19 July 1999
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Centrica, the largest gas supplier in the US, is not a company normally associated with rescuing broken-down vehicles.
But in an attempt to diversify its interests, Centrica has acquired the Automobile Association (AA) for £1.1bn (The Lawyer, 12 July).
The acquisition, yet to be approved by AA members, will bolster Centrica's client base, adding another facet to its business which also includes financial services, namely the heavily-publicised Goldfish credit card.
However, critics have balked at Centrica's topsy-turvy approach to building up business while it contends with making more than 1000 redundancies following its demerger from British Gas in 1997.
As far as the AA purchase is concerned, while the business will be kept as a unit should the sale go through, one area to be affected will be the in-house legal department.
Grant Dawson, general counsel and company secretary at Centrica, expects the company's legal department will grow as AA's lawyers become part of the parent company.
Dawson, who estimates the AA has four lawyers, says: "Obviously if the transaction goes through then we will acquire lawyers within the AA organisation.
"We will look to integrate all the departments."
This is not the first time the legal department has undergone a significant change.
Referring to Centrica's demerger from British Gas, Dawson says the entire legal team was restructured to deal with the break-up.
The department has since been restructured into five departments, the head office being based in Slough where two lawyers, including Dawson, are based. At Centrica's main operating subsidiary in Staines, five lawyers work at British Gas Trading (Centrica retained the British Gas name in the UK after the split) while four legal staff work at British Gas Services.
Two more lawyers are based at Centrica's financial services office in London. Dawson says: "We have three of what I would call true oil and gas lawyers who work for the company's energy management group."
In terms of external legal advisers, Dawson says Linklaters, which advised on the AA purchase, has remained with Centrica since the change.
He says: "Linklaters has stayed as our corporate lawyers and they also act for British Gas, but we have separate teams working for each company."
Dawson adds that Herbert Smith was appointed following the demerger while the existing property panel was reviewed to be taken over by three firms: Eversheds, Pinsent Curtis and Dibb Lupton Alsop.
Dawson says all property work, which focuses primarily on the company's 300 sites, is farmed out to external advisers simply because it does not have the internal capability.
However, he says that the in-house team retained a central role in the AA purchase, which Dawson says is the biggest deal Centrica has been involved in since the demerger.
"We did a lot of background work internally but when it came to the extensive and intensive due diligence process we brought in Linklaters," he says.
"Nevertheless, I would be expected by the chief executive to be central to that activity and I was very much involved in the major negotiations."
Dawson also places the same importance of in-house input on contractual work which takes up the majority of all his lawyers' time.
While he admits it is more cost effective to retain this work in-house, Dawson says: "It is better in the sense that the internal people are knowledgeable of your business and can therefore write the contract to greater effect."
Head of legal
|FTSE 100 ranking||58|
|Employees||15,000 full time, 5,000 temporary contractors|
|Legal function||16 lawyers|
|Head of legal||Grant Dawson|
|Reporting to||Roy Gardner, chief executive|
|Main location for lawyers||Slough|
|Main law firms||Linklaters & Alliance (corporate), Ashurst Morris Crisp (litigation) Herbert Smith (litigation), Lovell White Durrant (pensions) Pinsent Curtis (property) Eversheds (property), Dibb Lupton Alsop (property)|