Last week The Lawyer reported the departure of head of legal at Pearson, Paul Vickers.
Behind the story of one in-house lawyer leaving a major multinational there lies a broader story of how the Americanisation of the media giant Pearson has led the company to rethink the structure of its legal advice.
The line from Pearson is that Vickers left because the company now needs a “US-qualified general counsel with greater American experience” following its ambitious programme of acquisitions and disposals (see below).
Other than this, Pearson, where Vickers single-handedly ran the legal department at head office, is staying silent about Vickers' departure and how it relates to company strategy.
However, given that Vickers left Pearson at the end of June and the company is without a head of legal, his departure is arousing intense speculation.
For example, is one of Pearson's US businesses pulling strings in the background and insisting that the head of legal be a lawyer qualified in the US? Is Pearson hoping to bolster its internet businesses by replacing Vickers with an e-commerce guru poached from a software giant?
Merrill Lynch media analyst Meg Geldens says Pearson “is keen to expand its various internet properties”.
Meanwhile, in-house heads of legal at other media companies express surprise at Pearson's move, arguing it will be “unusual” for the company not to have a UK legal representative, given that it is a UK-listed company.
One head of legal says: “It would be difficult to run a UK office from another jurisdiction because of the time differences and differences in the law, so I expect they will find a replacement in the UK for Vickers.”
The real losers in Pearson's reshaping may be its main external legal advisers Herbert Smith and Freshfields.
According to one London media lawyer: “A lot depends on the seniority of [Vickers' replacement] because the more senior they are the more likely they are to get on with a decision about external lawyers.
“There are going to be a lot of firms pitching for work and you always have to be careful when a new in-house lawyer comes in.”
While The Lawyer understands that relations between Pearson and the two firms are good, whoever replaces him could opt for a clean sweep, particularly since Vickers has left before his replacement begins and so may not be able to hand over the goodwill that exists between lawyer and client.
As one in-house head of legal comments: “The first thing you do when you start a new job is to review the lawyers, assess their quality and work out whether to keep them or not.”
Neither Herbert Smith nor Freshfields would comment on the departure of Vickers.
It is also possible that a US counsel will use his or her links with stateside firms and favour one of the 100-odd US firms with offices in London, many of which employ English lawyers.
However a London-based senior partner at a US firm told The Lawyer he strongly doubts this.
“I would be very surprised because he is going to need first-class English advice and I don't think US firms in London can compete with English law firms in that,” he says.
The Lawyer understands that US firm Cravath Swaine & Moore is likely to be one of the names in the hat. The firm has a London office and has acted on several deals for Pearson in the past including its 1995 disposal of a 9.75 per cent direct holding in BSkyB worth £560m.
Cravath Swaine & Moore is an 83-partner New York-based firm with a London office of nine lawyers and two partners, which ranks Time Warner and CBS as two prime media clients.
Cravath Swaine partner David Brownwood says: “We have done regular work of a substantial nature for Pearson over several years and we would be delighted to continue doing so.”
Pearson, owners of Pearson Education, the Financial Times Group, the Penguin Group and Pearson Television, has undergone a dramatic reshaping since chief executive Marjorie Scardino (pictured below) took the helm.
Scardino has had such an effect that some commentators have labelled her influence at the firm a “revolution”. Since joining more than two years ago she has overseen disposals worth £2bn of mainly UK companies, including the £352m Tussauds Group and the £142m Future Publishing company.
Pearson's acquisitions in that time have transformed the company into one with a majority of interests in the US.
Media analyst Paul Richards of WestLB Panmure says: “It has been suggested that Pearson could change its domicile, and having someone who knows the US would help that.”
One source close to Pearsons describes the company's Americanisation as “a steady creep”, adding that the $4.6bn acquisition of Simon & Schuster last year “tipped the balance”.
The source agrees with media speculation, predicting that Pearson, a UK company with a US ADR listing, will switch headquarters to the US.
He says: “It shouldn't be long before Pearson gets a US listing. It makes sense, and I think there is a strong chance it will move its headquarters to New York.”
However Pearson strongly denies this, retorting that there is “no possibility” of the company switching its headquarters to the US, where it already has an office.
The source also predicts that Scardino will replace Vickers with “a very senior US lawyer, a legal supremo, a big mergers and acquisitions expert” and that Scardino wants a heavyweight lawyer who can handle the negotiating involved in the deal on her behalf.
He says: “A large part of her time is spent in nitty-gritty deals and I think she wants a heavyweight who will do part of that for her.”
The revolution at Pearson under Marjorie Scardino since 1997
February 1999 – Pearson TV acquires animation company EVA
January 1999 – Pearson TV acquires 10.9 per cent stake in online publisher E-Pub
November 1998 – Acquires Simon & Schuster education, reference and business and professional: $4.6bn
November 1998 – Pearson TV acquires Mastrofilm
May 1998 – Financial Times Energy acquires Pasha Publishing: $18m
October 1997 – Pearson TV acquires All American: £233m
September 1997 – Telefonica acquires 20 per cent stake in Recoletos
August 1997 – Pearson Professional acquires Resource Data International: £1.5m
February 1999 – Financial Times sells Extel: £19m
October 1998 – Pearson sells Tussauds Group: £352m
September 1998 – Pearson sells 25 per cent stake in Canadian Financial Post: £13.2m
August 1998 – Pears£n sells Flextech shares: £27.6m
June 1998 – Pearson sells Spanish theme park Port Aventura: £58m
June 1998 – Pearson sells Capitol Publishing: $20m
April 1998 – Pearson sells Future Publishing: £142m
March 1998 – Pearson sells Mindscape: $150m
March 1998 – Pearson sells law and tax publishing arms: £70m
February 1998 – Pearson sells stake in SES: £160m
August 1997 – Pearson sells Churchill Livingstone: $92m
June 1997 – Pearson sells stake in Troll: $92m
June 1997 – Pearson sells Flextech shares: £24m
February 1997 – Pearson TV sells 10 per cent stake in TVB: £111m