Land of the three
28 January 2002
14 October 2013
10 March 2014
31 March 2014
31 January 2014
24 March 2014
Sullivan & Cromwell, Davis Polk & Wardwell and Simpson Thacher & Bartlett are three US law firms which are usually bunched together by reason of their size and New York presence, but more often by their perceived tendency to service investment banks more than any other client. Sullivan is usually paired with Goldman Sachs, Davis Polk with Morgan Stanley Dean Witter and Simpson Thacher with Chase Manhattan.
It has long been the belief that these firms have only been allowed to take their seats at the European table because the deals that they undertake are primarily for these clients. This, say the firms, is not accurate. So what is the true position?
Sullivan & Cromwell
Led by William Plapinger, Sullivan & Cromwell's London office has quickly become a City heavyweight. The firm has an old and very established client in Goldman Sachs. And when Goldman Sachs expanded into Europe, perhaps Sullivan believed the best option was to follow suit to keep in with its best client.
There is no getting away from it - in 2001 the firm acted on some lucrative deals for the investment bank in Europe. It advised on the bank's $450m (£315m) LVMH Moet Hennessy Louis Vuitton deal with Donna Karan International (Goldman Sachs was the adviser to LVMH), and also on the deal for FAG Kugelfischer with INA Holdings in Germany, valued at £313m. Other deals included acting for Goldman Sachs when it advised VoiceStream Wireless Corp on a $45m (£31.5m) deal with Deutsche Telekom.
The evidence does show that the firm has done deals for its investment banking client, but there is another tale to be told. Jim Morphy, managing partner of the firm's M&A department in New York, disagrees that the firm's relationships are primarily with investment banks, either in the US or in Europe. He says a large number of the deals undertaken are for corporate clients. "Of course, we have good relations with Goldman Sachs all over the world," he says, "but in Europe particularly, there's less of a focus on the investment banks than here."
Looking at the firm's deals table for 2001, he is absolutely right. The statistics speak for themselves. Out of 60 completed European deals for 2001, the firm acted as adviser to the investment banks on a mere 10 of them; the rest of the deals show the firm acting for corporate clients only. There may be accusations against the firm that it is only giving advice to these clients on the US aspects of a deal, but given a choice between US advice or no advice, most European lawyers would attempt to requalify as a US lawyer overnight.
|Led by William Plapinger, Sullivan & Cromwell's London office has quickly become a City heavyweight|
On the purely corporate client side, Sullivan was involved in the biggest deal of last year when it acted for Allianz (alongside Shearman & Sterling and Hengeler Mueller) against Dresdner Bank, which was worth £22bn. It also acted for Eon on the £15.7bn acquisition of Powergen. Sullivan was also in on the negotiations for Interbrew on its $1.6bn (£1.1bn) deal with Becks, and also acted for Sidel as principal adviser on the n2bn (£1.24bn) acquisition by Tetra Pak. Nor are these isolated examples. It was called in to give US advice to the Bank of Scotland on its merger with the Halifax Group, worth £15bn, and also for the Nokia Corporation in Finland on a £421m deal with Amber Networks. The corporate clients are certainly there.
Clearly, Sullivan is not satisfied with simply handling the US piece of any corporate deal; its newfound local capability in France and Germany has underlined the firm's ambitions. In 2000, it hired Richard Vilanova from Stibbe Simont Monahan Duhot, followed by Gerard Mazet and Jean-Pierre Legall from Jeantet & Associés. At the end of last year, Sullivan also hired Wolfgang Feuring from Freshfields Bruckhaus Deringer and Konstantin Technau from Nörr Stiefenhofer Lutz to launch its German practice.
"There was a view that we were not going to compete with the large UK firms, as that didn't make sense," says Morphy. "Now it's a matter of looking at cross-border deals. Global law firms should be able to offer global clients the ability to do deals in all major centres." He admits that there are gaps in the practice areas in Europe, but says that the firm is in the process of building foundations. "We'll be filling the gaps with more people," he says. Jamie Logie, a former Norton Rose project finance partner, is the only UK-qualified partner in London, but it is logical to assume that UK corporate capability is seriously on the agenda.
Davis Polk & Wardwell
Like Sullivan, Davis Polk shrugs off the investment bank tag. "Most of our clients on the M&A side are principals," says John McCarthy, a partner in the London office.
More than half of the M&A work done in Europe is on the corporate client side. Admittedly, much of this comes from its cherished best friends policy. As is well known, it addresses its national needs by forging relationships with domestic practices, using top firms in each jurisdiction - Slaughter and May in the UK, Uría & Menéndez in Spain, Bredin Prat & Associés in France and Nauta Dutilh in the Netherlands. But its closest relationship is with German firm Hengeler. Through this, the firm has had access to some fabulous corporate clients, such as acting for Deutsche Telekom on the £4.4bn sale of cable assets to Liberty Media. Through this connection, Davis Polk has become closer to Slaughters, referring some eye-catching deals to the UK firm, such as the £61bn deal between Royal Caribbean and P&O; it also introduced Coors to Slaughters when the firm acted for the brewer on the Carling deal in 2001.
