Deal watch: Corporate activity in April 2015

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GE RESTRUCTURING BRINGS IN RAFT OF ADVISERS

A host of firms picked up work on General Electric (GE)’s restructuring, fielding large cross-border teams as the industrial giant sold $26.5bn of real estate assets and announced it would divest most of GE Capital’s other holdings. Hogan Lovells led for GE on the real estate sale, with buyers The Blackstone Group and Wells Fargo represented by Simpson Thacher & Bartlett and Dechert respectively.

Weil, Gotshal & Manges is advising GE on the wider restructuring, which will return up to $90bn to shareholders, alongside Sullivan & Cromwell and Davis Polk & Wardwell.

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‘A significant phase of renewal’: King & Wood Mallesons takes real estate team from Eversheds

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Three months after persuading Eversheds‘ heavyweight real estate trio William Naunton, Clive Jones and Cornelius Medvei to stay in Big Law and not launch their own boutique, King & Wood Mallesons (KWM) has hired a team of Eversheds partners as it seeks to reshape its London office.

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£1.1bn of student digs: Nabarro, Clifford Chance and Morgan Lewis take lead on Liberty Living acquisition

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Nabarro and Clifford Chance have picked up a major real estate instruction advising on the £1.1bn acquisition of UK student accommodation provider Liberty Living by Canada Pension Plan Investment Board (CPPIB).

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Land Securities

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  • Group general counsel and company secretary: Adrian de Souza.
  • Team headcount: eight lawyers.

Due to the nature of the industry, in-house real estate teams are traditionally smaller than most, tending to gift significant mandates to their chosen counsel. Group GC Adrian de Souza and his high functioning team at FTSE 100 company Land Securities outsource about 99% of their legal work, typically spending in the region of £15m-£20m externally.

‘The team here know their roles really well,’ comments de Souza. ‘They don’t do external lawyers’ work and they don’t do the business person’s work, but they
act as a seamless conjugate between the two. Every single sale for Land Securities has a bespoke legal agreement attached to it. Legal is right at the heart of our business and a relatively small legal team makes sure the work is done on a consistent and high-quality basis.’

One way in which the team ensures high-quality output is treating external lawyers as an extension of the in-house team, bringing them into the business and familiarising them with its specific model. Alongside this, the team also has an unusual market-shaping programme of identifying and supporting the rising stars in real estate practices across its law firms, safeguarding against a possible shortage of star lawyers in the years to come.

Like many in-house teams, the legal department at Land Securities does not think much of hourly rates, instead taking direct responsibly for driving the efficiency of its panel firms. Head of legal Alex Peeke, says: ‘Conventionally in real estate you are budgeting as a percentage of the transaction amount.’

The team’s highlights over the last year include the acquisition of a controlling stake in the Bluewater shopping centre in Kent – bought from Lend Lease Corporation for just under £700m, as well as the £1bn development of the iconic Walkie Talkie building, together with the Canary Wharf Group, which was 90% let at completion when it opened towards the end of 2014. But the team is arguably at its most effective around Victoria, where Land Securities is currently putting up around £2bn worth of buildings. It also has planning permission for a new residential tower worth over £1bn – the conversion of an office block, which is the tallest building in the area.

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Westfield Shoppingtowns

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  • General counsel: Leon Shelley.
  • Team headcount: 14 lawyers.

Described by the global head of real estate at one top-15 firm as being a ‘hands on, proactive team, close to all the issues with a no-nonsense, commercial, can-do approach’, Westfield’s is a tightly-managed team, with GC Leon Shelley also described as a ‘total star’.>

The legal team undertakes most of the shopping centre giant’s legal work internally. Westfield’s European lawyers, all currently based in London, are embedded within the relevant sectors of the business.

Shelley says: ‘When I arrived ten years ago Westfield spent tens of millions on legal services, but I have built it up so that we have great capability internally and operate a bit like a mini law firm that services all the business.’

With a highly variable external legal spend of around £7m to £10m depending on the level of activity in a given year, the team turns to external law firms for help with tax, litigation, corporate real estate and property work, and in its recent major transactions has used a combination of Freshfields Bruckhaus Deringer, SJ Berwin and Ashurst. Westfield also uses DAC Beachcroft’s regional offices for repeat instructions.

Freshfields recently assisted on a £750m refinancing via a commercial mortgage-backed securitisation, a first for the in-house legal team.

