Herbert Smith’s corporate practice is unlikely to threaten the magic circle this year, but the firm has won enough mandates on big-ticket deals to make its rivals sit up and take notice.
Over the past year alone it has guided Resolution though one of the most hotly contested takeovers of recent times; advised Canada Life on a multibillion-pound annuity deal with Standard Life; counselled waste collection giant Biffa on its take-private; and helped French utility company EDF tie up its £12.5bn acquisition of British Energy.
Oh, and then of course it won a role in what is shaping up to be one of the toughest financial markets ever, with corporate head Michael Walter advising Bradford & Bingley (B&B) on its part-nationalisation despite earlier advising the bank to do a rights issue with its investors. But the B&B role is the only major job Herbert Smith has won in the last few weeks.
As one source close to the firm says: “They are really high-quality lawyers doing high-quality work for high-quality clients.”
But if that’s the case, why is Herbert Smith’s name not synonymous with the big-ticket corporate work that, until this time last year, had defined the decade?
One answer is that the deals the firm has been doing have seen it repeatedly come up against those firms that are viewed as corporate powerhouses.
On the Resolution sale, partners James Palmer and Malcolm Lombers – both recognised as experts in corporate circles – initially faced Linklaters stalwart David Cheyne and Owen Clay, who represented Friends Provident when the deal started out as a life company merger.
As more bidders entered the fray Palmer and Lombers sat opposite Freshfields Bruckhaus Deringer partner Will Lawes (the longstanding adviser of Hugh Osmond’s Pearl Group, which was the eventual victor in the bid for Resolution), Clifford Chance partner Adam Signy (on for bidder Standard Life), and Skadden Arps Slate Meagher & Flom (drafted in to advise Swiss Re on part of Standard Life’s offer).
The firm has also sat opposite Slaughter and May, probably the UK’s most trusted corporate adviser, on numerous occasions. On the Canada Life deal partner Geoffrey Maddock negotiated with Slaughters partner and Standard Life adviser Craig Cleaver, while on Biffa partners Stephen Wilkinson and Alan Montgomery sat down with Slaughters partner Mark Horton, who advised private equity house Global Infrastructure Partners on its part in the acquisition.
But while Herbert Smith is obviously winning a high number of class instructions, according to one partner at a magic circle firm, it simply isn’t getting enough of them to be viewed as a serious contender.
“Herbert Smith doesn’t have the ;sheer ;deal ;volume ;or international experience that the magic circle has,” the partner claims. “Names don’t come up frequently for a reason.”
International cover is a major concern for all firms, given that practically every deal has an international element. Even Slaughters has lost some ground to the magic circle due to its lack of an international network.
While Herbert Smith does have a large international footprint because of its best friend relationships with Gleiss Lutz and Stibbe, in the corporate practice there is little coordination across the network.
One source said: “It’s not as joined-up as it should be internationally. The firm has a very strong practice in Asia, but there isn’t enough linkage between Asia and London. It’s a little bit too disparate and they need to glue that together.
“The practice is still quite London-centric in comparison with the magic circle firms, and some of the heavy hitters in London don’t do enough about trying to get work in from abroad and working with overseas offices.”
The firm is certainly aware that it needs to do more to boost the internationalisation of the practice and is understood to have hired Kevin Nudd as head of corporate business development from Baker & McKenzie with this in mind. Crucially, Nudd has experience of working in Asian markets and is well placed to help the firm marry its corporate teams across the continents.
In a sense, though, it doesn’t matter how good Herbert Smith’s corporate practice is (and the consensus is that it is a well-run group under Walter that produces consistently high-quality work) because the firm is simply not viewed as a corporate house.
As one source close to the firm says: “It doesn’t get the recognition it deserves because everyone still sees Herbert Smith as a litigation firm.”
In fact, corporate is the firm’s largest practice group, contributing 44.1 per cent of global revenue (£186m) in the 2007-08 financial year, while litigation contributed 35.7 per cent (£150m).
And yet, profile matters and, as one magic circle partner points out, if the profile isn’t there, then something just isn’t working.