Davis Polk has managed to pull off a good spread of US work for European clients. It acted for NatWest, which was the target of the unsolicited bids by the Bank of Scotland and the Royal Bank of Scotland, culminating in the $36bn (£25.2bn) takeover by the Royal Bank of Scotland. Also, the firm routinely advises major clients such as ICI on matters in Europe and provided US advice to Cinven on its £576.4bn leveraged buyout (LBO) of Klockner Pentaplast Group, the second-largest LBO in Germany in 2001.
Davis Polk's longtime commitment to the German market (it set up in Frankfurt a decade ago) has made it particularly visible there, but it has also been targeting Italy with some success. Several years ago, it won a beauty parade to advise Telecom Italia on stock exchange issues in the US. This brought about a slew of follow-up work. As a result, it was called upon by the Italian company to act on the hostile takeover by Olivetti, which was subject to new Italian takeover laws.
Yet the institutional connection with Morgan Stanley is strong, as evinced by deals such as the $383m (£268.2m) Sappi SEC registered offering. In fact, one might even describe the relationship as umbilical. Davis Polk has also managed to involve itself on deals where there is no US nexus, despite not being able to provide non-US advice. Morgan Stanley Capital Partners, for example, often requests that Davis Polk still be transaction counsel even if there is little or no US element.
Simpson Thacher & Bartlett
Meanwhile, Simpson Thacher does not play down its connections with the investment banks. The likes of JP Morgan Chase, Goldman Sachs, Merrill Lynch, Credit Suisse First Boston and Salomon Smith Barney feature regularly on the firm's deal list. The largest connection is, of course, with Chase.
The firm acted on 26 European deals in 2001, valued at £46.9bn. However, not all were advising investment banks. The largest cross-border deal the firm acted on was for Vivendi, which sold its spirits business to Pernod Ricard and Diageo. The firm acted for Telefonika when it purchased £2.6bn of shares in Motorola's mobile phone services company and was also US counsel to Telia, the Swedish telecoms company that sold its shares to Telecom Americas for $925m (£647.7m). Further deals with a non-investment bank connection was representing client Harcourt General, which was purchased by Reed Elsevier.
Whether or not investment banks dominate the US firm's practices, they are undeniably hugely influential. And the more the investment banks look to domestic law components, the more they will require domestic legal advice. This will attract the US firms into the domestic markets. What will also lure them is the chance to act as principal European advisers on European deals, as opposed to merely US implications. In the near future, all of these firms will be gearing towards taking on European-qualified lawyers in order to build on their domestic law capability. And then the deals tables will really begin to look interesting.
| Sullivan & Cromwell |
Sullivan & Cromwell is the largest of the three firms in Europe, with about 60 lawyers in London, 25 in Paris and 13 in Germany. It has made steps towards advising on non-US aspects of M&A and has been recruiting domestic lawyers across Europe to facilitate this strategy.
Davis Polk & Wardwell
Davis Polk & Wardwell has four European offices in London (12 partners and 37 assistants), Frankfurt (two partners and five assistants), Paris (one counsel and three assistants) and Madrid (one partner and two assistants). It has 665 lawyers worldwide.
Simpson Thacher & Bartlett
Simpson Thacher & Bartlett has only one European office and deals only in US law. It houses 30 lawyers in London.
|European completed deals|
|Rank||Legal adviser |
Full to each adviser
|Ranking value including net debt of target $bn (£bn)||Mkt share||No of deals|
|2||Freshfields Bruckhaus Deringer||188.3 (131.8)||24.3||171|
|3||Sullivan & Cromwell||169.4 (118.6)||21.8||56|
|4||Shearman & Sterling||153.9 (107.8)||19.8||58|
|5||Clifford Chance||121.3 (84.9)||15.6||195|
|6||Herbert Smith/Gleiss Lutz||117.4 (82.2)||15.1||92|
|7||Cleary Gottlieb Steen & Hamilton||114.9 (80.5)||14.8||57|
|8||Jones Day||99.9 (69.9)||12.9||133|
|9||Slaughter and May||84.5 (59.2)||10.9||102|
|10||Hengeler Mueller||83.6 (58.5)||10.8||40|
|11||Allen & Overy||79.6 (55.7)||10.3||172|
|12||Wachtell Lipton Rosen & Katz||58.6 (41)||7.6||17|
|13||Morris Nichols Arsht & Tunnell||56.1 (39.3)||7.2||17|
|14||Cravath Swaine & Moore||52.8 (37)||6.8||18|
|15||Davis Polk & Wardwell||48.1 (33.7)||6.2||16|
|16||Simpson Thacher & Bartlett||46.9 (32.8)||6.0||26|
|17||Ashurst Morris Crisp||40 (28)||5.2||111|
|18||Sidley Austin Brown & Wood||34.2 (23.9)||4.4||10|
|19||Skadden Arps Slate Meagher & Flom||33.9 (23.7)||4.4||46|
|20||Norton Rose||28.3 (19.8)||3.7||77|
|22||Debevoise & Plimpton||27 (18.9)||3.5||19|
|23||Dewey Ballantine||25.4 (17.8)||3.3||17|
|24||Blake Dawson Waldron||23.2 (16.2)||3.0||9|
|25||White & Case||23.2 (16.2)||3.0||48|
|European target or European acquirer ultimate parent based on deals completed 12/1/01-31/12/01 |
Source: Source: Thomson Financial