HSBC rights issue has seen Norton Rose steal a march on its magic circle rivals.
Norton Rose’s role advising HSBC on its £12.5bn rights issue was highly symbolic. It was the City firm’s second mammoth rights issue in several months, coming after last year’s for Carlsberg.
And it was a sweet moment; the firm had effectively broken Freshfields Bruckhaus Deringer and Linklaters’ stranglehold on major post-credit crunch rights issues.
But that taste was all the sweeter for the fact that Norton Rose had held off a challenge from Freshfields for its trophy client HSBC.
The rivalry between Norton Rose and Freshfields goes back four years. In May 2005 Freshfields advised HSBC when it paid $1.1bn (£0.76bn) to double its stake in Chinese life assurer Ping An – the third deal in a row Freshfields did for HSBC in Asia. The magic circle firm advised HSBC on buying a 19.9 per cent stake in Chinese lender Bank of Communications, and also landed a role on the counteroffer for Korea First Bank.
Freshfields’ sudden prominence in HSBC’s affections was, fundamentally, Norton Rose’s fault. Norton Rose lost its place on the bank’s Hong Kong panel after the termination of its joint venture with Johnson Stokes & Master (now merged with Mayer Brown) in 1998 – something the City firm knew was coming for years, but failed to plan for. The billion-pound rights issue, led by partner Martin Scott in London and Richard Crosby in Hong Kong, was a culmination of a considerable amount of work at boardroom level.
Defending their clients from magic circle overtures has become something of a habit for Norton Rose lawyers. “Magic circle firms call my clients and pitch to them all the time,” corporate partner Robin Brooks laments.
“’Magic circle’ is a branding,” says corporate head Tim Marsden. “The strength of the Freshfields brand or the Linklaters brand is big, but they don’t have to fight for business in the way that we do. They don’t have to club whatever it is over the head and bring it home. We can’t afford to carry just technicians.”
Norton Rose partners tend to make a virtue out of being slightly beleaguered. “It’s like herrings that all stick together and when they’re in danger they form an outline of a bigger fish,” muses corporate financial institutions head James Bateson. “If you’re not such a large fish, the collective outline is stronger and larger.”
This fighting talk is understandable. Like many firms without a private equity or leveraged finance practice, Norton Rose is now making a virtue of the fact that it did not enjoy the upside of the boom and has therefore not been catastrophically hit by the credit crunch.
In fact, when the firm lost virtually its entire acquisition finance team in 2001 to Allen & Overy it was never able to rebuild in that market, and its profits several years ago meant that it was utterly unable to land a big lateral hire in private equity. In the meantime, the firm continued to focus on what were then relatively small pickings in the AIM market – a move that in hindsight appears extraordinarily shrewd.
Marsden insists that Norton Rose was the “first quality brand really to go after AIM”. Ashurst may disagree with that particular assertion, but Norton Rose’s AIM practice, led by Richard Sheen, has been an undoubted factor in the firm’s resurgence in visibility over the past couple of years.
“We’ve used AIM as a platform,” explains Bateson. “It’s been a concentrated effort to upgrade the practice. We’ve used the AIM expertise to build the franchise internationally, particularly in India and in tech stocks.”
On his election as head of corporate in 2001, Marsden made it his business to integrate the practice as a cross-border departmental profit centre rather than measure it on a purely geographical basis. It is an approach adopted by most international firms now, but Norton Rose claims it was a pioneer. Under Marsden’s leadership Norton Rose was also an early adopter of segmentation.
“Part of our challenge to magic circle firms is based on sector specialisation,” believes Brooks.
Broadly speaking, Norton Rose’s ‘headlight’ areas are split into five. International corporate finance – the generalist section – is headed by Marsden himself. Simon Currie leads energy and infrastructure, with clients such as RWE, BP, Climate Change, Exxon Mobil and Macquarie. Bateson leads the financial institutions group, which advises HSBC, BNP Paribas, Axa, Kuwait Finance House, AIG and XL Europe. Gordon Hall coordinates transport (which counts Stena and Carnival as its clients), while in technology Mike Rebeiro leads a team that acts for Oracle, Vodafone, Siemens and MENA Telecom.
The talk of headlights is neat, but it does not necessarily map onto the reality of some of Norton Rose’s biggest clients. Carlsberg and Nestlé do not fit in to Norton Rose’s sector specialisation, for example.
“But both are strong brands that see us partnering with them,” points out Marsden.
Norton Rose’s Carlsberg relationship dominated its corporate profile in 2008, with Chris Pearson advising the brewer on its £10bn bid for Scottish & Newcastle and subsequent rights issue.
It was one of the few genuine breakup bids of recent years; highly contentious and extraordinarily complex, it earned Pearson a showing in this year’s Lawyer Hot 100.
Like Carlsberg and Nestlé, many of the firm’s biggest clients are not major City institutions but multinationals headquartered outside London, such as HSBC, China Development Bank, RWE, BMW, and Constellation Brands. The spread of client base means that having a meaningful international footprint is an imperative for Norton Rose. Indeed, its experience with HSBC in Hong Kong has imprinted itself on the firm: it means that it has to commit to its international offering in a way that other comparable practices do not need to.
This also means learning from problematic experiences. Like dozens of other UK and US firms in 2000, Norton Rose joined the goldrush to Germany. It ended up merging with part of Gaedertz Rechtsanwalte, only to split with the Cologne office in 2003. That clash of culture, personalities and business profile is still something that Norton Rose partners shudder about. The Frankfurt operation has now settled down into a solid mid-market German player.
In fact, according to Bateson, Norton Rose’s trim model has much to recommend it. “The magic circle are the new wannabes,” he says. “They want to be smaller, like us.”
Norton Rose: deal highlights
- Advised Carlsberg on its £10bn consortium bid with Heineken for Scottish & Newcastle (Chris Pearson, Andrew Phillips).
- Advised the Takeover Panel in relation to the £1.8bn contested takeover of oil services group Expro International (Chris Pearson).
- Advised Royal London on its £1.2bn acquisition from Pearl Group of Phoenix Life Assurance Limited and of Scottish Provident’s new business (Maria Ross).
- Advised Deutsche and Lloyds TSB-led consortium on the £2bn acquisition of Porterbrook Leasing from Abbey (Jill Gauntlett).
- Advised F&C Asset Management on its £8.4bn merger of its property business and REIT (Cathy Pitt).