of public M&A partner Dan Schuster-Woldan and antitrust partner Nicole Kar to the white shoe stalwart.
Baylin commented: ‘If you want to try and build a practice in London with some quality, it’s no surprise that US firms are going to target the Magic Circle because that’s where some of the quality sits. That’s nothing new.’
When questioned about how the Magic Circle can stand up to the deep pockets of US firms, Baylin noted: ‘While money is always a factor, to me it’s not the dominant factor and it doesn’t define success. Success in our eyes is bringing fantastic associates through to become new partners and providing fantastic services to our valued clients. That’s what’s most important to us.’
Baylin wins accolades as a steady hand in London – a sensible choice for the job. Market commentators also commend CC’s strong client relationships. Nevertheless, Sullivan’s exit leaves a void, and to stay in the game, pundits propose that the firm should prioritise nurturing fresh talent, despite tempting offers from US law firms waving their mighty dollars.
More deals and creative solutions
In the context of the broader private equity market, Baylin noted that private equity firms are gearing up to sell assets to deliver returns to investors, expecting favourable debt market conditions and interest rates, likely boosting deal activity through 2024.
‘This year, we’re seeing a number of PE houses prepping assets for sale, largely due to a desire to provide returns to LPs. We would expect some of those processes to come to market in Q2. Hopefully that will coincide with debt markets continuing to open up and debt pricing continuing to come down, along with interest rates. If that’s the case, then you should have exit processes launched in Q2 and buyers able to access capital in order to fund those acquisitions in the second half of the year – which should drive greater liquidity and deal activity in the market through 2024.’
Other City partners maintain a positive outlook for the upcoming year, citing anticipated growth in transaction volume attributed to a steadier economic environment and creative solutions from financial sponsors.
Ramy Wahbeh, co-leader of Sidley’s global private equity practice, told LB: ‘While last year was a tough market, we consider this as a modest and temporary downturn. There are several factors that indicate an expected rebound of PE activity later this year, including some positive economic news, certain dislocated valuations (especially in the public market space) as well as pressure on PE funds to deploy their dry powder.’
‘Having said that, PE houses will continue to exercise caution in deal making while searching for more creative structures to bridge valuation gaps and provide downside protection as well as search for “under the radar” targets in niche and specialised industries. This rebound of the PE market will mean more deals and more demand for high-quality first-in-class PE practices to support clients in these challenging times.’
In a similar vein, Ross Allardice, partner in White & Case’s global M&A and corporate practice, emphasised how private equity firms are exploring more flexible and creative solutions.
‘We are seeing financial sponsors on both buy-side and sell-side being more creative in a high interest rate environment, examples of which include significant minority investments in portfolio companies. This provides the selling sponsor with an interim liquidity solution and the incoming sponsor the right to deploy equity without necessarily having to raise debt or refinance at the same time.’
Tom Whelan, private equity partner at Reed Smith added that there is a growing expectation for increased deal activity driven by investors’ demands for returns and the need for sponsors to deploy capital effectively.
He concluded: ‘It has been a fragile market, but there are signs of optimism as the year goes on. Last year was not the best year in terms of volume of private equity transactions, but there is now increasing pressure on sponsors from their investors to achieve some exits and return capital and/or deploy capital rather than just pay management fees with sponsors doing nothing with the committed capital. This should result in more private equity deals getting done, notwithstanding the backdrop, of the upcoming US and UK elections as well as elections elsewhere, coupled with more protectionism around the globe.’