Partnership back within reach for City corporate assistants

What a start to the year. Figures reported by most of the top City firms have, in virtually all cases, been powered by massively increased levels of corporate work. It’s great news for senior corporate assistants, many of whom have had to hold their nerve in the past few years in the face of decreasing opportunities for promotion. So what are their chances?

Slaughter and May and Linklaters started their runs early. In 2004-05, Slaughter and May’s corporate group – which accounts for 51 per cent of turnover – billed £147.9m, its best result since 2000.

While the first six months of 2004-05 were extraordinary, with deals such as the defence of retailer Marks & Spencer and the Abbey-Santander and Aviva-RAC mergers, the second half of the year limped some way behind. Rather disturbingly for the City’s elite deal machine, the first quarter of this year continued in the same vein.

It was only in the second quarter of this financial year when the power came back, with mandates such as the sale of Cadbury Schweppes’ European beverages business and the glass-maker Pilkington deal. Thanks to those transactions, the corporate department is just about keeping pace with its blistering performance this time last year, but the increase is not as dramatic.

In any case, such mundane considerations as business cases are not part of the partnership equation at Slaughters. Slaughters corporate head Chris Saul says: “Driven by the renaissance of the corporate buyer and the ready availability of financing, we have seen high activity levels recently in corporate and M&A – although our new partner decisions are based on a long-term view rather than shorter-term trends.” The fact that corporate accounts for a massive share of Slaughters’ business has been reflected in promotions in the last few years. In 2005 three out of the six promotions were corporate; in 2004 it was two out of four; and in 2003 it was two out of three.

Linklaters’ astonishing return to form in 2004-2005 was entirely down to the performance of the corporate group, whose revenues rose 12 per cent to £322m. This year Linklaters has kept pace with that increase, with revenues up around another 10 per cent at the half-year stage.

That performance will have been helped by P&O Nedlloyd’s acquisition by AP Moller-Maersk, Deutsche Post’s bid for Exel and St Gobain’s offer for BPB, plus a mouthwatering number of IPO and private equity mandates. “The question is, how sustained is that pickup going to be?” muses corporate head David Barnes.

That question is presumably on the lips of his assistants. A look at Linklaters’ partnership statistics shows that the firm has promoted plenty of corporate lawyers into partnership outside London but has kept only a small trickle of promotions into London.

Two corporate assistants out of seven globally were made up on 1 May 2005; in 2004 two out of eight globally; in 2003 one out of six; and in 2002 two out of eight. What is more, Linklaters has had well publicised departures in that time and has kept the London practice relatively lean. “There are fewer partners in London corporate than in 2001-2002,” admits Barnes.

Clifford Chance’s corporate turnover is up nearly 12 per cent at the half-year stage. Private equity remained strong, but its less well-known public M&A practice was phenomenally busy. Clifford Chance advised the targets on the BPB-St Gobain and GE Insurance Solutions-Swiss Re deals. TMT sector deals have been plentiful, including T-Mobile Austria’s acquisition of tele.ring and eBay’s purchase of Skype Technologies.

Of last year’s four Clifford Chance partnership promotions into corporate, only one was in London, while three were in Germany. In 2004 the magic circle firm also promoted four corporate assistants into partnership; again, just one was in London. “The message generally is that there are opportunities in corporate across the market,” says corporate head Peter Charlton. “We’ve taken on a few laterals in the last few years, but we’re not looking at laterals in the corporate market now – we’ve got good people coming up.”

Freshfields Bruckhaus Deringer has had its own problems in corporate recently, with London turnover flatlining for several years. However, it looks to be on the verge of a recovery, with an increase looking to nudge 10 per cent this year. If that continues, new head Tim Jones should easily achieve his goal of growing the business by 20 per cent in two years.

Freshfields had a fantastic run of form on both M&A and IPOs in the first half of this year, tempered only by the sobering thought that the firm has been acting for a number of targets.

It lost Manchester United to Allen & Overy earlier in the year, and will have to fight very hard to keep O2 after its takeover by Telefonica. At least Gerry Robinson backed off from his bid for another long-term Freshfields client, Rentokil. Corporate head Tim Jones says: “Work levels have been higher than they’ve been for five years. Suddenly, finding resources is the biggest operational issue.” Jones’ observation may have some bearing on Freshfields’ promotions this year, especially because the number of London promotions has steadily dropped over the past few years. In 2003 Freshfields made up three London corporate partners out of a total of five within the global network; in 2004 two out of six, and in 2005 one out of seven.

The biggest investor in corporate looks to be Herbert Smith, which promoted four London assistants to partnership in May this year – double the previous year’s total of two in London. Herbert Smith’s optimism looks justified by its performance in the first six months of the financial year. Revenue in corporate is up a staggering 25 per cent on the back of deals such as Britannic-Resolution Life, as well as a slew of big transactions in China.

Corporate head Michael Walter admits his firm has benefited from the return of trade buyers making strategic acquisitions. “There have been a lot more industrial buyers in the market, which has slightly reduced the pre-eminence of private equity and hedge fund buyers,” he says.

The corporate heads – most of whom were not in place during the last boom – are all agreed on one thing: that they have not seen M&A at this level for five years. Jones, Charlton, Saul, Walter and Barnes are all enjoying their moment in the sun.

The current deal frenzy in the City will be giving them welcome breathing space after four years of financial pressure. But M&A success breeds another pressure: the weight of expectation from senior associates. The promotion announcements this April will be fascinating.

Deals with any UK involvement 01.05.05-31.10.05, ranked by value
Legal adviser Value ($bn)* Value (£bn)* Number of deals
Clifford Chance 78.93 45.81 65
Freshfields Bruckhaus Deringer 78.55 45.58 43
Sullivan & Cromwell 67.43 39.13 19
Linklaters 64.86 37.64 43
Ashurst 51.66 29.98 36
Allen & Overy 44.05 25.56 64
Slaughter & May 39.16 22.73 31
Simmons & Simmons 34.62 20.09 11
Herbert Smith/Gleiss Lutz/Stibbe 34.47 20.01 31
Lovells 33.38 19.37 40


   
   

Deals with any UK involvement 01.05.05-31.10.05, ranked by volume
Legal adviser Value ($bn)* Value (£bn)* Number of deals
Clifford Chance 78.93 45.81 65
Allen & Overy 44.05 25.56 64
Jones Day 3.019 1.75 61
DLA Piper Rudnick Gray Cary LLP 2.47 1.43 54
Eversheds 3.41 1.98 48
Pinsent Masons 2.74 1.59 45
Linklaters 64.86 37.64 43
Freshfields Bruckhaus Deringer 78.55 45.58 43
Lovells 33.38 19.37 40
Ashurst 51.66 29.98 36


   
*including net debt of target Source: Thomson Financial