Lovells expansion heralds leveraged finance assault
2 December 2002
There has been a flurry of activity within Lovells' acquisition and leveraged finance practice lately. November saw the hire of Clifford Chance partner Ken Breken in Amsterdam, the second such lateral following the addition of Clifford Chance partner Jacques Bertran to the Paris practice in July 2001. (Bertran has already completed a handful of deals for Société Générale since his arrival.) Also, two of Lovells' London acquisition finance lawyers - Penny Angell and Adam Freeman - were made up to partnership earlier this year.
The recent deal list is similarly impressive (see box), although the deals are not huge.
Lovells is never one to blow its own trumpet, but could all of this be a sign that it is making a bid to regain lost ground in acquisition finance? Not before time. There is no escaping the fact that the Lovells practice is tiny for a firm of its size and standing - and for a firm that counts Barclays as one of its top overall clients. Also, its competitors are not so much Allen & Overy (A&O), Clifford Chance and Linklaters, as DLA and Ashurst Morris Crisp.
Led by the highly-rated and much-liked Matthew Cottis, Lovells now numbers a grand total of three partners in London following the promotions already mentioned, while a fourth partner, Kay Booth, focuses on the workout end of leveraged transactions. The practice has a 60-40 split between banking-led transactions and the corporate support work which comes partly on the back of its strength for private equity debt.
Cottis stepped into the breach after the sad death of well-known acquisition finance figure John Penson in March 2000, a loss that dealt a severe blow to the practice. Cottis, Freeman and Angell can all be seen as Penson's protegés.
Size is not a new problem, however. Even under Penson the practice was relatively small, so bringing on Freeman and Angell this year was a wise move on the part of Cottis. Clients speak highly of both. Freeman is particularly close to CIBC and it seems no coincidence that Lovells' relationship with the bank was formalised with a panel appointment in June this year, just after his election. But for now there remains a lingering perception that the Lovells offering is a one-man band.
So what are the strong points? Barclays is certainly one. But although the bank is one of Lovells' top firm-wide clients, it is only the mid-market leveraged finance work that comes the way of Cottis's team and not the Barclays Capital work, which is the preserve of A&O, Clifford Chance and Linklaters. The market perception is that Lovells is on the way back after losing some ground over the last three years to fellow Barclays panel member DLA and to Ashursts, which has got itself approved for leveraged finance work. Mark Vickers' move from DLA to Ashursts certainly heightened the competition as he successfully targeted his old clients.
It is worth noting that there could be more exciting times ahead for all three firms. Something of a grey area has developed where Barclays Leveraged Finance ends and BarCap starts. Historically, facilities over £25m had to go into BarCap partly because they could, potentially, wind up being syndicated. But Barclays Leveraged Finance has grown and is doing bigger deals than that. Rather than watching BarCap get involved and use its own lawyers, Barclays Leveraged Finance wants to do more itself and bring in its own lawyers. That shift is likely to become more formalised in the near future, enabling Barclays Leveraged Finance to look at facilities in the region of £50m-£75m and more. Greater flexibility could gift Ashursts, DLA and Lovells some chunky instructions.
Lovells also faces tough competition from Ashursts and DLA for Bank of Scotland (BoS) work, while Clifford Chance gets the mega-deals. Other established clients include CIBC, Société Générale and Commerzbank.
There are also some new additions. Angell has been cultivating a close relationship with the leveraged finance team at Mizuho, the group created in April this year out of the merger of Dai-Ichi Kangyo Bank, Fuji Bank and Industrial Bank of Japan. Clifford Chance and Norton Rose were used in the past, but now the bulk of the work tends to go to A&O and the smaller share to Lovells.
Lovells' original Fuji Bank relationship came about after it acted on a co-arranged deal. The bank's role as house banker to Lovells client Doughty Hanson also helped things along.
Kate Armstrong, in-house legal adviser for Mizuho's leveraged finance team, has high praise for Lovells and says the firm's European offices are crucial to the growing relationship. As well as Angell and Freeman, she has been impressed by the abilities of Lovells' assistants, singling out the talents of Paul Mullen, Bryan Paisley and Leanne Palfrey. Mizuho is not particularly active just now, but when it does get more deals in the door Lovells is in with a good chance. Two recent instructions have already gone its way.
The question remains, however, whether Cottis has the appetite to grow the practice further. He is not ignoring the problem. Lovells' profitability, at £530,000 per partner last year, is inevitably an issue in the battle to attract the best talent. But Cottis plugs the firm's overall balance as a key selling point for attracting those who have just missed out on promotion from salaried to equity or from nothing to salaried because their firm is less well buffered.
|Lovells acquisition finance: recent deals|
€ 250m (£160.1m) refinancing of Findus Group Lovells acted for the joint mandated lead arrangers Mizuho Corporate Bank, Nordea Bank and Danske Bank