WFW opts for piecemeal growth

WFW opts for piecemeal growthWATSON FARLEY & WILLIAMS

No US merger for now, but growth is still the goal

Watson Farley & Williams managing partner Michael Greville has ruled out another US merger in the short term, with the firm seeking to expand its stateside offering piece by piece.

The firm, best known for its ship finance and energy practices, is ­aiming to broaden its offering in New York. In particular it is hunting for additional firepower in its ­corporate group as it continues to target expansion in the US following the collapse of its merger talks with Chadbourne & Parke last year.

“I’m not sure it’s necessary for us to look for another merger,” says Greville. “I can tell you that we’re not currently looking for a merger with anybody. Our strategy doesn’t necessarily require a merger. But it’s true we do want to expand.”

London-headquartered Watson Farley currently has one of the ­smallest New York offices of any major UK firm present in the US, with just 16 lawyers on the ground, eight of whom are partners.

Greville is candid about the ­realities of achieving the firm’s ­ambition, which is to more than double that number over the next few years.

“I don’t deny the fact that it’s very tough,” he says. “It’s very difficult to recruit in New York, but we believe our international platform, which is growing, is attractive. It’s also helped by the fact that the US profession is looking more internationally. Our profile fits with that trend.”

Over the past couple of months Watson Farley has grown its presence across Europe significantly. It recently opened an office in Munich through a merger with private equity boutique Oldenbourg Plus to beef up its presence in Germany (it already has an office in Hamburg) and launched an office in Milan, which is also focused on private equity.

But the firm’s relatively low ­profitability will not help it recruit in the notoriously competitive New York market. Last month The Lawyer reported (4 June) that the firm’s average profit per equity partner (PEP) rose by just 7 per cent between 2007 and 2008, from £396,000 to £424,000. The firm has also been steadily slipping down The Lawyer’s UK 200 ranking of the UK’s largest firms in terms of revenue. In 2006-07 it was 51st, whereas four years earlier it was 36th.

In an attempt to strengthen the firm’s US offering, Watson Farley last month hired Tony Backos from Orrick Herrington & Sutcliffe – a ­partner specialising in securities and M&A, notably for Greek and Italian clients. Greville argues that the hire of Backos is particularly significant in the context of his firm’s international coverage. “Tony provides a good link through to Europe, particularly to Greece,” says Greville.

Watson Farley has also hired a mid-level associate from Shearman & Sterling to work with Backos.

Alfred Yudes, the litigation ­partner who heads Watson Farley’s New York office, says Backos’s hire was evidence that the firm had not changed its strategy after the collapse of its talks with Chadbourne. Instead, he argues, it is fulfilling it.

“It’s our intention to have a ­larger footprint in New York which ­maintains our finance-focused practice but also looks at getting into capital markets, securities and M&A areas,” says Yudes. “It’s long been our goal, but we hadn’t found the right person until now. It’s our intention to grow the office to around 40 lawyers over the next few years.”

Watson Farley’s link to Backos stretches back several years, Yudes reveals. “We knew him when he was at the New York maritime firm Healey & Bailey, which was absorbed into Blank Rome. Tony then went to Orrick. We really should have approached him then, but Orrick got in first.”

There is, of course, more history than just this episode between the two firms. In 2002 Orrick poached Watson Farley’s Paris office, with the team led by David Syed never to return. This time, at least, there was a happier ending for Watson Farley.

Efficiency pays off as SIV cases come to english courts

Julia Berris

The impact of the credit crunch on structured ­investment vehicles (SIVs) has been creating significant work recently for firms in both the US and UK.
Clifford Chance, Lovells and Orrick Herrington & Sutcliffe are among those to have reaped the rewards of significant SIV restructurings of late, including Cheyne Finance, Rhinebridge and Whistlejacket.

Mandates in this specific area of restructuring are exceptionally sought after, especially since US organisations are looking to the fast-paced world of UK bankruptcy as an alternative to the US courts.

“We’re increasingly seeing the English legal system being favoured over New York because it tends to be a much speedier process,” says Orrick structured finance partner, Mark Fennessy. “The Woolf Reforms have made it more streamlined and this is very attractive to these groups embarking on these proceedings.”

Last month Orion Finance became the first US company to turn to the UK courts to settle a creditor dispute over the sale of SIV assets. Milbank Tweed Hadley & McCloy represented Orion’s senior noteholders, while Sidley Austin won the mandate to advise the trustee, Bank of New York.

The court ruled in favour of the Orion noteholders, who wanted to postpone the sale of assets due to market conditions. Opting for a UK rather than US court enabled this decision to be reached much faster.

“These SIVs are losing money fast,” adds Fennessy. “Waiting for complicated court proceedings to move on isn’t an option for many. Action needs to be taken quickly. This is why the more efficient system we have in the UK is being favoured.”

The wave of SIV restructurings began last October when Allen & Overy, Mayer Brown and Cleary Gottlieb Steen & Hamilton won mandates to advise on the so-called ‘super-fund’, which was designed to alleviate the impact of the credit crunch on SIVs. While the plan to create a $75bn (£37.5bn) rescue fund was abandoned early this year, the past few months have been characterised by a number of restructurings in this area.

“There are more to come,” says Fennessy. “I think it’s safe to say many of these will be restructured via the UK courts.”