Think Skadden Arps Slate Meagher & Flom, think probably the best M&A firm in the world ever. Then think about its strategy in London, and you will probably draw a blank. Currently poised to hire Lovells private equity guru Allan Murray-Jones, to stake a claim in Italy and bulk up in Germany, the firm topping deals tables worldwide is on the offensive. But why?
The obvious answer is that US clients want it, and after all, that’s what makes Skadden tick. Anywhere else and the plan might be: big UK practice, then win lots of new clients and start stealing work from the magic circle. Not Skadden – it insists that it is not even interested in competing with the UK firms.
I know it’s quirky, but it could just be telling the truth. Take the office’s latest big deal, the £18bn Prudential/American General (AmGen) merger. AmGen is a longstanding client in the US, and so called on Skadden for the deal. The London office rang what you would have thought was an arch rival – Slaughter and May – to do the UK end, after deciding partner Glen James was the best man for the job because of his experience in the financial services sector.
James had worked opposite Skadden’s London office on Citigroup’s £1.35bn takeover of Schroders’ investment arm last year, when Skadden advised Citigroup with Norton Rose and James headed a Slaughters team for Schroders. It pays to be nice to these guys when they’re sitting across the table.
At the moment Skadden has 53 lawyers in London, 18 of whom are English. The first English partner was Michael Hatchard, who joined from Theodore Goddard in 1994, where he was head of corporate finance. He heads the English M&A practice, and James Healy the UK securities group.
The strategy is to focus on three core areas in every European office – M&A, capital markets and project finance. The plan is to do only high-profile, highly profitable and highly complicated cross-border deals; and yes, I know everyone wants to do only those, but Skadden is in a position to be choosy. The middle market is just not on its radar; the firm has a client base to die for, acting for all the major investment banks and a raft of huge corporates in the US.
There are still gaps in London that need to be plugged though – namely tax, bank finance and acquisition finance, all of which would help the core areas, as would deepening the debt resource.
Should Murray-Jones sign on the dotted line (which is likely), he will obviously be a massive boost on the private equity side. What Skadden really wants is someone to act for US clients entering Europe – companies like Blackstone, Wasserstein Perella and PaineWebber – and while it says it is not after a book of business, Murray-Jones’ relations with Doughty Hanson will help as well.
Skadden is not interested in anything that might be dilutive, so if it is going to take on partners, it has to be able to sell them to New York. The firm is the biggest in the US, with around 1,400 lawyers, and has the highest revenues, topping $1bn (£6,987m) last year. Profits per partner averaged $1.6m (£1.1m).
That’s why Italy could be the site for Skadden’s first alliance. It has never before linked up with a firm, but is now talking to a few top firms out there concerning a link-up. An alliance would be cheaper than setting up an office, and it would give instant credibility in all of the key areas. And London is doing very nicely. Its recent deals, besides Prudential, include representing Xcel on its £1.8bn sale of Yorkshire Electricity to Innogy. It also advised Morgan Stanley on two deals where it was financial adviser: Degussa’s £1.4bn offer for Laporte and Cinven’s £450m acquisition of McKechnie.
What Skadden is doing is certainly different. It is arguably in a league of its own in London as one of New York’s truly elite corporate firms with an English law capability (though Weil Gotshal & Manges, Shearman & Sterling and Cleary Gottlieb Steen & Hamilton might not agree), and it is not trying to build a UK practice for its own sake. Unusually, the UK lawyers work in mixed teams with the Americans in London to try to offer clients a truly one-stop shop approach, and the firm quite happily refers things to what should be its biggest competitors instead of trying to handle all of it itself.
So keep in with Skadden if you can, because although the plan might be sketchy, it is clearly going to be the one to watch.