City firm insists it is still a major force despite loss of top talent.
If the rumours of a salary hike of up to 400 per cent are to be believed, the reasons for the recent departure of Ashurst corporate partners Gavin Gordon and David Arnold to Kirkland & Ellis should not be too hard to fathom.
However, for a department that has seen more than its fair share of partner exits over the past 18 months, the loss of these two may still be a cause for concern. While the other clutch of partners who have left the City firm – whether ultimately pushed or not – are all thought to have done so as part of senior partner Charlie Geffen’s wholesale restructuring exercise, the latest departures were not part of the plan.
The Ashurst management, including Geffen, freely admit that the loss of the two young bucks has been an unexpected body blow, but the party line remains that the practice is still up there with the best of them.
“We have a good track record of operating at the top of the market,” says Geffen. “If you take the 10 biggest deals of the year in the market, we would want to have roles in more than half of them.”
But having a smaller, leaner group of partners to draw on means that resources will inevitably be more stretched if others leave the stable.
Gordon’s exit is a perfect illustration of the problem. It leaves Geffen as the only longstanding relationship partner for one of the firm’s key corporate clients, Russian aluminium giant Rusal.
Two other Rusal partners, the retiring David Kershaw and Andrew Edge, now with Stephenson Harwood, have both left in the past six months. Gordon had been in place to carry the relationship forward under Geffen’s watchful eye. Now that will not happen.
Bruce Hanton is understood to have been moved onto the Rusal account and, with little deal activity since the company’s IPO in January, it may be that the relationship survives the upheaval. But the story is indicative of how clients’ loyalty cannot be taken for granted when partnerships undergo a cull.
“We’re not complacent because it’s a good relationship,” says outgoing head of corporate Adrian Clark. “Of course there’s a need
to make sure relationships are covered when people leave, but it’s not something we’re concerned about in this case.”
But as a corporate partner at another City firm puts it, Gordon’s departure “probably won’t be fatal, but it could reduce the workflow – we just don’t know by how much.”
One former Ashurst corporate partner who has acted for its clients at his new firm believes a certain amount of change is inevitable given the number of comings and goings at Ashurst.
“It’s a great firm but like any law firm at the moment it’s got issues,” says the partner. “Every firm’s vulnerable in that you always have four or five others trying to lure clients away. I suspect a lot of Ashurst’s clients see themselves as institutional clients.”
It is a point echoed by Geffen and Clark, who both point to the fact that every key relationship has a number of partners assigned to it. But Geffen readily accepts that some work could go astray.
“Of course some partners will take clients with them [when they leave],” he says. “The market contracted and, like everybody else, we found we had to reduce the number of partners, which was a hard thing to do. We have to stand by our decisions, but we didn’t seek to impose client covenants on any partner who we asked to leave.”
Inevitably, it leaves the practice exposed. Last month, Edge closed his first major deal since moving to Stephenson Harwood – Piramal Healthcare’s $3.7bn (£2.6bn) sale of a pharmaceutical unit to Abbott Laboratories. He has also been mandated by another Ashurst client in the shape of GDF Suez.
The Piramal instruction was assigned while Edge was still at Ashurst, proving that not all relationships are so institutionalised.
“It hasn’t been a hard sell,” Edge explains. “If a client knows how a partner operates and he moves to another strong firm, it doesn’t take that much to persuade the client that the new firm can service their needs.”
It is a statement that rings particularly true in the private equity market, where personal relationships drive the deals.
Arnold and Gordon follow a number of other private equity partners out of the Ashurst door, including Graeme Ward to Latham & Watkins, Jonathan Angell to Dechert and Duncan Stiles, now at Stephenson Harwood. (For a look at Kirkland’s ambitions, see page 9.)
It means some of Ashurst’s other corporate generalists, such as former German managing partners Simon Beddow – already touted by some as a replacement for Clark – and Nigel Stacey, will have to step up to the plate on the private equity front as and when the market returns.
Clark adds: “It was always the case that there were certain partners who were private equity specialists, but there are a vast number who are capable of doing the deals. If a large volume of deals suddenly comes in, they’re capable of handling it.”
Among the other corporate partners touted by insiders as those who could take centre stage in the corporate team are Eavan Saunders Cole, Anthony Clare, Jonathan Earle and Michael Robins.
Despite making a number of recent lateral hires, including restructuring partners Lee Doyle and Dan Hamilton, who joined from RBS and White & Case respectively, none have yet been recruited into the corporate department.
“We’re very confident with the team we’ve now got,” says Geffen. “We’ve been very specific on the laterals we’ve made because we wanted to grow the business in areas we thought we needed to.”
With deals still few and far between there is some sense in having a smaller corporate team, but if more unwanted suitors with deep pockets – such as Kirkland – come calling for the remaining talent, that strategy may need a rethink.