Flying away from the City
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6 October 1997
Despite being a global player, Airtours is keen to put its trust in North West firms. Dearbail Jordan reports.
Airtours is a perfect example of why corporate and commercial lawyers in the North West deserve to be taken as seriously as those in London.
This year alone, the travel giant has undertaken no less than five acquisitions and is still grappling with the European Union over competition issues surrounding its £852m hostile takeover bid for First Choice.
And if Thomson Travel Group's current fight against a billion pound hostile bid by German tour operator C&N Touristic fails, Airtours will have no choice but to continue expanding to avoid being dwarfed by the competition.
This means much more work for its chosen firms, particularly Addleshaw Booth & Co, which handles the majority of corporate work for Airtours, including last year's bid for First Choice.
Greg McMahon, group company secretary and head of legal services at Airtours, says: "The rule of thumb is, providing that Addleshaws has the correct level of expertise within the firm, it will be the first port of call for legal services."
On a deal the size of Airtours/First Choice, City investors would expect the bidder to go to one of London's big hitters but McMahon is adamant that it is not a problem he has ever had to face.
He says: "In November 1998 when we did a £300m subordinated convertible bond issue, sponsored by Merrill Lynch, Addleshaws did the work on that and nobody batted an eyelid.
"On our bid for First Choice we were advised by Deutsche Bank in London and they also didn't bat an eyelid even though Addleshaws was handling it for us.
"It is about the quality of the people and I think that the quality of advice coming out of regional firms can be as good as you are going to get anywhere in the world."
However, for competition law on the First Choice transaction, Airtours opted for Slaughter and May after holding a beauty parade.
McMahon says: "We had invested a lot of money with Slaughters, getting it up to speed with our business and our industry.
Airtours also opts for City expertise in its asset finance work.
McMahon says: "For the asset finance work there are probably only about half a dozen firms in the UK that can do it and those are based outside Manchester."
He adds: "There might be other clients in the North West who can justify using asset finance lawyers but I don't think between the local clients there will be a huge demand for the establishment of dedicated asset finance teams.
"I think firms probably accept that the business in the North West just doesn't justify it."
But in other areas McMahon is a staunch supporter of keeping outsourced work local.
It also helps that McMahon used to practise at both Addleshaws and Garretts, another of Airtours external advisers.
He says: "I do consider myself to be a relatively sophisticated buyer of legal services. And because I am a poacher turned game keeper I know who to go to and therefore I think that I can probably choose the right adviser for the right project.
"I don't believe in slavishly going to one or two London-based law firms for everything. It is about the person who is giving you the advice."
While McMahon holds ultimate responsibility for the company's legal issues he works closely with Andy Cooper, company secretary and company solicitor, and his two lawyers at Airtours Holidays, the company's tour operating business based in Rossendale.
The company also owns Going Places, which is based in Woking, where head of legal services Richard Barlow leads a team of two.
Airtours retains about 60 per cent of work in-house including commercial contracts, employment and compliance and regulatory work.
Internationally the company relies on external advisers more extensively than in the UK.
Within Airtours' numerous worldwide trading divisions, it also houses legal managers in both Belgium and Scandinavia. But it is McMahon's job is to decide which European firms the company oursources work to.
He says: "We use Garretts and Andersen Legal where I have got a worldwide project that is not linked to any specific country."
For example, Garretts was on stand-by on New Year's Eve in anticipation of problems arising from the millennium bug.
He adds: "Alternatively where they have a very strong firm in their network in Spain or in France, it actually assists me a great deal to use that network firm because I can go to Manchester and get access to them."
For specific projects, McMahon uses local firms such as its US adviser Morgan Lewis & Bockius.
Once those relationships have been established, he keeps in close contact with each of the firms, both international and domestic, to make sure things run smoothly.
But he is keen to emphasis his commitment to the North West, and not just because fees are cheaper than in the City.
He says: "I am not going to prejudice the quality of advice I receive which I communicate to the board just to save money.
"I'm a North West man and I have spent all of my career providing legal services here. I know the market and what it is about and I know that it is cheaper, but I know you are going to get the right advice."
FTSE 250 ranking: 3Market capitalisation: £1.7bn
Legal function: 12 lawyers
Head of legal: Greg McMahon, group company
secretary and head of legal services
Reporting to: David Jardine, financial director
Main location for lawyers: Manchester
Main law firms: Addleshaw Booth & Co, Slaughter and May, Garretts and Andersen Legal, Norton Rose, Denton Wilde Sapte, Weil Gotshal & Manges, Brooke North and Beachcroft Wansbroughs.