While Westfield’s team is based in London, it is currently hiring a lawyer in Milan, in anticipation of a raft of work on Westfield Milan, which is expected to be the largest shopping centre in Europe.

Other than Shelley, Georgina McManus is singled out for being ‘a knock-it-out-of-the-park, excellent lawyer with a business brain’ and the pair are said to ‘help drive the business forward, they are not just an internal legal team’.

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The Crown Estate

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  • Director of business operations and general counsel: Vivienne King.
  • Team headcount: five lawyers.

The Crown Estate is governed by an Act of Parliament that involves funnelling profits into HM Treasury – totalling around £2bn in the last decade – and currently manages a diverse property business valued at more than £8.6bn. Its well-regarded director of business operations and GC, Vivienne King, is responsible for more than the legal side of the business: she also spends a great deal of her time working on sustainability, public affairs, and health and safety matters.

Hogan Lovells global real estate chief Jackie Newstead says: ‘They know what they want, they know how to get there and they do it in a very nice way. Those are the hallmarks of an outstanding in-house team. That’s one of the advantages that a good in-house team gives you: you can get a sensible, experienced view from the team, which translates into a more intelligent instruction.’

Major deals for the team included the formation of a £320m joint venture vehicle with Oxford Properties to develop two super-prime blocks in St James’s Market and Lower Regent Street in 2013. In April, the sovereign property portfolio made greater efficiencies by halving its rural and coastal and Windsor Estate legal panel from four to two. The move saw Burges Salmon and Bond Dickinson re-appointed, while Clarke Willmott and Thomas Eggar lost out.

Head of legal Rob Booth says displaying a good moral code is an important aspect of the team discipline: ‘The legal team is very closely involved with the government and, therefore, the ethics piece. We play a moral compass role within our organisation. That requires the absolute highest standards of ethics because we’re effectively benchmarking an approach across the organisation.’

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Carillion

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  • Director of legal services and company secretary: Richard Tapp.
  • Team headcount: 19 lawyers in the UK, four in Canada, two in Dubai; 50 staff, including lawyers, in Carillion Advice Services.

Described by one law firm partner as displaying ‘outstanding leadership and encouragement’, construction giant Carillion was one of the earliest adopters of innovative business solutions in the form of its own legal outsourcing arm, Carillion Advice Services (CAS). Carillion diverts the commoditised and quasi-legal portion of all its workload to CAS, which is also now used by its panel law firms to service their own clients’ needs.

In 2013, Slaughter and May announced it had begun offering the services of Newcastle-based CAS to Vodafone, and that arrangement has subsequently been extended to other clients.

CAS has, over the past 18 months, grown from undertaking Carillion’s contract review work across the UK to across the globe. GC Richard Tapp says: ‘Our lawyers love it. It frees them up to do things that are the best use of their time.’

Such a move has ultimately helped the company keep legal costs at the same level they were a decade ago.

Other moves to reduce costs include using external firms in a collaborative network, where firms agree standard forms of documentation for their Carillion work and meet twice a year. Tapp adds: ‘It works best if all the firms are getting work and we keep the network fairly small. I appreciate we are quite demanding so it’s quid pro quo.’ Each year, Carillion asks its network of advisers to identify the legal issues on the horizon that may impact its business.

The standout task for the team during 2014 was undoubtedly the £3bn negotiations over a combination with main rival Balfour Beatty, in which Tapp and his team – which includes Alison Shepley, GC for outsourcing; Jeremy Mutter, GC for construction and Anne Ramsay, GC for projects – played a key part. The deal ultimately fell through after the pair failed to agree terms.

Carillion also entered into a joint venture with ASK Real Estate and Tristan Capital Partners; an £800m landmark partnership with Sunderland City Council to secure regeneration activity within Sunderland and the wider north-east region; and is part of the £550m Aberdeen Roads consortium, previously operating under the collective name Connect Roads. Aberdeen Roads will inject an estimated £6bn into the local economy and create around 14,000 new jobs.

At engineering, IT and facilities service business NG Bailey, GC Scott McKinnell says: ‘They have clearly delineated risk processes and teams serving projects across the world, ensuring that this works commercially, operationally and legally and to a tight deadline of preparation.’

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Royal Mail Group

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  • General counsel: Neil Harnby.
  • Team headcount: 27 lawyers.

