Linklaters has missed out on thousands of pounds worth of fees after Goldman Sachs ordered that Allen & Overy (A&O) was instructed on an upcoming leveraged buyout (LBO).
It is understood that Linklaters' banking department was initially instructed on the LBO by UBS Warburg through the firm's strong links with the investment bank's European M&A division. The LBO is due to become public in the next few weeks. However, Goldmans subsequently became involved in a bid to act as lead arranger on the senior debt element of the deal and insisted that A&O, one of its preferred law firms, be retained as counsel.
Barclays is also believed to be bidding to become lead arranger on the LBO, which is being headed by a leading private equity house that cannot be named for reasons of confidentiality.
According to a source, it is common for a number of competing banks to opt for one law firm on a deal where the debt is likely to be syndicated. This is because each of the banks will have some involvement in providing debt.The lead bank will be liable to gain a greater percentage of the fees and therefore be in a position to dictate the remuneration that the other banks will receive once the funding reaches the sub-underwriting phase.
According to one source, law firms are initially retained on a no-win no-fee basis, but the banks consolidate their choice if other competitors become involved.
It is believed that the deal could have been worth around £500,000 to Linklaters. However, A&O will now gain the lion's share of the fees.