CC and Linklaters use Chinese walls on Homebase

Clifford Chance and Linklaters navigated their way through a maze of complex Chinese walls on the recent £900m sale of DIY giant Homebase to retail group GUS.

The lightning-quick deal, which was completed in just five weeks, saw Clifford Chance act for Permira (formerly Schroder Ventures) and the company’s management on the sell-off of Homebase as well as for Royal Bank of Scotland and Barclays Bank, which provided an estimated £1bn of financing to GUS.

Linklaters represented both GUS and J Sainsbury, the original owner of the DIY business, as both are also longstanding clients of the firm. Linklaters also advised J Sainsbury on the original sale in March 2001.

Commenting on the duality of the firms’ roles, Linklaters corporate partner Iain Fenn told The Lawyer: “It is not that common, but then it is not that unusual. It really just comes down to the circumstances and whether the clients are happy with it.”

At Clifford Chance, corporate partner Matthew Layton headed the team acting for Permira, which exited its investment in Homebase in record time, while banking partner James Johnson advised RBS and Barclays on the loan.

Post-Enron, professional advisers have become more cautious about the checks and balances put in place to guard against gaps appearing in the Chinese walls.

Recently, The Lawyer revealed that investment bank Goldman Sachs was expected to ban the use of Chinese walls for firms acting on leveraged buyouts (The Lawyer, 4 November).

At both Clifford Chance and Linklaters, separate teams in separate locations were used for each client, while the relevant documents were password-protected.

The small number of advisers on the deal also means that both firms will be entitled to a huge slice of the fees. Neither Permira or GUS employed financial advisers on the deal.

It is understood that GUS, which usually relies on Merrill Lynch and UBS Warburg, sought advice only at the tail end of the deal, in relation to the announcement made to the market.

Financial advisers can usually command fees of between 1 and 2 per cent of the total deal value, which in this case would have meant a pay-out of around £18m.

According to figures released by Thomson Financial, a huge number of M&A deals have taken place this year without the involvement of financial advisers.