The legal team at Royal Mail has had a busier few years than most, with an initial public offering (IPO), a panel review, an inaugural corporate bond and two competition inquiries just some of the work the team has engaged in since the group’s GC Neil Harnby (pictured) took over in January 2012.

The £3.3bn IPO in particular, which included extensive due diligence across 37 countries, the transfer of historic pension scheme assets to the government and the company’s separation from the Post Office – all against a controversial political backdrop – has garnered the team admiration from many within the legal industry. Louise Bloomfield, employment partner at DAC Beachcroft, says: ‘The team was intrinsic to steering Royal Mail through its IPO. It is focused, sharp and consists of technically exceptional lawyers who put the business at the forefront of all that they do.’

Other highlights for the team include non-transactional mandates, such as the crafting of a comprehensive pay and conditions agreement – the first significant legally binding collective agreement with the Communication Workers Union, consisting of 139,000 people. Of the two competition inquiries meanwhile, the first is with a French competition authority over Royal Mail’s subsidiary GLS in France and the second in the UK where Ofcom is carrying out a review into the sustainability of the universal postal service.

Royal Mail’s deputy GC, Maaike de Bie – who led the company’s recent legal panel review – looks after the transactional side of the legal portfolio, while Harnby oversees the risk aspects and overall in-house function.

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Associated British Ports

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  • General counsel and company secretary: Andrew Garner.
  • Team headcount: four lawyers.

According to one law firm partner instructed by Associated British Ports (ABP), Britain’s largest port operator: ‘It’s a small but very resourceful in-house team. It has a very close relationship with management and is able to steer matters smoothly and efficiently.’

GC and company secretary Andrew Garner is particularly noted for being ‘erudite and affable, extremely perceptive and able to cut straight to key issues’. Garner was appointed as head of the legal division at ABP in 2005 from travel operator First Choice. By 2006, he was successfully navigating ABP through a multibillion-pound takeover by a consortium of private investors comprising Borealis, GIC, Goldman Sachs and Prudential.

Meanwhile, senior solicitor Angela Morgan is noted for being ‘hands on’ and praised for her tenacity and ability to grasp key issues. Angus Dawson, a construction and engineering partner at Macfarlanes, says: ‘Angela has just led from the in-house side on a £300m port redevelopment project we have advised ABP on. Although she does not have a real estate background, this was not apparent in her handling of the transaction.’

ABP may own and operate 21 ports around the UK, and manage around 25% of the UK’s seaborne trade, but Garner has opted not to put a formalised panel in place, instead calling on a roster of up to 23 firms. These are split into two camps: some regionally-based and close to ports and others that do more centralised work.

Annual external legal spend is generally between £1m and £3m, but this varies from year to year and depends on whether ABP is involved in major development projects or heavy litigation.

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Network Rail

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  • General counsel: Suzanne Wise.
  • Team headcount: 32 lawyers.

The past 12 months has seen Network Rail transform from a private company to an arm’s-length body of the Department for Transport (DfT), with the in-house team hugely instrumental in negotiating with the DfT what that would mean for Network Rail’s governance and processes.

Suzanne Wise, who joined as GC from Premier Foods in October 2011, comments: ‘The legal team has been involved in a huge number of aspects as we go through the implementation of going from a private company to a government body.’ Wise works alongside three other divisional GCs: for property, Cathy Crick; for corporate, Natalie Jobling; and Richard Smith for the routes division.

On top of governance issues, the team has also been heavily involved in preparing the organisation for compliance with the Freedom of Information Act; the changes in procurement law a result of its change in status; and how the legal team will support the business in its new environment.

Alongside these changes, the Network Rail team has been involved in corporate activity, including reclaiming over 100 rail depots.

The litigation team has also agreed a significant settlement after a colliery tip shut the tracks near Hatfield Colliery (then run by Hargreaves Services), closing the line between Doncaster, Poole and Scunthorpe, and causing eight weeks of delays.

The past 18 months have seen the team more than halve its external panel to five core firms. Wise says: ‘We continue to leverage those relationships and have extracted a lot of value out of that.’ Wise is planning to bring in key performance indicators for external firms.

The team continues to extend fixed fees and an arrangement that allows the Network Rail business to go direct to panel law firms for certain categories of work.

RPC corporate partner Richard Haywood says: ‘The Network Rail team are impressive. They are very well organised under Suzanne Wise, and Natalie Jobling’s selective appearances at industry conferences shows a willingness on the part of the team to put something back for the future of the profession.’

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