Ping when you're winning
19 April 2004
They call him ‘Ping’ on account of the braces he wears. And on the day I meet Linklaters’ Nick Eastwell, he lives up to his nickname, as the head of global capital markets breezes into the room sporting a handsome pair of navy suspenders.
To be honest, though, I’m a bit disappointed. I was hoping for a pair of garish, eye-watering Gordon Gekko-esque braces, in keeping with the type of lawyer others had described.
‘Estuary boy done good’ was a typical refrain. I was half expecting Eastwell to burst out into a music hall rendition of Roll Out The Barrel at any time. Of course, that’s all rubbish.
With no hint of a ‘cockerney’ vowel, Eastwell tells me that, being a Cambridge man, he should have worn his light-blue braces, “but it was dark this morning”.
Hmm. Moving swiftly on, at the time of writing, Eastwell has been head of global capital markets for nearly a year. He took over from Michael Canby in May 2003, who had led the worldwide practice since 2000 and the London group since 1995.
Over the past couple of years, Linklaters’ capital markets group has moved through a series of interesting phases, some good, some bad.
One of the more notable developments has been the reorganisation of the capital markets group into three divisions: mainstream debt and equity, structured finance and derivatives and structured products. “It got too big, it’s as simple as that,” says Eastwell.
The other driver was the fact that capital markets itself was becoming more specialised. “The guys at the major investment banks who are doing repackagings are completely different from the guys doing MTN [medium-term note] programmes or securitisations, so we have to be able to have the expertise and the experience and the associates that can focus on those fields,” he says.
On the downside, though, 2003 was a year that saw a number of departures from capital markets, mainly of associates, many of whom decamped to White & Case and some to Deutsche Bank, which has been described by some wits as “the finishing school for Linklaters’ lawyers”.
Eastwell says: “One never likes to lose good people, but what you have to realise is that, in a big practice area, you’re bound to have attrition. If you didn’t then something would be wrong in the first place.”
There are theories in abundance as to why capital markets had been hit particularly hard by lawyer resignations as opposed to the redundancies that were implemented in practices such as intellectual property, for example.
Many sources have spoken about the lack of opportunities in capital markets to make it to partner level.
As part of Linklaters’ internal reorganisation, it is certainly now more difficult to achieve partnership; the benchmark on entrants has been raised while the firm closely aligns new partners to a practice area’s profit margin.
Capital markets is, I’m told, a successful group. Where the problem lay, apparently, was in the fact that there was simply a bottleneck in equity partner numbers in the group – too many at the top restricted opportunities at the bottom. Certainly, partner promotions in that area have been small over the past two years and have come predominantly in foreign jurisdictions.
In April 2003, just one Hong Kong-based capital markets lawyer was promoted, when a total of 19 lawyers across the firm were made up.
This year, when a total of 31 lawyers were admitted, three associates were promoted – one in São Paulo, one in Tokyo and one in London.
Rumours have also surfaced that overseas-based capital markets partners wanted to return to London after their postings, but that there was simply no room in the UK group to accommodate them.
Although not a slippery lawyer (he is open and candid throughout the interview), Eastwell does sidestep commenting on this issue. “I think it’s more of an issue for the firm generally than it is to capital markets,” he says. “I say that because we’re still in expansionary mode in capital markets. I need partners in certain areas that we just don’t have at the moment, so I just don’t see that.
“I’ve been doing my business planning for the next three years, and I have no problem with the number of people coming through and finding slots for them. So it’s not, and hasn’t been, an issue for us.”
Although he does add: “It may be in the future, but I don’t see it in the foreseeable future.”
If there is a battle to fight in making up associates, I suspect that there is no better lawyer than Eastwell to argue the case for his group, given his considerable powers of persuasion.
After all, it was Eastwell that convinced a reluctant management to significantly build up its Central and Eastern European presence five years ago.
At the time, Linklaters was in full-on ‘Alliance’ mode, focusing on Western Europe, but Eastwell recognised that further afield the firm was losing valuable ground to rivals such as Clifford Chance and Allen & Overy (A&O).
“I did the first convertible bond in Poland, I did a whole batch of early GDRs [global depository receipts], but then we began to lose out because Allen & Overy and Clifford Chance went in and were on the ground and we weren’t,” he explains.
Although Linklaters already had outposts in both Warsaw and Prague through its Alliance partners, both were small, servicing Dutch and German clients.
“At around about that time it suddenly became clearer that certainly the Central European offices were moving towards a new accession, and people began to think that these countries were not at the other end of the world,” Eastwell says. “And so what I said to [Linklaters managing partner] Tony [Angel] in 1999 – it was a year after we’d executed the Alliance deal, which was July 1998 – was first we need to do something about the operation in Warsaw and Prague.”
