The success of Manchester lawyers in the private equity market has been well documented, not least in this publication. Towards the end of 1999 and throughout 2000, the region has pulled in its most significant deals to date.
These include the purchase and sale of HSBC's stake in CRP Group to Barclays Private Group, the management buyout (MBO) of Allied Carpets involving 3i, as well as the £442m MBO of Caradon's plumbing division. All of which involved the legal skills of Addleshaw Booth & Co, Eversheds or DLA.
The private equity houses have obviously recognised that there is money to be made in the region. Lloyds TSB Development Capital opened an office in Manchester last year, citing the need to have a large regional presence throughout the UK as its motivation. There is also speculation that the Bank of Scotland is hoping to make a foray into Manchester.
It was the tenacity of private equity specialist Phil Goodwin, formerly with 3i, who persuaded HSBC to open in Manchester, that has paid off, as the Caradon deal testifies. Other private equity houses or banking arms in the region include Bridgepoint Capital, Murray Johnston and Granville.
Although it is well documented that private equity deals have grown significantly over the past decade – nobody cares about a £20m deal any more – there has been a clear evolution in the Manchester market. One private equity director says that at the beginning of the 1990s, most institutions with some kind of presence in Manchester would certainly have turned to London for advice, since there was a severe lack of expertise in the region. Even when there was just a small handful of North West-based lawyers who had expertise in this area, a London firm would always be employed as well.
Of course, Manchester has recognised the need to boost staff numbers and refocus to accommodate such a deliciously lucrative area. But one lawyer says that until relatively recently, it was unusual to have a local lawyer working on a deal worth more than £50m, or indeed to have a transaction of that volume based out of Manchester.
But the tide has changed: 1997 was a watershed year for the North West, which saw deals being pushed past the £50m mark, including the £145m MBO of AM Paper, headed up by HSBC Private Equity and advised on by Eversheds. However, while this deal was a turning point in the quality and quantity of private equity, it also highlighted a couple of problems which still exist to this day.
One of these is that although there are lawyers of an extremely high calibre, they are limited in number, which means that if there is a spurt of work or a complex deal involving a number of different parties, each requiring legal representation, that reduces the choice of lawyers for any other financial institution engaged on a transaction. On AM Paper, then, HSBC employed the services of Pinsent Curtis, a Leeds firm with no Manchester presence, which means one of two things: either Pinsents should open a Manchester office or there is still an awful lot of room for growth in the region, with too few firms currently on location that can genuinely provide private equity advice.
The other point is that on the AM deal, HSBC went to JP Morgan in London for the senior debt. And while one private equity director argues that there are in fact more banks in the region now able to offer this facility, as did the Royal Bank of Scotland when it led a syndicate on the provision of £145m senior and £30m mezzanine debt on the Peter Black Holdings MBO, it is not too unusual to look to London for this type of debt.
So while the region has made leaps and bounds in terms of being a booming area of growth for this work, it is not totally self-contained. But this is likely to change, and these are really minor blips on a very sunny landscape.
What should be noted by other firms in the region which boast strong corporate finance and banking practices, such as Halliwell Landau and Chaffe Street, is that there is a very real opportunity to muscle in on an area that has for so long been dominated by so very few firms.