Off with their fiduciaries

Ogier has become the latest firm to sell off its fiduciary business, but is this indicative of a trend?

On Saturday, Channel Islands firm Ogier completed a management buy-out (MBO) of its fiduciary business (3 February 2014). The transaction, which has an enterprise value of £180m, saw Ogier Fiduciary Services’ (OFS) management take control of the business with an £83m capital injection from private equity company Electra Partners.

Nick Kershaw Ogier
Nick Kershaw

The deal had been rumoured for some time, but like many things offshore, was hard to confirm, as is the suggestion that OFS was the biggest such business of its type still attached to a law firm. But it is the third big divestment of a fiduciary business by an offshore firm in just five years.

The first firm to sell off its associated administration business was Mourant du Feu & Jeune in 2009 (2 February 2009). Mourant sold Mourant International Finance Administration to State Street, while Mourant Private Wealth went to the Royal Bank of Canada Wealth. Managing partner Jonathan Rigby later told The Lawyer that the sale was a key stepping stone en route to the Jersey firm’s merger with Guernsey’s Ozannes in 2010 (24 July 2011).

Then in 2012, Walkers also sold its fiduciary business, Walkers Management Services (WMS), to trust company Intertrust (6 March 2012). The value of the sale was not disclosed, but WMS’s revenues were understood to be around $50m.

Ogier’s decision to split legal and fiduciary is more akin to Walkers’ than Mourant’s. Like Walkers (29 April 2013), Ogier’s CEO Nick Kershaw says the move will allow the law firm to focus on being a law firm and expand independently. Ogier is also using the sale as an opportunity for a bit of restructuring and investment, notably with its management structure and IT systems.

“There are a number of things we’re looking at to improve the efficiency and cost-effectiveness of the delivery of our legal services,” Kershaw says.

As well as implementing a more sector-led management structure, with less emphasis on jurisdictions, Ogier will invest in new IT systems – designed with only the law firm in mind. It is also going to look at the way it delivers services to its clients.

“We think clients more and more want a partner-led approach to the provision of legal advice,” says Kershaw.

Ogier has for many years had one of the highest partner-to-associate ratios in the offshore world, of more than 1:3 (25 February 2013), but Kershaw predicts partner numbers will increase. The firm currently employs around 130 lawyers and another 40 partners, making it one of the biggest offshore firms by lawyer headcount but only seventh-ranked by partner headcount.

Naturally Ogier’s clients will still need access to fiduciary services; offshore structures always have ongoing corporate services needs, and Kershaw says the MBO will provide an easier transition for those clients than if the business had been sold to another entity. Indeed OFS will keep the Ogier branding for a transitional period, and there is likely to be a good stream of business between the law firm and OFS in the future.

The question many are asking is whether there are other firms’ fiduciary businesses still for sale (5 November 2012).

“I doubt that it represents a change,” says Kershaw, when asked if he thinks the OFS sale, on the back of Walkers’ and Mourant’s divestments, is indicative of a trend. “What happens is that these businesses get to a certain size and scale and to take them to the next level they require increasing amounts of investment.”

 OFS CEO Paul Willing has previously told The Lawyer that Ogier had ensured that succession planning was not an issue for the firm, suggesting that the sale is not a result of retiring partners wanting to cash in their shares. This was rumoured to be the cause of the WMS sale, although it has never been confirmed by Walkers.

What the OFS MBO does represent is a widening split in offshore strategy, between those firms on the one hand which want to concentrate on law – Mourant Ozannes, Ogier, and Walkers – and those which believe their fiduciary business has significant benefit for the law firm – like Appleby or Maples and Calder.

The two models will co-exist for the time being, but with internationalisation and consolidation showing no sign of slowing down in the offshore market just as in the onshore world, there may well be radical shifts in the future.