Slaughter and May's private equity U-turn fires warning shot to rivals

Catrin Griffiths warns private equity experts in the City not to underestimate Slaughters' foray into their sector.



Slaughter and May has staked out a claim in the private equity market by taking advantage of a Clifford Chance conflict.

Slaughters, which has traditionally avoided the private equity sector, has advised on its largest deal yet for Schroder Ventures - the £397m management buyout of Hogg Robinson. The firm is understood to have billed some £750,000 on the deal.

Partner Mark Horton, who advised on the transaction, says: "It's a growing relationship." And, although Clifford Chance is still very much Schroder Ventures' preferred legal adviser - the ever-voracious City giant still managed to get a piece of the action, advising both Hogg Robinson itself and SocGen on the senior debt - Slaughters seems intent on cementing its position as the number two choice.

Slaughters has advised Schroder Ventures on fund establishment for several years, but it is rare to see a law firm transform funds work into advising on the investment side. It is more likely that the firm's inroads into the private equity house can be attributed to a personal relationship with one of Schroder Ventures' partners, Ian Sellars.

Sellars trained at Slaughters before moving to Clifford Chance, where he became a partner, before leaving for Schroder Ventures.

But the significance of the Hogg Robinson deal lies elsewhere. What it illustrates is an increasing amount of private equity work Slaughters is undertaking generally. Rather than building a practice through other firms' conflicts, it is explicitly targeting the sector - which in itself is a U-turn.

For years, Slaughters scorned the private equity market. But then that was in the days when it was still termed venture capital and considered rather grubby.

But with deal values rising and US buyout houses awash with cash wanting to invest in Europe, the word from Basinghall Street is that the private equity industry is now worth courting. In other words, the fees now make it worthwhile.

"It's moved from management buyouts at the smaller end, where the vast bulk of transactions were at the £10m to £15m level, to a much changed market where private equity is firmly competing for larger scale businesses like Hillsdown," says corporate head Nigel Boardman. "They fall within our natural area of M&A activity."

As such, private equity practices such as Travers Smith Braithwaite and SJ Berwin - which have colonised the medium to large domestic buyout market - will not be threatened by Slaughters. Rather, the firm is after the bigger-ticket jobs where the likes of Ashurst Morris Crisp, Clifford Chance and Freshfields have traditionally dominated, and where public bid experience is at a premium.

Slaughters' two most prominent private equity-backed deals, Punch Taverns and Focus Do-It-All, bear this out. Corporate partner Neil Hyman advised Punch Taverns on its bid for Allied Domecq's UK retail business, backed by Texas Pacific and CVC, and colleague Tim Clark advised on the Duke Street Capital-backed hostile bid for Wickes by Focus-Do-It-All. With private equity houses now among the most active predators on the corporate scene, Slaughters' CV is likely to be attractive to sponsors.

But can the firm cut the mustard on the financing side for sponsor clients? According to several bankers, Slaughters will need to watch its tendency towards wilful opacity. And as the corporate generalists par excellence, the firm is not about to parlay its expertise into a dedicated private equity team - unlike Clifford Chance, for example. All of which means that parts of the market still feel that Slaughters cannot speak the language of private equity - yet.