CC in front seat at Carlyle
24 September 2012 | By Joshua Freedman
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The flurry of deals undertaken by private equity giant Carlyle this year has provided rich picking for a number of big firms
The Carlyle Group has announced deals at a rate of knots in the past months. In August it said it was buying Los Angeles asset manager TCW Group from Société Générale. Later in the month it said it was acquiring Getty Images from Hellman & Friedman for $3.3bn (£2bn). Then it announced it was acquiring DuPont’s performance coatings business for $5.15bn.
Meanwhile, in July this year it completed the sale of Basingstoke-based cash management business Talaris to Japan’s Glory for £650m, which it had bought at the low point of the financial crisis in September 2008, and a month later sold Austria-based IT company UC4 to EQT Partners for $270m.
The flurry of summer deals follows a busy year and a half for the US buyout group, which revealed it was buying RAC from Aviva in June 2011.
Carlyle is nonetheless seen as a fairly low-intensity client in Europe, with the bulk of its investments taking place in the US. The legal team overall is headed by Washington DC-based general counsel Jeffrey Ferguson, but advisers say decisions about law firm instructions are largely made by individual country teams in line with the majority of the private equity industry. Divisions exist between both jurisdictions and funds, with the leveraged buyout and real estate funds, for instance, instructing separate informal rosters of firms. Equally, Carlyle will often work with lawyers already instructed by a company that has approached it seeking funding.
The London legal operation is headed by Europe and Africa general counsel Heather Mitchell, while former Clifford Chance lawyer Louise Dumican and London in-house counsel Tom Alabaster, who is formerly of US firm Debevoise & Plimpton, are also key figures.
Debevoise is the group’s main adviser on fund formation, with the firm largely fielding New York teams even for European matters, but on the deal side the clear frontrunners are Latham & Watkins in the US and Clifford Chance in London.
The Lawyer sourced deal data from information provider Thomson Reuters going back to 2007, which shows that although Latham and Clifford Chance do well out of Carlyle, the company shares its mandates out relatively broadly. Close behind Clifford Chance is Linklaters, while Berwin Leighton Paisner, CMS Cameron McKenna, Freshfields Bruckhaus Deringer, Taylor Wessing and Canadian firm Bennett Jones all have relationships in Europe or the Middle East.
Clifford Chance has advised Carlyle since 2002, with the company developing into one of the magic circle firm’s most prized private equity relationships. Relationship partner David Walker, the London-based global private equity head, won the client for Clifford Chance when he snatched a role advising on Carlyle’s 2003 acquisition of a 31 per cent stake in technology and security group QinetiQ for £42m. Clifford Chance was acting for a corporate client involved in the bidding process, with Walker coming in to advise Carlyle when the corporate pulled out. It is understood that Walker and the firm had been courting Carlyle for a long period of time.
The biggest threat to the Clifford Chance relationship came when youthful City partner Ian Bagshaw left the firm to join Linklaters in 2007, a move that started the revival of the Silk Street firm’s private equity practice following the exit of partners Graham White and Raymond McKeeve to Kirkland & Ellis the previous year.
Bagshaw was on the QinetiQ deal alongside Walker and has made efforts to win work from Carlyle since the move. Bagshaw and the Linklaters private equity team - the other key member of which is Bagshaw’s close friend Richard Youle - have won work advising on unannounced deals and failed bids, as well as one completed deal. This has come with the help of Asia relationship partner Peggy Wang, a corporate specialist in Hong Kong who was made up last year, and Milan-based finance partner Davide Nicholas Mencacci.
For some five years Bagshaw had known an ex-Dubai International Capital (DIC) team consisting of Eric Kump and Brian Lindley, both of whom moved to Carlyle in 2010. Both are based in London and had worked with Bagshaw in their previous roles at DIC. One of Bagshaw’s first deals since his move from Clifford Chance saw him advise DIC on its acquisition of Almatis alongside Youle and Dubai-based relationship partner Scott Campbell.
