Do US-UK mergers make sense for property teams?
17 February 2003
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4 October 2004
It may not be long before transatlantic mergers become a little passé. But it seems that at the moment, UK firms, rather like Tony Blair, just can't get enough of the Yanks. And marriage obviously isn't too high a price to pay for a shot at some work across the Atlantic. Even Gouldens, the firm that always seemed to be 'single and loving it' has succumbed to the security of a sprawling bedfellow.
But what does a transatlantic tie-up mean for real estate practices? The flippant response would probably be 'not much'. More often than not, it's the corporate and banking practices calling the shots, with the real estate team taking something of a back seat when it comes to deciding on the compatibility of partners and then pushing through a merger. Indeed, one partner quips: "Back seat? We'd be lucky to even make it into the side-car."
Real estate partners in the legacy Rowe & Maw and Mayer Brown & Platt firms were sceptical as to whether a merger was going to generate much more work for them. "Go ahead and merge," the US real estate lawyers said. "But it won't make any difference to us." But apparently, that's where some hat eating has been involved - it seems the property sceptics have been proved wrong. Some of the biggest cross-referrals have been within the real estate team. The latest has seen the Rowe & Maw relationship with Royal Bank of Scotland generate a lead for the US team, which advised on the financing of Soho House's purchase of its trendy new Manhattan club due to open in the spring.
In the past year, New York real estate partner Douglas Wisener estimates that an extra 10 per cent of work was generated by the tie-up. And for the legacy Rowe & Maw team that figure is around 15 to 20 per cent. They have, in no small way, benefited from not only the US office, but also the legacy offices in other jurisdictions, particularly Germany. Last year saw German open-end investment fund iii, a long standing client of Mayer Brown's Frankfurt office (previously Gaedertz), making a £50m acquisition in the UK.
Another highlight was scoring a huge acquisition job for a US telecoms company which bought 180 properties in more than 40 different countries. Without the strength of the two practices, the firm was unlikely to have won that work from Clifford Chance when it pitched in February last year.
For the German office, around 70-80 per cent of the real estate practice is cross-border work and the stronger European presence has been something of a godsend for the team.
All in all, it sounds rather too good to be true. But before you all pack your bags and sunglasses and head off in search of some truly international and seemingly sexier work, there is a catch. The transatlantic gambit is all well and good, but it's not going to help unless you remember those local clients that got you there in the first place. Not only are those lower end jobs for domestic clients, in part the bread and butter of the firm, but they also form the base for forging stronger relationships that will ultimately secure the higher end goal.
It is a brave real estate partner that forgoes their local client in the hope of bagging purely top-end work, but this is one criticism that has been levelled at Dechert's property practice.
In its day, Titmuss Sainer Dechert, as it was then known, was one of the real estate darlings of the UK. But where exactly is it now? The image that springs to mind is that of a rudderless ship. Following the US tie-up, the firm lost its head Chris Edwards to Charles Russell, partner Edward Bannister to Field Fisher Waterhouse, and at the beginning of this year, partner Pat Jones to SJ Berwin. The perception in the market and of certain ex-Dechert lawyers has been that the firm has focused on its property finance and securitisation work somewhat to the detriment of its old UK property clients such as WHSmith, which ditched the firm from its panel in early 2002.
It is an admirable task that Dechert's new head of property Ciaran Carvalho has undertaken. There have been some notable wins: Land Securities and the Crown Estate to name but a few. However, in times when the international market is suffering and you're fighting tooth and nail with the big boys for any top-end work that comes along, one can't help but wonder whether the comforting and maybe more reliable arms of those domestic UK companies would be rather nice.
Still, times change. Titmuss Sainer is now Dechert and Gouldens is now, perhaps more surprisingly, Jones Day Gouldens. So will that mean a change in the focus of Goulden's property partners?
Despite the firm's corporate bent, real estate has always been a fundamental part of Gouldens' income - last year, it was responsible for around 30 per cent of revenue. It maintains strong relationships with a number of key real estate clients including Pillar Property, Delancy Estates, the Hercules Unit Trust and Box Properties. Jones Day also has a large real estate practice, with almost 50 partners worldwide, of whom three are, rather surprisingly for a US firm, based in London.
And it's not just the US offices - of which there are twelve - but the European Jones Day outfits that are going to pay dividends for Gouldens' UK real estate clients.
It is certainly good timing for key client Pillar, which just last month completed its first ever European acquisition in Madrid and has made no bones about its intentions to invest in Europe further. If that acquisition had occ-urred six months down the track, we can assume that it would have been the Madrid office of Jones Day Gouldens rather than Uría & Menéndez which advised Pillar on Spanish matters.
It remains to be seen whether Gouldens will still remember the little people now it has joined an international player, but then Jones Day is hardly the kind of firm to pitch itself at the very top-end of the market - it is more like a US version of Eversheds than of Slaughter and May.
So Gouldens' clients, for now anyway, can probably sleep safe in their beds with the knowledge that their firm will still be there for them in the morning.