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For WPP, the world's third largest advertising company, the coming months are critical. After weeks of intense speculation, the conglomerate has finally announced a £3.1bn takeover of US rival Young & Rubicam, during which time WPP's share price plummeted a worrying 27 per cent.
In a deal based on a share swap, share-holders in Young & Rubicam was understandably worried that a drop in price would undervalue the company.
However, Young & Rubicam has primarily agreed to the takeover. The deal will create the largest advertising company in the world.
Despite the size of deal with Young & Rubicam, it is a drop in the ocean for David Calow, group legal adviser at WPP. The company has been expanding at an alarming rate since its inception in 1985.
In 1997 alone, WPP undertook 21 takeovers and, although the in-house team is made up of just three lawyers, Calow says that, together, he and his team internally manage the majority of commercial deals the company is involved in.
Calow says the majority of the work on the Young & Rubicam deal was carried out by Fried Frank Harris Shriver & Jacobson, and its usual US adviser Davis & Gilbert.
He says: "We rarely bring in other law firms to advise us. We sort of see what we need first. But in the UK, Allen & Overy was involved in some issues but there wasn't really a UK element to it."
While the in-house department is comparatively small in terms of the number of employees at WPP, so is the company's choice of external advisers.
Calow says: "We keep it small because we get a good service. In the UK, we have used Edge Ellison since WPP started, as is the case with Davis & Gilbert."
Commenting on the size of the in-house legal department, Calow admits: "It is tiny but our head office is generally small. I think it is part of a concerted effort to keep the head office numbers small."
However he is vehement that he will not be adding any more lawyers in-house. He says: "Cost comes into it but the department works efficiently as it is."
In terms of the number of takeovers the company is involved in, Calow says: "I think it constitutes pretty much the same amount of work we would do anyway.
"Private companies are pretty chunky deals but the day-to-day work also has to be done. But that is nothing new."
In an industry where the calibre of a person's contacts book is a reflection of the size and quality of its clients, the same can be said to be true of the way in which WPP has chosen its external advisers. Calow says: "Martin Sorrell has known the senior partner of Davis & Gilbert since the early 1980s."
As for the relationship with Edge Ellison, Calow has been a consultant at the firm since his practice Calow Easton merged with the practice in 1991.
In 1991, WPP's second UK adviser, Allen & Overy, was brought in. The firm acts on mainly banking issues and corporate governance.
Internally, the in-house department in conjunction with Edge Ellison heads up the majority of WPP's major European corporate deals. He says: "If it is based outside the Americas, Edge Ellison will manage the acquisition activity with myself or Andrea Harris (an in-house lawyer)."
Allen & Overy has acted for WPP in some jurisdictions, for example in Singapore, France and Germany. But Calow says the firm does not rely on the magic circle firm's international connections and often uses local firms in a particular region.
"We sometimes use Allen & Overy, but not always. We use the firm a lot in Hong Kong because it has a pivotal office in that region."
"Out of London, we have a healthy sheath of firms which we use throughout the world." Calow says that local firms in foreign jurisdictions are either chosen by him or one of WPP's 950 offices throughout the world will make its own decision on which firm to use on matters concerning smaller litigation cases and employment issues.
In these instances, Calow says its local offices act autonomously. "We do not dominate the local offices on what are strictly local issues, but if it is a big piece of litigation then I might get involved."
While much of the in-house activity surrounds mergers and acquisitions work, Calow says the legal department is adaptable to the differing needs of the company.
Calow says: "I do a lot of incentive plans, share option schemes and senior executive share arrangements. Andrea Harris and I would be involved in high level employment matters on a strategic level, although the detail would probably be dealt with by Edge Ellison.
"A lot of the copyright work will go outside. Some of it goes to Edge Ellison, but some of it I have not been particularly involved in and that work would go out to other agents and when it comes to clearance work they would use their own firms."
Calow says his department also deals in public relations, market research and venture capital work. "We have an ecommerce business which takes a share interest in new companies. It is a matter of taste. I personally wouldn't go so far as to call it a venture capitalist arm, although other people in the company might."
Head of legal
WPP Group plc
|Organisation||WPP Group plc|
|Sector||media and photography|
|FTSE 100 ranking||47|
|Legal function||Three lawyers|
|Head of legal||David Calow|
|Reporting to||Martin Sorrell, group chief executive|
|Main law firms||Edge Ellison, Allen & Overy and Davis & Gilbert (US)|