The Carlyle breakthroughs came last year. First the company hired Bagshaw for its £450m acquisition of Integrated Dental Holdings (IDH), with Clifford Chance’s Walker advising the seller, Bank of America Merrill Lynch. Clifford Chance banking chief Mark Campbell advised the lenders.
The deal was seen as a watershed in Linklaters’ relationship with Carlyle before a second breakthrough later in the year when Carlyle instructed Bagshaw to advise on its unsuccessful bid to acquire Swedish alarm company Securitas Direct from EQT. Carlyle, teaming up with Stanley Black & Decker and Clayton Dubilier & Rice, lost out to private equity rivals Bain Capital and Hellman & Friedman, which hired Kirkland London corporate partners Sam Pakbaz, Ross Allardice and James Learner. EQT turned to White & Case Stockholm partner Ulf Johansson and senior associate Tuula-Anneli Tallavaara.
Clifford Chance has kept its relationship with the group going strong, with Walker leading on both the RAC and Talaris deals, although Linklaters’ Bagshaw and City banking partner Chris Howard advised Carlyle on the debt side for the RAC takeover.
Clifford Chance also won a small role opposite Carlyle on the UC4 disposal, which gave the key sell-side corporate role to Freshfields Vienna corporate partner Konrad Gröller. Clifford Chance London banking partner Taner Hassan, Frankfurt corporate partner Christopher Kellett and London corporate partner Amy Mahon led a due diligence-focused team advising buyer EQT, which granted the lead corporate job to Vienna corporate partner Christian Herbst at Austrian firm Schoenherr. Freshfields was Carlyle’s obvious choice for this deal: Gröller advised the group on the original acquisition in 2006, while UC4 hired Schoenherr’s Herbst. Freshfields also advised Carlyle, Blackstone and Providence on their joint 2008 bid for Informa, the publisher of Lloyd’s List.
A chasing group of magic circle and City firms is doing a fine job of picking up the pieces for Carlyle or has a niche in certain areas. CMS UK corporate head Andrew Sheach is good friends with Carlyle London consumer and retail partner Andrew Burgess, with the firm winning some work from the client, although one of its recent trophy corporate mandates saw City partner Jason Zemmel advise IDH opposite Carlyle on the 2011 deal. However, the bulk of CMS’s work for Carlyle is in Central and Eastern Europe.
Carlyle’s relationship with Freshfields is understood to have been on the quiet side for years in terms of winning deal mandates. London corporate partner David Sonter is traditionally the company’s go-to contact at the Fleet Street firm, but it has been receiving relatively few London mandates recently as Clifford Chance and Linklaters stretch ahead.
Chris de Pury at BLP and Simon Price at Herbert Smith are towards the front of the queue for real estate funds work. De Pury, who left Herbert Smith for BLP in 2007, is still friends with Price, with the key Carlyle figures in real estate comprising European property chief Eric Sasson in Paris and London-based managing director Robert Hodges.
Allen & Overy has won debt work, especially in France, and Travers Smith corporate partner Ian Shawyer has done deals for Carlyle Europe Technology Partners, such as the acquisition of special effects software maker The Foundry in 2011.
It is a relationship that is spread broadly, but there is no doubt who has the upper hand.
The key Carlyle figures
Jeffrey Ferguson – general counsel, Washington DC
Andrew Burgess – consumer and retail partner, managing director of Carlyle Europe Partners
Alex Stirling – director, European buyout team
Heather Mitchell - managing director and general counsel, Europe and Africa
Louise Dumican – associate vice president
Robert Hodges - managing director, real estate
Eric Sasson – managing director, head of European real estate
The key lawyer relationships
Chris de Pury – real estate, London
David Walker - relationship partner, private equity, London
Paolo Rulli – corporate, real estate, Paris
Eric Davoudet - real estate tax, Paris
David Sonter – relationship partner, corporate, London
Konrad Gröller – corporate, Vienna
Simon Price – real estate, London
Daniel Lennon – corporate, Washington DC
Ian Bagshaw – relationship partner, private equity, London
Peggy Wang – corporate, Hong Kong
Davide Nicholas Mencacci – finance, Milan
Ian Shawyer – corporate, London