Paul Claydon and his corporate team at the London office of Morrison & Foerster (MoFo) have played what he terms “molecular roulette” and won to the tune of $15m (£10.49m) in revenues a year. But the risky business of life sciences is forcing the team towards the more traditional technology markets.
“They’ve mopped up the life sciences corner of the corporate world, but if that market disappears then they have to turn to other sectors,” says a source close to the firm.
Claydon admits that the firm is casting around for corporate partners with a focus on the technology sector to broaden the team’s horizons. He talked to the corporate team headed by partners Richard Eaton, Chris Grew and Struan Penwarden when they left WilmerHale for Heller Ehrman, and then, when Heller went bust, before they joined Orrick Herrington & Sutcliffe.
Eaton, Grew and Penwarden’s practice almost exactly mirrors what Claydon’s team does. It acts for technology companies seeking investment through to IPO and/or acquisition, while Claydon’s team acts for life sciences companies.
“But Claydon has been much more successful than them,” claims a source familiar with both teams.
One of the reasons MoFo passed up the chance to sign the team second time around was that the Heller team was trying to keep as much of the office intact as possible. It would have doubled the size of the office, Claydon says, but not the size of the team’s revenues.
So the hunt continues.
The concern is that the ‘molecular roulette’ of the biosciences market is about to deal MoFo a bum hand. Investing in the market is always a risky game, with many investors running scared at present.
“It’s a very challenging environment if you want to raise money,” admits Claydon. “It’s more difficult than it’s been for six or seven years.”
But there is an upside.
“M&A is still reasonably active. If you’re a VC [venture capitalist] investor, you have two choices – either you exit or you stump up more investment,” says Claydon.
In a corporate market that has been heading downhill fast over the past year, MoFo has held its own by focusing intently on the life sciences market. In addition to a string of licensing deals and investments, it has scooped headline roles on the $185m (£129.4m) sale of Piramed to Roche (opposite Freshfields Bruckhaus Deringer) and Sanofi Pasteur’s £276m acquisition of Acambis (opposite Slaughter and May).
These ;deals ;have ;helped Claydon’s team treble its revenue since 2005. Claydon and partner James Gubbins joined MoFo that year from Weil Gotshal & Manges. They had built a thriving practice at Weil, but had failed to set pulses racing among Weil’s management as they advised on relatively small-scale deals.
The arrival of Claydon and Gubbins added an attractive sheen to MoFo, which had never really got off the ground in London. The pair were soon joined by Simmons & Simmons corporate partner Ed Lukins. And that core must have made MoFo a far more interesting proposition when Alistair Maughan’s technology team was looking for an escape from Shaw Pittman.
The corporate team alone numbers six partners and 10 associates, while MoFo’s London office houses 16 partners and 34 associates. In 2008 it brought in a revenue of around £19m.
Much of that growth can be attributed to Claydon’s relationship with former office head and IP licensing partner Julian Thurston, who recently handed the management role to tax partner Trevor James.
While the pair have not always seen eye to eye, they have worked together well and successfully cross-sold to each other’s clients.
“Our client lists were almost mutually exclusive,” says Claydon. “We’ve converted about three-quarters of his clients and he’s advised about three-quarters of our clients.”
Thurston is co-chair of the firm’s life sciences group, which accounts for around 17-18 per cent of global revenue, with technology bringing in around 30 per cent. The latter is the market that MoFo is looking to tap further in the UK. The team has lessened its reliance on life sciences, which once accounted for around 80 per cent of revenue – a figure that has now dipped to between 50 and 60 per cent; but Claydon wants to reduce that further.
“Their problem is that they’ve sold off a lot of their clients,” says a source close to the business.
Claydon cheerily admits it is an occupational hazard. One untapped source of work is the firm’s global network, which has failed to supply the team with much inbound work. The firm’s West Coast US and market-leading Tokyo offices would seem to be an obvious source given the number of IP owners in both regions, and Claydon was in Japan when he was interviewed for this article. He sounded a little weary.
“Business development goes with the territory,” he sighs. “There’s always a churn of people looking for exits. The business is buying and selling companies.”
At the moment, some will envy him his problem.