Then there was the question of the three ‘Bs’ – Bratislava, Bucharest and Budapest.
By a strange quirk of fate, Eastwell had just been approached by Michael Tetreault Schilling and Jason Mogg from Canadian firm Burns Schwartz about expanding in Bratislava and Bucharest. “In fact, Michael came to see me, he bought me dinner, so I thought I ought to come.”
At the same time, Csasba Berecz, the head of Clifford Chance’s finance team in Budapest, approached Eastwell with a business plan.
“I put the whole package together,” says Eastwell. “I went to the partnership, and the partnership view was that it was a bit out on the edge, but they said that if I said we should do it and was prepared to run for it, they’d give it a go.”
Any misgivings about stepping into emerging markets or diluting the Linklaters brand, which Eastwell said were some of the firm’s main concerns, have since been more than allayed.
In the financial year 2002-03, Central and Eastern Europe grossed £33m with income of £10m, signalling a comfortable 30.3 per cent margin.
Aside from the financials, it is no accident that the partnership felt it could trust Eastwell to deliver.
During his 24 years at Linklaters, he has been instrumental in building the firm’s reputation in capital markets and, on the back of this, its expansion in many countries outside Western Europe, particularly in Asia, where Eastwell was posted for three years after joining the firm in 1980.
“In the beginning, Tokyo was certainly built on capital markets work,” he says. “It’s always been a mainstay of Hong Kong and a mainstay of Singapore.
“For the firm’s expansion in the old days before Europe, capital markets was, I think, the driving practice area. Anyone, I think, would tell you that.”
I ask Eastwell if he feels that capital markets has taken a back seat to corporate since Linklaters took its ‘three-legged stool’ approach to the realignment of the firm’s main practice areas into corporate, finance and commercial.
“I don’t think so,” he says. “The fact is, we don’t. [Head of corporate] David [Cheyne] and I are very good friends. I worked for him in Hong Kong between 1983 and 1986 and he came to my wedding, so we’re actually good chums, and that helps.”
Yes, but from a business point of view? “The other point is that we’re convinced that one of our advantages over our competitors is that belief that the one firm has twin pillars,” he says, adding: “I don’t think we do have that tension, or indeed that feeling that corporate is the dominant practice. It’s not. And I think that David will tell you exactly the same thing. We see ourselves very much as these twin pillars.”
At this point I’m starting to wonder where commercial, which houses practices such as real estate and litigation, fits into the architecture of the firm.
Eastwell then says: “Which is not to underestimate the third pillar – that’s the commercial bit and that’s a number of more discrete practice areas; that’s also important. There isn’t that pressure or tension.”
Certainly in London there is much cross-selling between capital markets and corporate, where Eastwell and his partners do a higher percentage of issuer-led deals, whereas in the emerging markets the firm’s main clients are investment banks.
“In the UK market,” he explains, “in the convertible market which we dominate, we’ve worked on every UK convertible for the last three and a half years on one side or the other. But I stress ‘or the other’, because actually in the UK convertible market we’ll end up acting 60 per cent of the time for the banks and 40 per cent of the time for issuers. But if you look at the global practice, it’s much more investment bank-driven.”
The cross-pollination of corporate and capital markets is a strategy the firm is building across Europe, while as part of his new-ish role as head of global capital markets, Eastwell says he is hoping to bump up the number of US-qualified lawyers.
Out of an overall capital markets team that includes 50 partners and between 250 and 300 specialist lawyers worldwide, 10 partners and a total of 50 lawyers are US-qualified.
“Invariably, with the US being the biggest capital market in the world, if you’re doing a big IPO, you’ll need the US capability,” he says.
Also, since taking over from Canby last year, Eastwell has implemented other changes, including a scheme whereby lawyers qualifying from this September will spend their first two years rotating through the department’s three areas, after which they can choose to specialise.
While Eastwell feels that there are some areas where the department needs to catch up with its rivals – securitisation, for example – he thinks that the firm is now competing well in the MTN market, as well as in derivatives and structured products.
For Eastwell himself, I think he’s pleased to be head of the group, so long as he can keep on fee-earning, which is obviously what he loves. “If you’d asked me was I gunning to be head of capital markets, the answer is no,” he says. “It might sound silly, but I don’t really have this game plan.
“What I do know is that I’m passionate about working in this area. While I still get a kick out of what I’m doing, I’ll continue to do it, but I don’t sort of think ahead about what I’ll be doing in a year or a year after that.
“I’ll take it as it comes.”
Head of global capital markets
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