14 January 2002
November seems to be a tricky month for Garretts. In November 2000, the Leeds office of the Andersen Legal firm decided that it wanted to move into the welcoming embrace of DLA. The move was followed by several suggestions that Garretts might close more of its regional offices - all denied.
And then last November, the two main partners at Garretts' Cambridge office left, following the decision of main man Gerry Fitzsimmons to become a venture capitalist, and opted to join Taylor Joynson Garrett. Come this autumn, my advice to Tony Williams, Andersen Legal's worldwide managing partner, would be to lock up his lawyers to dissuade unsuitable suitors.
So now Garretts no longer has a Cambridge presence and Taylor Joynson has its first office outside London. Approaches from Garretts' Cambridge corporate partners David Mardle and Simon Crossley were first received by Taylor Joynson in the summer of last year and were the answer to the latter's prayers for a way to open in the technology hub of Cambridge.
Simon Walker, corporate partner at Taylor Joynson, who focuses on technology-related work, will move from the London office to Cambridge to try to make the Garretts guys feel like part of the Taylor Joynson team. He blushes when I ask him how the move came about, obviously aware that Garretts' version of events differs from the one he is about to present.
You may be able to guess how they differ, but just in case your brain hasn't switched back into spin mode after the holiday, I'll explain. Garretts says that it decided to pull out of Cambridge after the departure of Fitzsimmons, leaving Mardle and Crossley to find new homes. Taylor Joynson says that the closure of the office was because none of the three partners were left. A subtle but distinct difference.
So why does Walker think Mardle and Crossley, who are bound by confidentiality agreements, decided to jump ship? "I believe they wanted access to a legal skills base on the IP [intellectual property] side," he asserts. "As you know, multidisciplinary practices don't have litigation arms, so it's very difficult to go to technology companies and say we can advise you on how to protect your IP when you don't have a litigation group. That was an issue for them. It was that, combined with wanting to be with a firm that had a greater focus on technology work - I'm not sure what IP capability other Garretts offices have - and having access to more people who understand the science and technology."
Of course, those of you who keep a weather eye on the market will be asking exactly why Taylor Joynson wants to throw more eggs into the technology basket, which is regarded by most as so 'last season'.
Walker is at pains to point out that Taylor Joynson helped to build the technology wagon, rather than merely jumped on it once it started rolling. The firm's decision to focus heavily on technology came about in 1997, a good couple of years before the boom. "We don't think that technology is a passing phase," he says. "The really huge companies now are the likes of Dell and Microsoft, and if you look at what companies like General Electric are doing, then it's growing. Obviously, there are some fallers, such as Marconi, but technology work is here to stay."
Getting to know the market as well as Taylor Joynson claims it does, suggests Walker, means that you have to get used to the way the market works and be prepared sometimes to allow the client to go ahead with a deal before the lawyer would ideally like to.
"It's an 80-20 approach [rather than a 100 per cent approach]", he explains. "You have to be prepared for clients to take decisions that aren't going to be the best in legal terms. Some lawyers won't allow clients to make that decision. If you've explained to the client the risks involved and the client wants to move on, then we have to understand that and be comfortable with that approach."
However, Walker admits that the past few years have taught the technology market that sometimes it pays to take it slower. During the boom, many deals were pushed through too quickly.
"One of the lessons that was reinforced by the slump is that you have to get the legal documentation right and you can't do away with due diligence," he says. "There were some deals done where people said, 'I just have to invest', and didn't look at the company properly. The venture capital companies learnt that there's no substitute for due diligence, and one of the things that followed last year's events is that many realised they didn't know enough about where they had invested their money."
The other lessons to be learnt, Walker adds, are for law firms. Taylor Joynson was one of the technology-focused firms that thought there was money to be made in taking equity for fees. Sometimes there was, he says, and with some companies the firm has done quite well.
"We made some good investments and some bad investments, but it was something that was on a very small scale. The jury's still out on whether we made a profit overall from the idea," he admits. "With some companies, there are private equity investments that we're still holding, so they may prove to be profitable in the future."
Walker concedes that the technology market will not, in the foreseeable future, ascend to quite the heights that it reached during the boom, but he is cautiously optimistic about what this year holds, while also stressing that 2002 is a difficult one to call.
In part, the downturn in work last year, he argues, is due to the fact that many companies had highly successful funding rounds in 1999/2000, and so did not need any more in the bank for the time being. This year, Walker expects a lot of good companies to be returning to the investors for more money. And on the other side of the money merry-go-round, pressure will be put to bear on the private equity houses by their investors to start spending their money.
But the speed at which the market picks itself up will depend on whether market valuations have bottomed out or not. If they have, then Walker expects many larger technology companies and private equity houses to go on spending sprees, picking up the bargains. As for the initial public offering (IPO) market, he is optimistic that larger companies may start to look again at the possibility of floating. But if it happens at all, it won't be until the fourth quarter because of the timescales involved.
"Most IPOs come before Thanksgiving at the end of November," says Walker, "so you really have to instruct lawyers and accountants before the summer break, which means you instruct the investment bank by April or May. So you are starting to think about it now, so we are looking at the fourth quarter and no earlier."
Despite the technology golden goose refusing to produce many eggs at the moment, Walker says it wasn't hard to persuade fellow partners to take a gamble on the Cambridge office.
"While London isn't that far from Cambridge, the feeling among Cambridge clients are that those miles are long ones," explains Walker. "We take the view that this would give us a good opportunity to get to know the clients on the group and to secure them for the long term. The great technology companies grow very quickly and are legally-intensive companies. They're not the sort of outfits that can buy an off-the-shelf company and keep going for a year before they consult lawyers."
The move into Cambridge is a big step for a firm that is extremely conservative in its expansion; and now that the commitment has been made, says Walker, it is in for the long haul. The Garretts office was profitable, but no targets have been set for the new boys to prove their worth.
And, adds Walker cautiously, if Cambridge works out well, the firm may start to consider other areas. Steady on, guys.
Taylor Joynson Garrett