National Grid’s (formerly National Grid Transco) in-house legal function has had a busy time of late. In addition to handling a number of headline-grabbing M&A deals, during the last 18 months the team completed a review of its external lawyers and was itself restructured.
The FTSE100 utility was created in October 2002 following the multibillion-pound merger between legacy companies National Grid and Lattice, which were advised by CMS Cameron McKenna and Linklaters respectively. Following the merger, National Grid head of legal Fiona Smith was appointed as group general counsel. But in a surprise move Smith quit after just one year in the role, to be replaced by former Lattice company secretary Helen Mahy.
Mahy is supported by four corporate lawyers who handle all of National Grid’s major M&A deals and special projects. Mahy is also responsible for the group’s risk and compliance function. Most recently she handled National Grid’s recent rebranding exercise, which resulted in the group ditching the ’Transco’ part of its name. “Both Alison [Kay] and I were involved in the corporate ID project, because the company’s management was keen to get us involved in projects beyond legal matters,” explains Mahy.
Meanwhile, UK company secretary and general counsel Alison Kay leads a team of 23 lawyers. Kay, who has been in her current role since the completion of the 2002 merger, is responsible for supporting the legal, contractual and regulatory framework in the UK for both of National Grid’s electricity and gas businesses. Her team also handles general commercial, corporate, property and employment work for all areas of National Grid’s activities in the UK.
Last month National Grid completed a complex return of capital. The move, which resulted in £2bn of cash being returned to shareholders, was announced on 1 June 2005 after the company completed the £5.8bn disposal of four of its regional gas distribution networks. The return of cash was implemented through a B-share scheme and a consolidation of existing ordinary shares, allowing the company’s 1.4 million shareholders, most of whom are retail investors, to receive a payout in the most tax-efficient way.
As part of the scheme, shareholders who received a B share for each of their ordinary shares had the option to receive a B share dividend, sell some or all of their B shares, or to retain their B shares and sell them at a future date.
“We wanted to give our shareholders as much flexibility as to how they received the return of cash so we offered different options,” explains Mahy.
With deals such as these, the National Grid team has developed a strong specialist reputation. This has been reinforced by an internal restructure and an external triumph.
Last June the team was the winner of the In-house Commerce and Industry Team of the Year Award at The Lawyer Awards. The achievements that led to that recognition came about because of a comprehensive review of National Grid’s legal requirements. “Part of the review was to look at what sort of in-house legal team we want to be – one that keeps all its work in-house or one that outsources everything,” Kay comments.
The review concluded that National Grid’s in-house legal team wanted to be a centre of excellence for energy and regulation, as well as for dispute resolution. Consequently, the vast majority of this work is handled in-house, while other areas are farmed out to external lawyers.
National Grid instructs either Camerons or Linklaters for advice on corporate work and M&A deals. Both firms advised the legacy companies on their 2002 merger. However, Camerons seems to have handled the lion’s share of National Grid’s M&A work since the merger – indeed, it advised the utilities company on the £1.1bn acquisition of Crown Castle, a turnkey service provider of infrastructure and services to the wireless telecommunications industry in the UK, as well as on the sale of the gas distribution networks. Meanwhile, Linklaters landed the mandate to advise National Grid on the return of capital.
At the tail end of 2004, National Grid awarded Eversheds, Hammonds and Pinsent Masons places on the company’s general commercial panel. “We had about seven firms doing general commercial work and felt that wasn’t maximising our buying power,” explains Kay.
Indeed, although neither Mahy nor Kay like to comment on how much National Grid’s annual legal spend is, the review of external legal advisers has enabled the company to secure discounts of up to 20 per cent on standard hourly rates, while the company’s overall legal budget was slashed by 30 per cent.
Group company secretary and general counsel
|Legal capability||80 (Group), 38 (UK)|
|Group company secretary and general counsel||Helen Mahy|
|UK company secretary and general counsel||Alison Kay|
|Main law firms||CMS Cameron McKenna and Linklaters|