For the UK’s top corporate practices 2009-10 was very much a case of plus ça change, plus c’est la même chose, with dealflow still in decline and competition for the work that remains as tough as ever.
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Revenues for the top 20 corporate practices dropped by an average of just over 4 per cent, as did the total fee income received across the top 20.
But whereas last year brought with it drastic action from some in the City, the feeling this time round is that things may finally be picking up.
“It’s definitely better than last year,” says Allen & Overy (A&O) London corporate head Richard Browne. “Over the course of the past 12 months it’s been tough and the market’s been down substantially, but there’s more happening now.”
It is no surprise to see the magic circle, along with Slaughter and May, continue to monopolise the few big deals that did see the light
Clifford Chance and Slaughters took the honours by acting on the standout deal of the year – Kraft’s hostile acquisition of Cadbury. Clifford Chance rainmaker Guy Norman led for Kraft and also acted for Babcock on its £1.3bn takeover of VT Group. Slaughters M&A chief Stephen Cooke led the defence for Cadbury.
However, with private equity not making the comeback that some were predicting, Clifford Chance still saw its corporate revenue fall by more than 6 per cent.
“Against levels of activity in the market we were pretty pleased with our performance,” says global corporate head Matthew Layton. “We’ve had a raft of good deals across the network.”
Slaughters, meanwhile, could not match last year’s performance, which was aided by a healthy slew of Government work on the back of the banking crisis. It too lost ground to its rivals, although A&O’s 12 per cent drop-off was the largest among the big five.
Linklaters extended its lead at the top of the table, with its corporate revenue dropping by only 1 per cent. A prize role acting for Lloyds Banking Group on its record-breaking £13.5bn rights issue helped Linklaters stay on an even keel following last year’s 14 per cent fall. Jeremy Parr led the capital-raising exercise before stepping up to fill David Barnes’ shoes as global corporate head.
In contrast to Slaughters, Linklaters reaped rewards from the continuing fall-out from the financial meltdown of 2008, courtesy of its relationships with Lloyds TSB and RBS.
Despite suffering a 6 per cent year-on-year fall, Freshfields Bruckhaus Deringer can claim justifiably to have had the best recession of all the leading corporate lights. It is the only firm to have increased its corporate revenue since 2007-08.
Global corporate head Ed Braham believes that the continuing absence of deals is acting as a differentiator for the best firms.
“It’s been a horrible market in which we’ve more than held our own,” he says. “We’d probably say we took market share.”
Braham highlights the firm’s European spread as key to keeping the corporate practice on track. A German and French team landed a role for Daimler on its three-way tie-up with Renault and Nissan, while partner Ian Frost led the international group acting for Springer Science & Business Media on its sale to private equity house EQT.
Despite a less successful year, Slaughters still enjoys a healthy lead in terms of revenue per corporate partner, with its figure of £4.15m well ahead of Freshfields’ £2.71m.
On the whole the struggles of the mid-market continued in 2009-10, with most firms either consolidating after a poor 2008-09 or suffering a delayed dip.
SJ Berwin steadied the ship after its disastrous performance the previous year. Its 1.5 per cent fall is a sound result considering its continued emphasis on a private equity market that remains thin. Corporate chief Steven Davis’s work for Apax on the £600m investment by China Investment Corporation even bagged The Lawyer’s Corporate Team of the Year gong.
Ashurst is another firm whose strength in private equity could have proved a burden in 2009-10. However, its corporate performance, in a turbulent year for the firm as a whole, was impressive. The department was the only major one at the firm to hit its budget for the year.
The City firm posted a modest rise of just under 1 per cent in corporate turnover for the year, but was one of only four firms in the top 15 to pull off the trick. CMS Cameron McKenna, Eversheds and Hogan Lovells complete the quartet.
Ashurst’s figures were boosted by its instruction for Gala Coral on the gaming giant’s £2.7bn debt restructuring exercise, with restructuring partner Giles Boothman leading. The firm also acted for longstanding client Rusal on its $2.2bn (£1.4bn) IPO in January.
Norton Rose did win a role acting for France Telecom on one of the biggest European deals of the year – last September’s Orange-T-Mobile merger – but still saw revenue fall by 10 per cent.
“There’s been lots of pricing pressure and a squeeze on the mid-market,” said Norton Rose head of corporate Tim Marsden. “We can expect to see the magic circle push into the areas where we’re strong.”
Herbert Smith and Hogan Lovells were both widely seen as having solid, albeit unspectacular, years. Herbert Smith saw a small reduction in turnover throughout the year, but a practice under the new leadership of James Palmer was boosted by some impressive mandates, not least a role acting for BSkyB on its £7.8bn takeover by News Corp and another for Arriva on its proposed takeover by Deutsche Bahn.
Despite such successes, a limited dealflow means that the squeeze is one for the mid-market and below, with the hegemony of the big five as firmly entrenched as ever.