Whether you love or loathe incumbent Competition Commissioner Mario Monti, he has done his bit to bolster the flagging M&A market with the Schneider-Legrand saga. Bought and sold twice since last autumn, Legrand has kept lawyers in France and London busy during a dry spell.
The big winners in Monti's sale of the century are the Wendel consortium, Linklaters Paris and Simpson Thacher & Bartlett in London. The losers are Schneider, which had to sell Legrand at a knockdown price, and Allen & Overy (A&O), which masterminded the company's competition strategy.
Under French capital markets law, Schneider could not make the acquisition of Legrand contingent upon subsequent regulatory approval, which, given the vagaries of recent competition policy, is a somewhat unfortunate position for French companies. Schneider gambled and lost.
The Competition Commission ordered the company to divest 98 per cent of its holding and a private equity sale ensued. There was a host of potential bidders that needed legal advice. Permira, Carlyle, Paribas Affaires Industrielles, CVC Capital Partners, BC Partners, Cinven Group, Kohlberg Kravis Roberts (KKR), Wendel Investissement and Candover were all involved.
The benefit of being an M&A lawyer rather than a banker is that you do not have to win to get paid. One magic circle firm that dabbles in private equity bills a 120 per cent fee on a successful bid and a discounted 80 per cent fee for aborted deals. Other firms are more generous. However, in this M&A climate, you have to take anything you can get and even a discounted fee is pretty good news.
Linklaters acted for the successful Wendel consortium. Paris partner David Aknin was instructed by Candover, a one-time member of the consortium. The firm also has close ties with French consortium member CGIP. Aknin has worked with Candover in France for more than two years, although the house often uses Clifford Chance in London. When Candover pulled out, Linklaters stayed on the deal.
Aknin got lucky with conflicts. The remaining consortium member, KKR, had already instructed its regular counsel Simpson Thacher, which has no French law capacity. Other firms, including Ashurst Morris Crisp, Clifford Chance, Freshfields Bruckhaus Derringer and Willkie Farr & Gallagher, were conflicted out through relationships with financiers or failed bidders. But then, you need a bit of luck in private equity.
The Legrand buyout was KKR's first in Europe for two years. Given that the Simpson Thacher's London office was opened for key clients such as KKR, a bit of activity is good news for the US firm. While Linklaters Paris will hope to get more business from KKR should the house's Francophile tendencies last, the firm has no hope of muscling in on the more important London relationship.
So it will be left to former SJ Berwin and Dickson Minto partner Graham White to deliver the goods for Linklaters in London. White has been at Linklaters for around eight months and is waiting for his first major transaction to go through. Head of corporate David Cheyne has expressed his affection for private equity, so White has high-level support. However, Linklaters has no pedigree in the sector and White will initially be reliant on his own contacts. Established players will be watching carefully.
Schneider, A&O and everyone else are waiting for the results of the appeal against the Competition Commission's decision to turn down the Schneider-Legrand tie-up. If successful, Schneider can pull out of the sale upon payment of a break fee. Post-Airtours, it is impossible to rule anything out; but the consensus is that, while the court may throw Schneider some concessions, the overall decision will stand.
Interestingly, A&O is no longer alone in advising Schneider. The firm continues to lead the appeal against the Competition Commission's original decision to turn down the merger. However, earlier this year Schneider instructed Cleary Gottlieb Steen & Hamilton on the Legrand divestment. A&O is staying uncharacteristically mute on the reasons behind the switch.