It’s just like old times for insolvency professionals – the expected flow of mandates has undoubtedly begun. At the top end Linklaters (Lehman Brothers, Waterford Wedgwood) and Freshfields Bruckhaus Deringer (Woolworths) have made the most, but the rest of the headline work on high street names has gone not to the magic circle, but to two firms that have distinct insolvency heritages and which made their names in insolvency in the 1990s. Step forward DLA Piper and Hammonds.
DLA Piper has bounced back from its disappointment at losing out to Freshfields on the McCarthy & Stone and Crest Nicholson restructurings last autumn (The Lawyer, 27 October 2008). It has advised Whittard on the run-up to adminstration and on the administrations of pub group Orchid and entertainment chain Zavvi, as well as those of restaurant chain Little Chef and retailer Allders last year. Also, the firm’s role on the administration of investment group Dawnay Day won Leeds insolvency veteran Mark Jackson a spot in The Lawyer Hot 100 this year.
Meanwhile, Hammonds has restrengthened its insolvency practice considerably over the past few years. Contrary to expectations, it actually had a rocky time in the 2001-02 downturn. As the then senior partner (and insolvency specialist) Chris Jones admitted to The Lawyer at the time, the expected level of instructions failed to materialise.
The firm’s Leeds office used to be positioned at the individual voluntary arrangements and bankruptcy end a decade ago, but Yorkshire-based insolvency head John Alderton has worked his contacts to good effect. With seven partners nationally, Hammonds is much smaller than in its pomp (and much smaller than DLA Piper’s 26-strong partner team), but has had roles for the administrators of building group Consort Homes, Adams Childrenswear and Dolcis, and on Whittard for the buyer Epic.
But while the big City firms may have dipped down into the mid-market when it comes to M&A (what there is of it), they have been unsuccessful in colonising the insolvency market – with the exception of Freshfields and Linklaters. The blithe assumption by certain City banking lawyers that they could cross-dress as insolvency specialists now appears false.
“Why would you turn to someone who’s been a banking lawyer for 10 years when you could have people who are doing insolvency day in, day out?” asks DLA Piper insolvency partner Jonathan Leitch.
Hammonds insolvency partner John Alderton agrees. “It’s a completely different skill set to step into from something which is just going to be refinanced away,” he says. “People want lawyers with experience from the last recession. Insolvency legislation is a minefield for an unwary banking lawyer. It’s a very technical area of law that has to be assimilated.”
DLA Piper and Hammonds have both benefited from the change in the dynamics of the insolvency market. The clearing banks are inevitably still key players, but gone are the days when they would call up firms telling them about a winding-up petition, thereby throwing lawyers in at the deep end.
Corporate recovery and insolvency work now is as likely to come from corporate clients that have developed more sophisticated early-warning systems. Zavvi was a corporate client of DLA Piper, for example, while Adams was a client of Hammonds. Hammonds also acted for Epic, the backers of Dolcis and the buyer of Whittard.
Indeed, the rise of the pre-pack administration is testament to the fact that both insolvency professionals and businesspeople are more likely to react early to financial difficulties. “There’s been a conscious effort on the part of the legal, accounting and business community ;and ;through [insolvency industry association] R3 to promote the visibility of the pre-pack option for creditors and the public,” says Alderton.
That said, both Leitch and Alderton acknowledge that panel places are absolutely vital; it’s still important to get the nod on the initial security review work. DLA Piper is on the Royal Bank of Scotland (RBS), HBOS, Barclays and Lloyds TSB panels, while Hammonds is on those of RBS, Lloyds TSB and National Australia Bank.
But perhaps the most important clients to have are the asset-based lenders (ABLs), many of which are the invoice finance arms of the clearing banks, plus players such as GE, Burdale and Bank of America. “They’re key,” says DLA Piper insolvency partner Michael Fiddy. “They were involved in a massive boom in transactions over the past few years.”
ABLs may be less glamorous than the investment banks, but they have serious clout.