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Legal fees on UK public M&A are dwarfed by those paid to investment bankers on the same deals, with lawyers billing up to 70 per cent less on takeovers during the first half of 2013, according to research by The Lawyer.
Legal fees from 18 public offers from January to the end of June were £26.1m compared with £46.1m going to financial advisers and brokers and a total of £99.3m spent on all fees and expenses.
Kier Group’s takeover of May Gurney Integrated Services yielded the poorest legal fees to bankers’ fees ratio for lawyers, with £2.74m going to firms including Eversheds and Linklaters compared to £9.2m won by bankers at Canaccord Genuity, Peel Hunt and Rothschild - a 70 per cent drop.
The best deal for lawyers by this measure was Regus’ acquisition of office space provider MWB Business Exchange, which was a rare offer that gifted highest estimated fees to lawyers (£2.52m) than to brokers (£1.5m). This was largely propped up by the fee of up to £2.07m charged by lawyers for Regus, led by Slaughter and May. MWB was advised by Mayer Brown, while the financial advisers were N+1 Singer for MWB and Rothschild for Regus.
The disrepancy is largely down to the fact that bankers often on more of a no-win, no-win basis, while lawyers tend to charge by the hour irrespective of whether the deal completes, although firms are starting to take on more risk. Bankers often take on more risk and field larger teams.
Linklaters corporate partner Charlie Jacobs commented: “Historically there’s just been a different approach where lawyers charge by the hour. Bankers typically do a lot of work where they don’t get paid so when they do they get paid on a different measure.
“It’s fair to say investment banking M&A fees are probably coming down from the boom time. In the old days it was a percentage of the deal size. Now that’s a starting point. Clients are now saying, ’Why should I be paying a percentage of a deal size, where the deal was not brought to me?’”