Has Osborne Clarke lost its way in the City?
22 April 2003
Three years ago, Osborne Clarke's London office seemed to be doing everything right. Those were the glory days, a time that played massively to the strengths of Osborne Clarke's technology and media client base.
Yet while growth has continued to be a priority across the firm as a whole, this has hardly been true of the London corporate practice. It didn't help that Simon Beswick, the firm's most prominent corporate partner, left to spearhead the firm's Californian push.
Perhaps incremental rather than dramatic growth rather suits Osborne Clarke, which is culturally happier fielding smaller, partner-led teams. This approach gives it a selling advantage over larger firms when it comes to advising growth businesses, but it has also been a brake on expansion. The result? Virtual invisibility in the City.
One also wonders whether Osborne Clarke has been sidetracked by trying to build up Reading. The firm clearly sees the Thames Valley as crucial to its strategy of dominating the London-Bristol corridor. However, it has very few competitors in that space. Morgan Cole is certainly not going to give Osborne Clarke a run for its money. Olswang is more of a threat, but only on a localised basis in the Thames Valley. London is where the competition is, and it's in London where Osborne Clarke has been unable to make dramatic headway.
The last Thomson Financial table gave Osborne Clarke a minuscule 0.5 per cent market share for M&A work nationally (by value). Granted, public bids will never be Osborne Clarke's forte, but the good news is that the deal size has not shrunk horribly. Osborne Clarke props up the lower end of the £20m-£75m range, with a classic recent deal being the sale of three of Glynwed Pipe Systems' business units for £23.5m.
Osborne Clarke is reluctant to supply detailed information on corporate transactions, but according to a list of deals seen by The Lawyer, the firm tends to find itself opposite the likes of Olswang, Hammonds, Wragges, Taylor Wessing and the odd corporate boutique such as Rosenblatt. Only occasionally will it play in the same arena as Lovells, SJ Berwin or Macfarlanes.
Of course, it's unrealistic to expect Osborne Clarke to aim for any other bracket, whether it be for corporates, venture capitalists or intermediaries. As corporate partner Tim Birt points out, Osborne Clarke's ambitions are, perforce, limited. He says: "The mid-tier corporate boutiques tend to have panels. Traditionally we've been three or four on their list, and you can't expect to leapfrog [larger firms]. Our aim is to move up the pecking order."
That said, there's not been much expansion in the intermediary/broker client base. Osborne Clarke regularly acts for Rowan Dartington - a key Bristol relationship - as well as City brokers Collins Stewart and Evolution Beeson Gregory, both longtime clients.
But three years ago, it looked as if Osborne Clarke was set to make its great leap forward. Simon Beswick was getting a strong corporate reputation in London, while Birt was also pulling in some meaty deals. Indeed, Birt led the team which acted on the £120m initial public offering (IPO) of web-based recruitment business Stepstone and the £125m rights issue for telco Redstone Telecoms.
The best you can say is that Osborne Clarke has held its own. Given the disastrous IPO market, the firm hasn't had too bad a track record. It says it has handled nine public issues on AIM and the Official List in the past 12 months, although this number also includes reverse takeovers and secondary offerings.
Corporate partner Simon Fielder admits: "The markets have been fairly difficult over the past 18 months and we've traditionally seen a much higher level of activity, particularly on the new issue side."
As a result, Osborne Clarke's key transactions in the past year and a half have been way below the level of the Stepstone float. It handled the £8m AIM listing of Kuju and acted for Evolution Beeson Gregory on the £7m Superscape placing.
The institutional side has not been quite as patchy. Osborne Clarke's relationship with 3i, which underpins its corporate finance business in Bristol, has helped it get a foothold into London, mostly through a relationship with 3i director Paul Cannings. But while Osborne Clarke has managed to get instructed on development capital and portfolio reorganisations (often in the technology sector), there is no way it is going to dislodge 3i's London panel law firms. Macfarlanes has a grip on that work, with Lovells and Travers Smith Braithwaite sharing out the remainder.
Instead, Osborne Clarke has relied on Close Brothers, plus a smattering of work from ECI Ventures and Barclays Ventures, for most of its private equity deals.
There are other ways into the City. Osborne Clarke has a lingering reputation for advising management teams, though it never quite capitalised on the £1.2bn Racal deal three years ago. It has also not figured in the big ones of late, apart from advising the management on the Duke Street-led Thornbury Nursing buyout - although that was managed out of Bristol. Fielder acknowledges: "At the moment, a relatively small percentage of the work in London is advising management teams. The aim is to grow the proportion of the overall work in London here."
Hence, the move of Roma Linton from Reading to London, partly to target work for management. It's a tried and tested route into the institutions. Just look at Travers Smith's progress; through exposure on the management side it snagged some work off Apax in the late 1990s and has never looked back.
While it's hardly Osborne Clarke's fault that the technology sector crashed, it may have to move up a gear soon. Osborne Clarke's London corporate practice is by no means as vulnerable as some of its detractors like to think, but the situation is all the more acute given that Osborne Clarke's classic national firm competitors for mid-market work in London are starting to motor. DLA, Hammonds and Pinsent Curtis Biddle are already well up the deals tables, while Addleshaws' forthcoming merger with Theodore Goddard will give it ready-made muscle.
Still, Osborne Clarke can rely on a nice fillip soon. Simon Beswick, its erstwhile corporate star, is to return from California to become firmwide managing partner. Of course, what the corporate practice really needs is for London to become the firm's head office, but don't hold your breath.