On The Pull
2 October 2000
11 February 2013
16 May 2013
7 October 2013
1 July 2013
13 February 2013
There just aren't any juicy anecdotes about David Morley. There's none of those quirks that occasionally pass for personality in the City; a wow on the karaoke machine perhaps, or one of those middle-class Arsenal season ticket holders, or any other cultivated eccentricities. What you see is what you get - a funny, down to earth, grounded guy who has never bothered to posh up his estuary accent. But Morley, normally so relaxed, is betraying just a touch of anxiety as the photographer is setting up. "This isn't going to be all about me, is it?" he ventures. "Can we get a shot of the team? I mean, it's all about your team in the end."
Well, yes and no. It may seem odd now, but even as recently as the mid-1990s Allen & Overy (A&O) was considered a clear second to Clifford Chance for general finance work. It had spent the first part of the decade handling most of the major restructurings and workouts arising from the economic slump - Canary Wharf and the Maxwell private companies. The primary lending side of the practice was, frankly, nowhere near as prominent as the Clifford Chance machine.
Yet within five years, A&O - driven by Bill Tudor John, Jonathan Horsfall-Turner and Philip Wood - was rivalling Clifford Chance. It campaigned to attract UK houses such as Barclays Capital, and forged strong relationships with US banks, notably Goldman Sachs and Citibank. "We certainly focused on the importance of investment banks as clients," acknowledges Morley. "It's not just because the work is directly billable, but it's so influential on referrals." He certainly provided much of the energy; A&O's relationships with both Barclays Capital and Goldman Sachs (particularly with Andrew Swinburne, managing director, leveraged finance), for example, are largely down to him. In fact, the rise of the banking department has closely paralleled the entrepreneurial rise of Morley himself.
At 44, Morley is A&O's best-known banking partner. Although famously described by a partner at a rival firm as "the Errol Flynn of banking lawyers", he is probably more a James Stewart type - the boy next door made good. This is the man who married his childhood sweetheart, who wanted to be a lawyer from the age of 13 ("I can't explain why"), and who has spent his entire working life at the firm. Speak to both clients and colleagues, and the same descriptions emerge: "drive", "punchy", "enthusiastic", "inclusive", "no side to him", "a real doer". Morley's celebrity is partly due to his easygoing relationship with journalists, but also because of his triple role. To start with, he manages A&O's banking department, and therefore has a strong political voice in the firm's global strategy as a whole. Second, he was one of the forces behind A&O's pioneering online dealroom, Newchange. And last, he is one of the biggest rainmakers in the City, currently a little more than halfway up the A&O equity ladder on around £865,000. He could command at least £1.5m should he want to move, says one headhunter.
It was Morley's rainmaking skills which made him the obvious choice to head the department in the first place. The slightly dreary syndicated lending field, where so many of the deals were put together in order to service corporates' working capital requirements, has been transformed over the past three years by the huge European M&A boom.
"The engines of profitability in the loan market are firstly the leveraged finance business, which is more sensitive to interest rate movements and the high-yield market, and secondly the jumbo investment grade acquisition financings," says Citibank/Schroder Salomon Smith Barney director David Bassett, a long-time client of Morley's. "The fees that come along with those deals are very, very attractive."
There is no doubt that A&O has - unconsciously or not - hitched its star to both types of acquisition finance. The LBO finance group, with such luminaries as Tony Keal, Tony Humphrey, current hot property Stephen Gillespie and young partner Euan Gorrie, is market leader, rivalled only by Shearman & Sterling.
Meanwhile, Morley's focus has been on investment grade lending. It all started in 1997 when Morley was drafted in by Goldman Sachs on the $8.5bn (£5.8bn) acquisition finance by ICI of Unilever's speciality chemicals division. As a deal that Morley now describes as "audacious", it certainly wrote the template for the future.
As is always the way, you get in first and get the pick of the crop - and over the last couple of years, Morley has pulled in dozens. He advised Citibank, Goldman Sachs, Merrill Lynch and UBS on the $16bn (£11bn) backing of Spanish oil company Repsol's bid for YPF of Argentina in June 1999; he represented Warburg Dillon Read and Dresdner Kleinwort Benson on the $4bn (£2.7bn) financing for PowerGen's acquisition of Kentucky electricity generator LG&E; he advised ABN Amro, Barclays Capital, Chase Manhattan, Deutsche Bank, Dresdner Kleinwort Benson and HSBC on the $3.15bn (£2.16bn) financing of National Grid's acquisition of US electricity company New England Electric System. But his key deal last year was advising bookrunners Bank of America, Barclays, Citibank and Goldman Sachs on the the euro30bn (£18bn) loan to Vodafone AirTouch as part of its bid for Mannesmann. "David is so good because he gets to see the vast majority of the work," says Peter Fleming, director at Barclays Capital. "If you're doing the business, you know the answers."
The Vodafone deal was the biggest acquisition financing ever, but it was trumped six months later by France Telecom's acquisition of Orange, pulled in by Clifford Chance partner James Johnson. (Morley, betraying a touch of chagrin, says he was conflicted out.)
But Morley's most-wanted status means that he may have to make some difficult decisions soon on whether he acts for borrowers. Several clients express disquiet at his occasional role as a borrower's lawyer. "He's sitting on the other side of the table, and only the week before you're letting him into your darkest thoughts," says Fleming.
Morley is slightly defensive on the subject. "Personally, I think the best banking lawyers make very effective lawyers acting for borrowers," he argues. "Some make the mistake of being too bank-orientated - they get too aligned with the views of one side of a negotiation. You have to be sensitive to it, but most bankers recognise that in the long run you can do a better job for them because it helps you to suggest solutions. But I understand that banks might feel uncomfortable if you pop up the next day [for a borrower], and they say, 'Hang on, you've been in the inner sanctum'. But 80-90 per cent of my work is acting for banks."
But after half an hour discussing his own practice, Morley is becoming restless. "The practice isn't all about jumbo financing," he protests. His managerial remit covers the entire banking department - a business that turns over some £65m in London alone - and covers securitisation, LBO finance, project finance and asset finance, but not capital markets. As a manager, Morley has clearly managed to cultivate a strong assistant pool and strong teams - something volunteered by four investment bank clients. Two of the banking department's brightest new stars, Stephen Kensell and George Link, served apprenticeships under Morley.
There is no cynicism with Morley about the art of management. In his room is an alumni shot of an intensive course at Harvard earlier this year (other faces in the picture are John Tucker and Richard Godden at Linklaters & Alliance, Peter Charlton at Clifford Chance and Barbara Stephenson at Norton Rose). For the arch-enthusiast, good management is about generating enthusiasm. "Every lawyer is deluged with things, and there's never enough time in the day," he says. "So you have to generate the feeling within the firm that such and such is a major client, and that they have that at the forefront of their minds. You have to want to do it. It's 97 separate businesses and the whole thing is still dependent on the entrepreneurial efforts of each partner."
The next few years will see A&O having to confront a whole host of strategic issues, all of them key to the development of the banking department. They include that crucial US financing capability, as well as the need to beef up its Continental offering, where it is lagging behind Clifford Chance. Morley's entrepreneurial skills will be at a premium.