Not all about Granada: how Lovells rode its corporate luck
27 October 2003
5 November 2013
15 July 2013
17 January 2014
17 January 2014
17 January 2014
"Our tails are definitely up at the moment," confides a Lovells corporate partner. No wonder. He was speaking the day Michael Green was forced to stand aside. As the talk in the City began to grow of a Granada takeover sans premium, Lovells partners would probably be forgiven for a certain amount of optimism on snagging the top adviser spot for ITV plc.
Not that a Lovells partner would openly speculate about winning the ITV plc work over Slaughter and May; that wouldn't be the done thing. The polite approach has defined the firm's culture. So much so that Lovells, always a little aloof from the fray, was perceived to be on the wane a few years ago.
And even now, Lovells is thirteenth by value and tenth by volume in the mergermarket UK tables (2003 year to date).
But then Lovells surprised the City by posting excellent results for the past financial year. The corporate department turned over £124.8m, putting it sixth in The Lawyer 100 corporate table. Of that sum, London accounted for £63m and Germany some £24.5m. But this is the most extraordinary stat: in a year of stasis for most City corporate departments, Lovells managed a jump of 20 per cent in overall corporate turnover.
How much of this has been down to luck? There has always been a suspicion that in mainstream M&A Lovells has relied on a handful of major clients. There's a smattering of Fortune 500 companies such as Xerox, Texaco, Johnson & Johnson and Schering-Plough, but there's a paucity of FTSE names on the roster. Lovells' key clients, by a long way, are Granada, Barclays, Pruden-tial and SABMiller.
Lovells says it is still close to Barclays as its house corporate law firm, but it's undeniable that other firms are circling. Barclays turned to Clifford Chance Madrid for its takeover of Spanish bank Banco Zaragozano, for example.
But - and this is where the luck comes in - two of its FTSE clients have come up trumps. Deals for Granada and SABMiller have dominated the firm's deal list of late, and Lovells has farmed them both well.
Granada, advised by corporate head Hugh Nineham, has provided a feast of corporate work, but look at the deal list for SABMiller, advised by John Davidson. First of all there was the £3.4bn UK listing in 1999, and a series of major securities placings, then the $5.62bn (£3.32bn) acquisition of Miller Brewing company in 2002 and subsequent $1bn (£591.5m) equity placing. This year has seen the e563m (£3.91m) Peroni acquisition in May and the $2bn (£1.18bn) bond issue in August.
Davidson is part of a jewel in Lovells' crown; the corporate insurance group. That group has been consistently active in the past two years, with the likes of Aviva (formerly CGNU) and Credit Suisse/Winterthur providing a strong deal flow; the latter gifted the firm with the £1.1bn sell-off of Churchill Insurance, for instance.
A few years ago Lovells was regularly going head-to-head with Herbert Smith and Freshfields for insurance sector M&A. But with former Herbert Smith insurance queen Marian Pell retired and Freshfields partner Philip Richards stationed in Italy, it has virtually been a clear run for corporate partner John Young and his team. Lovells is currently working with old sparring partner Freshfields on the AMP demerger - a deal which the two firms put together in 1999.
Insurance companies' pressures are different from those of mainstream industrials, and the current vogue for buying businesses in run-off has played right into Lovells' hands; Swiss Re's acquisition of Zurich Life Assurance Co for $240m (£141m) this year is a classic example. The deals may not be big in terms of value, but the tricky regulatory aspects of insurance deals tend to help along premium billing.
Young and Davidson, the twin insurance M&A kings, are stalwarts of the corporate group. Yet for a firm which tends to pride itself on home-grown partners, there are two laterals who have impressed: Derek Baird and Nick Parden.
Parden, who joined the Lovells partnership from Freshfields more than two years ago, is one of the most prominent dealmakers, according to mergermarket. Even more significantly, given his Freshfields pedigree, he has started to work the investment banks with some success.
Lovells' financial adviser contacts have, on occasion, produced some stellar instructions. Lazards re-ferred Granada to Lovells back in 1993 for the LWT bid; Flemings introduced SAB to the firm and CSFB introduced Corus (although Slaughter and May is its primary UK adviser). But Lovells still has nowhere near the financial adviser connections as Freshfields - the partnership Lovells most closely resembles, both in culture and international strategy. So Parden has started to plough a new furrow in acting for the financial adviser, getting a look-in for Merrill Lynch and UBS on Carnival, and for Nomura on the Scottish & Newcastle auction.
Baird, meanwhile, has been a strong addition to Marco Compagnoni's private equity team, a group which has been a mainstay of the Lovells practice.
A hire from Dickson Minto in 2001, Baird has since won work for Apax and Advent International to add to a client list hitherto dominated by 3i, HG Capital and Doughty Hanson. (Lovells still retains a relationship with Doughty through private equity partner Julie Bradshaw, although Allan Murray-Jones, who left the firm for Skadden two years ago, took much of the work with him.)
One of the most intriguing developments, though, is the way Lovells has managed to cross-sell its London corporate practice into its Continental operations. The SABMiller-Peroni acquisition was a classic example and the cross-referrals have worked to an astounding degree in Germany - partly helped by the astute seconding of Bradshaw to Frankfurt in 2001.
Last year the German operation's top corporate clients were all those cross-sold out of London: Advent International, Doughty Han-son (loosening Hengeler Mueller's lock on the private equity house), HG Capital and Corus.
So, all in all, it's no wonder Young and Nineham, who have presided over such an upturn in Lovells' corporate fortunes, are gunning for the senior partner role. But that, of course, is another story.