European firms in London: City of dreams
4 November 2013 | By Joanne Harris
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With a focus on internationalisation and a determination to forge bonds with clients, European firms are finding their City bases increasingly important
Gatherings of European lawyers working in London have been pretty upbeat recently. Despite the normal slowdown in activity over the summer, firms from countries as diverse as Belgium, Germany, Ireland and Italy all report buoyant levels of work and a healthy pipeline – despite the economic problems many of their home jurisdictions are facing.
Indeed, it may be because of that instability at home that London has reinforced its position as a legal hub in the past year.
Portugal’s Miranda became the latest firm to launch a London office, opening its doors earlier this year after signalling a launch a year ago. Italy’s Legance, which also announced its launch last year, finally went live in May.
Meanwhile, a host of other firms have strengthened their London presence. Iberia’s Cuatrecasas Gonçalves Pereira’s London head Iñigo Rubio went home to Madrid at the start of the summer and was replaced by partner Antonio Baena and associate Ignacio Buil. Both Bonelli Erede Papplardo and best friend Hengeler Mueller added an extra partner in London, following the example early last year of Gianni Origoni Grippo Cappelli & Partners.
And Gide Loyrette Nouel, which this month celebrates its 10th anniversary in the capital, has spent 2013 rebuilding and refocusing its City presence after a tough few years.
Access to clients
The message coming from European firms is that the importance of the London office has never been greater. Newcomers point to the accessibility of clients as one of the things they have noticed most.
“It makes things a lot smoother in a number of ways to be present in London,” says Miranda’s London office head Nuno Antunes. “I find that the clients always want to have someone to talk to and it’s easier to meet. We can go anywhere in the UK to talk to a client if they want.”
“We already had a number of clients in London and being here could really boost these relationships,” says Legance’s London resident partner Marco Gubitosi. “So far it seems the market welcomes the fact that we’re on the ground.”
Legance is one of three Italian firms to have increased its presence in London recently. Both Bonelli and Gianni Origoni added partners to existing capabilities. All three say there is a direct correlation between the turbulence at home and the decision to ramp up in the City, particularly when it comes to the private equity and investment banking markets.
“We saw some of our clients moving from Italy to London – in particular investment banks but also key players in private equity,” explains Gianni Origoni partner Raimondo Premonte, who has been in London for several months. Premonte is a corporate and private equity specialist, and joined the firm’s debt capital markets head Marco Zaccagnini in the City.
Gubitosi notes the same trend and says it was one of the drivers for Legance to set up in the UK – he too is a corporate and private equity lawyer. The other driver was the firm’s internationalisation, six years after its foundation.
Bonelli’s move to strengthen London came in the shape of finance partner Giuseppe Sacchi Lodispoto, but London managing partner Andrea Carta Mantiglia has also noted the need for private equity advice in the City.
“Partners devoted to private equity constantly go to London to ensure our relationships with private equity firms are as strong as possible,” Carta Mantiglia says. He adds that having a permanent private equity presence in the City is something the firm will monitor.
Although Germany is not suffering the same economic problems as Italy, private equity was also the focus for Hengeler Mueller. Partner Steffen Oppenländer moved to the City in August. His private equity practice complements the firm’s existing offering in London, consisting of finance specialist Martin Geiger and real estate and corporate partner Daniel Kress, as well as a team of associates.
“Private equity plays a big role in our London office and we saw the potential for more work to be covered out of London for local funds,” Oppenländer explains.
He cites Bain Capital, CVC and EQT as examples of clients that can be better served through an enhanced London office, but adds that smaller private equity funds are looking at Germany too.
Kress says that private equity is a key focus for Hengeler in London, largely due to the drop-off in investment from banks.
“Typically, the UK investment banks don’t do much primary lending in Germany anymore, but they have a lot of legacy issues to work through,” Kress says. “But there are a lot of US funds who are either coming back to Europe or coming for the first time because the US market is increasingly competitive. They’re not coming to London just to cover the UK but also as a hub for Europe. Germany is obviously a key target market.”
The other firm to have ramped up on the corporate side this year is Cuatrecasas. For a few years the London office has been mainly staffed by finance partner Iñigo Rubio, but when his three-year term came to an end the firm chose to change strategy slightly. While Buil is maintaining Rubio’s finance practice, new London managing partner Baena is focusing more on corporate and private equity clients.
“We’re trying to broaden our capabilities,” explains Baena, adding that Cuatrecasas can now deal with issues ranging from “pure equity to pure debt and everything in the middle”.
Baena says it was important for Cuatrecasas to strengthen in London due to an improvement in the situation in Spain and Portugal.
“Luckily, the climate in Iberia is changing,” says Baena. “There are still things to fix, but the homework has been done. That’s fostered a climate of confidence that we may be at the turning point of the crisis we’ve had in the past few years.”
He believes new investment is coming into Spain again, not just the distressed transactions which have characterised the past few years, elevating the status of the London office and the work coming through it.
“Transactions are happening that are challenging, not just vanilla,” he stresses.
But the fact remains that Iberia is a tricky place to do business. For Miranda, which has roots in Portugal, the crisis has led to a refocusing of strategy away from Portugal and towards the vast emerging markets of Africa. In turn, says Antunes, that was a driver for the firm to launch its London office this year.
