Firms find most fertile hunting ground in AIM
25 March 2013 | By Joshua Freedman
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There’s been some client jostling in the FTSE 100 and 250 markets but firms have hooked more clients in the alternative index, show the latest quarterly adviser rankings
The FTSE 100 is known to be a slow burn, and the latest data on firms’ lists of clients from the index shows no exception to this rule. There has been some reordering but sadly for many firms out there, that slight shift tends to be in largely one direction: towards the elite.
The latest quarterly tables from Adviser Rankings Limited (ARL), a new venture formed out of Morningstar’s (previously Hemscott) rankings operation, show a steadiness in the advisory market among the top tiers of UK plc. Very few companies have changed adviser, although the market for top corporate lawyers is far more competitive than that for auditors.
All but one of the FTSE 100 companies use one of the so-called Big Four auditors: Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers (BDO has the single client). By contrast, at least 19 different law firms have FTSE 100 clients, ranging from Slaughter and May at the top with 29 clients, to Davis Polk & Wardwell, Jones Day and to Norton Rose and SJ Berwin in joint 15th place with three each.
SJ Berwin acts for Associated British Foods, British Land (BL) and Marks & Spencer, while Jones Day’s roster covers BL, Eurasian Natural Resources and Weir Group. None of these firms increased their count at all; neither did Slaughters, whose FTSE 100 clients include Aviva, BHP Billiton, Diageo and Unilever.
The only top-level changes for February 2013 compared with the November 2012 rankings were at Allen & Overy (A&O) and Herbert Smith Freehills (HSF), but neither of these were seismic client wins. HSF added TUI Travel to its list, but only because the leisure group moved up from the FTSE 250. A&O retained utilities client Pennon Group and only loses out in the rankings because the company dropped into the FTSE 250.
The only other change was Addleshaw Goddard, whose roster shrank minimally from eight to seven. Freshfields Bruckhaus Deringer, Linklaters, Ashurst, Clifford Chance and Eversheds were all among the firms with static client counts for the top index.
Only when you move into the FTSE 250 is there more activity, but even this is small. The standout change - if it can be called that - was Slaughters’ addition of two clients. It won Direct Line last year when corporate partner Andy Ryde snatched the insurer by winning a joint role with A&O partner David Broadley on its IPO. Broadley had previously been advising the company but its directors decided in February last year that it should bring in a new firm as an independent adviser to Direct Line and its directors. A&O continued advising Direct Line and former owner RBS.
Slaughters also acquired new client Morgan Crucible, whose legal mandates it won after pitching last year. It has not yet carried out any major transactions for the materials group but as relationship partner Stephen Cooke points out, the strategy is to target the client first and then hope deals will follow.
“We’re always sniffing around for new clients,” Cooke asserts. “We play the long game. We go for the clients, not the deals. Build it and they will come.”
For Cooke, one-off rankings and short-term trends are less significant than how the market looks over the course of several years. ARL’s data shows the firm leading in the top two indices and for overall numbers of listed clients.
He adds: “The reality with the FTSE 100 is you have to look at it over a much longer period. To me, the trends over ten years or so - where we do well - are what matter. We’re top of all the three rankings across the board - FTSE 100, 250 and listed.”
Slaughters has consistently been top of the FTSE 100 charts for years; the May 2011 rankings, which marked 20 years of records kept by ARL predecessor Hemscott, show that over the two decades since 1991, the firm had usurped previous leader Linklaters, which by then had even been overtaken by Freshfields in second place. Freshfields had been a distant fourth in 1991, on just nine clients; today it remains second with 24 FTSE 100 clients.
The two additions bolster Slaughters’ FTSE 250 roster from 42 to 44. Ashurst’s dropped from 25 to 24, but this was because client Shanks left the index to become a constituent of the small-cap indices.
Linklaters moved up from fourth to second place after increasing its FTSE 250 client count by adding Alent and Vesuvius, both formed when existing Linklaters client Cookson demerged into two.
HSF’s client count in the index dropped from 24 to 23 after client TUI moved up the FTSE 100. This meant it dipped below Linklaters into joint fourth place with Freshfields.
But if you really want to find change of sorts, you have to look at AIM. The alternative investment market might not be as lucrative as the elite indices, but it gives more opportunities for winning new clients.
Pinsent Masons was the clearest example of a firm to benefit from a sudden influx of AIM work: it made a net gain of nine clients following its merger with Scotland’s McGrigors last year, according to Morningstar’s rankings for the third quarter of 2012. It has since risen from the pre-merger figure of 38 to the post-merger count of 47 and now to 51. It made a net gain of one, adding Aimshell Acquisitions, power producer IPSA Group and Tyman, which supplies building products to the door and window industry. At first glance it also lost Autoclenz Holdings and Lupus Capital from its list, but fear not: the changes are purely because the two companies rebranded as Aishell and Tyman respectively.
Memery Crystal, traditionally the market leader in AIM, has only been overshadowed because of Pinsents’ inorganic expansion. The firm remains second, albeit reporting a net loss of one client after Evolve Capital stopped trading on AIM last month. Clients Gem Biofuels and Kingswalk Investments changed their names to Hunter Resources and EW Group respectively.
Canada’s Fasken Martineau also lost out due to Evolve’s exit from the list, while the firm added Chinese clothing manufacturer and distributor Camkids Group, which it advised on its December listing.
The company was also advised on the float by China’s Grandall, offshore firm Appleby and Hong Kong-based Chin & Associates, while Pinsents advised nominated adviser and broker Allenby Capital.
Offshore firm Carey Olsen dropped from 40 clients to 39 because Sofia Property Fund left AIM, while Lawrence Graham’s only loss - bringing it from 40 to 39 - was Aberdeen oil and gas outfit Parkmead Group. Parkmead now uses Burness Paull & Williamson.
While the upper echelons of the markets remain fairly still, AIM is more unsettled, and with companies coming and going lies opportunity for those lawyers ready to pounce.