Slaughters still rules the blue-chip jungle
14 March 2011 | By Gavriel Hollander
The latest Hemscott rankings reveal that the top companies’ legal adviser rosters have barely changed during the downturn. Gavriel Hollander reveals the swings and roundabouts since 2005
To say that the corporate world has changed over the course of the past five years probably goes some way beyond understatement. But a comparison of corporate adviser rankings over the same period shows that, while some firms have been at the mercy of recessionary forces, many others have managed to maintain their positions in a shifting deal landscape.
The Hemscott rankings for advisers to listed UK companies in 2011 reveal at least one constant: in terms of client numbers Slaughter and May leads the way on the FTSE100, FTSE250 and overall stock market lists. They are the same positions the firm held in November 2005, although total client numbers have dipped slightly to 111 from 118.
On the full list, the star performer, certainly among the traditional corporate heavyweights, is Herbert Smith. The firm has risen from ninth in the rankings to joint third alongside Pinsent Masons. Its listed company client numbers have swollen from 59 in November 2005 to 90 at the end of this February.
Herbert Smith head of corporate James Palmer, when quizzed on his firm’s improved performance in the listed companies space, admits that “it’s been a targeted plan. It’s been a case of consistent wins. Sometimes people come in and out of the indices, but it’s our consistency over the period that we’re really proud of.
“We take a long-term view and won’t just dump someone because they haven’t done a deal in three years. We’d rather stay loyal to our clients.”
At the other end of the scale in terms of clients, Ashurst has seen numbers fall from 116 to 77 over the same period. In 2005 the City firm was second only to Slaughters at just two clients behind. It now lies in sixth place, behind Norton Rose, which itself has slipped from third to fifth.
However, a closer examination of the figures lends support to Mark Twain’s well-worn opinion of the value of statistics.
While Ashurst may have lost its place of five years ago in the full stock market table, the same is not true - or at least not to the same extent - when the FTSE100 and FTSE250 lists come under the microscope. The firm is still second on the FTSE250 ranking, dropping eight clients from the 32 it claimed in 2005, while it has shed only one FTSE100 client during the half-decade.
What accounts for the more significant fall-off in small-cap and fledgling clients (Ashurst has lost 26 of the 50 it numbered in 2005) is the fact that the nature of deals being done has changed in the early years of this millennium.
“The biggest difference in the past decade with small-cap companies has been public-to-private takeovers by private equity funds,” explains Ashurst Europe corporate chief Simon Beddow. “Because we’ve traditionally been a firm with a good reputation in private equity we acted for a lot of investee companies when they floated, but the growth in secondary buyouts has meant that a source of listed clients has gone.
“We’ve lost a few [clients] through [those] takeovers and there’s been a shift of focus towards FTSE250 companies or larger.”
Beddow also points to another trend unearthed by the stats - namely, that while the FTSE rankings have tended to stay relatively stable, fluctuation in the fortunes of law firms happens around the small-cap end of the market and, to an even greater extent, on AIM.
“On the FTSE nobody’s really moved,” continues Beddow. “Firms are working hard to protect their clients, but below that level it’s much more volatile.”
The AIM figures tell a much more dynamic story than the FTSE ones. Some of the traditional players, such as Pinsents, Memery Crystal and Eversheds, have maintained their elevated status, even if the last of those three has relinquished the top spot it held in 2005. However, as might be expected of a market in which new players come and go on a regular basis, there are also plenty of newcomers.
One of the big stories has been the rise of offshore firms in the rankings, with Ogier and in particular Carey Olsen making their marks from virtual standing starts. The driver for such markedly improved performances is the listing of a high number of closed-end funds on the junior market, thanks in no small part to the Channel Islands’ relaxed listing regimes.
“The market’s grown and we’ve grown to meet that market,” is how corporate partner Tom Carey explains Carey Olsen’s success. “We see the closed-end market in Guernsey as a core area and we want to be the best in that area.”
Among the City firms to have reaped the benefits of the mercurial nature of the junior market are Travers Smith, which by trebling its AIM clients has seen it sneak into the top 15, LG, which is now second only to Pinsents on the list, and Stephenson Harwood.
Stephenson Harwood has built its AIM book from five in 2005 to 32 today, moving the firm up to seventh. According to chief executive - and the former head of corporate - Sharon White, success breeds success when it comes to AIM work.
“One of the good things about the work we’ve done is that it increases the exposure we have to financial intermediaries, which helps raise our profile and win more work,” she says.
White also points to the good interaction between the firm’s London and burgeoning Hong Kong offices as a source for a good deal of the AIM work that has come its way. And she echoes the sentiment that the tougher nut of the FTSE lists has become harder to crack in recent years.
“There’s certainly been a move towards having more organised panels, which means many companies have been looking to use a smaller number of firms in order to maximise value. Most companies want a range of advisers, but they want to keep it to a smaller number.”
What the situation means for advisers hoping to claim new wins among the top 350 public companies is that it is harder than ever to prise them from existing counsel.
“There’s not a decent law firm in Britain that doesn’t have a business development team telling them to work really hard to keep their clients happy,” says Beddow. “But what these stats don’t show is the fierce competition for market share with these clients.”
Slaughters M&A chief Steve Cooke believes that, while client numbers have remained steady, the more elusive jewel of market share has coalesced around his firm and the magic circle duo of Freshfields Bruckhaus Deringer and Linklaters.
“The overall picture over 10 years is one of consolidation of market share by the first three firms,” he adds, pointing out that the best way to judge performance is by combining the FTSE100 and FTSE250 figures. “Trends in representation of the FTSE100 judged over any short period of time are normally quite misleading as there’s a lot of movement of companies between the 100 and 250.”
And if anything is a testament to the glacial movement of the rankings it is Cooke’s own firm. Through the worst recession for generations, among the top-end clients the law firms of choice have barely changed.