“Over the past three or four years we’ve changed our focus on Africa somewhat, to the extent that we started expanding into countries where we weren’t present before,” Antunes explains.
Business development and client relationship management became, as a result, far more important, and that led Miranda to the City.
“London works as a bridge for us. We have a huge list of clients in the UK – either they’re from the UK or they’re multinationals that have a presence in the UK,” Antunes adds.
He says Miranda’s strategy sets it apart from most other European firms in London, as the service being offered focuses as much on the “challenging” jurisdictions of Africa as on Iberia.
Miranda’s London office is following the model of its Houston office. Both are targeting a client base heavy in natural resources, energy, mining and infrastructure – the key practice areas for Africa – and are strictly representative. Antunes is the only lawyer in London and is not expecting this to change, although he does not rule out adding more bodies in the future.
“Since we don’t do English law it’s very effective in terms of streamlining our operations to have only one person in this office,” he says. “It’s something that’s always on the cards both for Houston and London, but we’ve found that probably the most efficient way to work is with one person.”
Gide back on track
At the other end of the scale from the lean operations favoured by the likes of Cuatrecasas and Miranda is Gide. The French firm has experienced a number of ups and downs over the decade it has been in London, but office managing partner Rupert Reece, who relocated from Paris last year to take up the reins, believes Gide is finally on the right track in the City.
The firm made up four lawyers to partner in London this year, finance specialists Fernand Arsanios, Fiona Gulliford, Karine Imbrosciano and Phung Pham. The firm now has nine partners based full-time in London, predominantly dual-qualified in English and French law, and still with a heavy focus on structured finance, which has always been the main area for Gide in the City.
“We’re feeling pretty optimistic at the moment – we’re hitting all the targets in our business plan,” says Reece. “It’s been great making up these four new partners. They’ve hit the ground running.”
Reece recognises that compared with last year, when revenue from London fell by 29.5 per cent and the firm reported a £2.2m operating loss, it was hard for things to get worse, but he says the firm has examined its cost base and associate pyramid in an effort to address performance.
“We’ve got the right business model, which is still playing off the strengths we can bring in a cross-border business transaction – we’re on the right lines,” he asserts. “We’ve managed to get our cost structure more proportionate to our revenue stream.”
While acknowledging that the decision to practise English law remains an anomaly among European firms, Reece maintains it is a necessary offering for the type of securities transactions Gide does. He says the firm is not trying to compete with UK outfit and does pick up instructions from other law firms as well as clients.
The received wisdom is that European firms are in London to improve their network of law firm referral partners, but partners say that these days the majority of the work comes direct from clients, especially the banks.
“Through other law firms there’s a relatively small number of instructions that come through the London office. Although private equity sounds international, there aren’t that many cross-border deals,” points out Kress, adding that a fund investing in Germany is unlikely to need English or US advice as well as German advice.
Carta Mantiglia provides the same estimate of law firm referrals as Kress at 10 per cent of all London-originated work. At Gianni Origoni, Zaccagnini says this proportion is true for his debt capital markets practice, but Premonte’s more corporate-focused team picks up about half of its work from clients and half from law firms.
Legance partner Bruno Bartocci, who has been one of the strategic leads behind the London office, says while it is too soon to say for sure, the trend seems to be that work is coming mostly from clients rather than other firms.
“In these early days there semms to be a higher percentage of work coming directly from clients,” he says.
While other firms might not contribute vast amounts of work, the Europeans in London are still convinced of the necessity of maintaining strong relationships with their Anglo-Saxon counterparts in the City and further afield in the UK.
“Relationships must be maintained – the visibility of the firm has to be there,” says Baena.
“For us the relationship with our friends is crucial. We spend a lot of time strengthening this kind of relationship,” adds Premonte, saying that Gianni Origoni is keen to develop its relationships with all types of firms. He points to those specialising in high-tech sectors, which can often be headquartered outside London.
Bringing in the fees
The main job of most European firms’ offices in the UK is to develop business and maintain the firm’s visibility on the ground here.
But to a greater or lesser extent, most also carry out fee-earning work. Premonte and Zaccagnini both have enough associates with them to do the bulk of work on any instruction that comes through, either from their own efforts in the City or via Italy.
Likewise, Kress and Oppenländer say they have enough strength to execute as well as originate deals from London – in fact, the London office has a greater number of associates to each partner than Hengeler as a whole.
“We’re used to working cross-office because none of our offices have all functions available,” Oppenländer adds.
Bonelli has increased the number of associates it has on secondment to London recently and Carta Mantiglia also feels the office has enough staff to cope.
“We’ve enough people to execute fully the type of deals we have right now,” Carta Mantiglia says.
He adds that the Bonelli story in London is more multi-faceted than just picking up Italian deals.
“There’s another point here – we’re practising more international law in practice areas that are international by nature, such as arbitration and taxation, where the Italian element is limited or absent,” Carta Mantiglia explains. “We believe that in relation to this sort of activity London is – and will be – more and more important for us.”
Gubitosi says the same holds true for Legance.
“Sometimes there are transactions related to Italy, but all the execution and origination is in London with little involvement in Italy,” he notes.
City-based partners all want the status of their offices to grow, with several saying they are keen to encourage partners from their home jurisdiction to use London as a base more often.
With internationalisation the buzzword in Europe, the importance of having a presence in the UK – despite the relative ease of flying in and out for meetings – will continue.