When the first waves of the financial tsunami broke on the shores of the magic circle’s corporate practices, those that could adapt quickest were the ones that kept themselves dry.
While the likes of Linklaters and Slaughter and May were nimble enough to pick up new business, Clifford Chance was generally perceived to be the unlucky firm left floundering in the water.
As a corporate partner at a top 10 firm says: “The tide went out and there were a lot of people left swimming without their shorts on.”
The firm’s previous strength proved to be its Achilles heel as the financial services sector – in which Clifford Chance was a market leader – all but disappeared overnight. With around two-thirds of its business exposed to the sector pre-recession, a tricky 2008-09 looked likely and the resultant 37 per cent drop in average profit per equity partner (PEP) will have taken few by surprise.
“The recession really exposed the lack of diversity on the corporate side at Clifford Chance,” adds the partner. “They had a lot of people doing nothing, especially in capital markets.”
Private equity dealmaker Adam Signy’s shock departure to Simpson Thacher & Bartlett in May 2009 after 22 years at Clifford Chance was a sign of the times and a potential hammer blow to an ailing corporate group.
Coupled with the loss of Signy, Matthew Layton’s accession to global head of corporate a year earlier was perceived to have created a generation gap in the
“The problem’s always been that the best fee-earners get sucked into management,” says a veteran City partner. “There’s a vast amount of untapped potential being wasted on management. If you look at partner hours, they’re way too low as a result.”
It is a view that the firm’s partnership is aware of, but which does not tell the whole story.
Guy Norman is one of a group of younger, talented partners helping to rebuild the reputation of the leaner, hungrier corporate team.
Norman’s is the name that crops up everywhere when you ask who is at the vanguard of the new breed of rainmakers. He led the team on Kraft’s headline-grabbing £11.5bn acquisition of Cadbury, along with even newer blood in the form of partners Patrick Sarch and Rob Crothers in London and Sarah Jones in New York.
The deal showed that Clifford Chance now has some serious corporate muscle to flex, but according to Norman this is not a new phenomenon.
“It’s a bit like with Skoda cars – the perception lags behind the reality,” he explains. “Older people will say we’re a finance firm and not a corporate M&A firm. If it was like that I wouldn’t be here.
“The perception going back five or 10 years was that Linklaters and Slaughters were packed with these awe-inspiring M&A lawyers and we weren’t. But a lot of the people who gave those firms that reputation have gone and a lot of work’s being done by partners who weren’t partners five years ago.
“There’s a buzz here now. We’re not populated by lots of grey hairs and the energy and drive of the younger partners is impressive.”
The youthful make-up of the corporate team has started paying dividends in terms of private equity work too. The likes of partners Kem Ihenacho and Amy Mahon have joined private equity chief David Walker to re-establish links with some slumbering clients in the sector, with Carlyle Group, CVC Capital Partners and Permira Private Equity thought to be ready to come out of hibernation.
Other partners tipped to be stars include Hong Kong private equity partner Simon Cooke, corporate finance partner Lee Coney and M&A partner Brendan Moylan.
Walker points to the firm’s new sector-based strategy – part of Layton’s manifesto when he took charge of the corporate team – as something that has motivated the partnership.
“There’s a real focus about the place with the revived sector approach,” he says. “It aligns us more closely with the way clients work. It’s a very exciting time for the corporate practice.”
Despite such bullishness, Signy’s departure still stings both emotionally and financially. Although an insider says that he was “not involved in most of the major transactions going back three or four years”, private equity remains a relationship-driven business and those relationships cannot be replaced overnight.
Last week’s news that Signy’s English law M&A expertise saw Kohlberg Kravis Roberts (KKR), a longstanding institutional Simpson Thacher client, ditch Clifford Chance in favour of the US firm on the M&A side of its £955m Pets at Home buyout will have gone down like a lead balloon. Although Simpson Thacher would always have been called on to do KKR’s financing work, Clifford Chance traditionally would have been a shoo-in for the corporate role.
It is, perhaps, proof that energy, youth and drive are not enough on their own to turn around a battleship.
“A lot of the younger guys they had have taken over, but it’s got to be a fundamental reshaping,” comments the City partner. “They’re more hungry and the market knows that, but that’s because they had to be.”
Fundamental reshaping is not flavour of the month any more, but Clifford Chance global managing partner David Childs is known to be keen on slimming down management in the firm as a whole, and the corporate team is ahead of the game in this regard.
The perception that the corporate practice is still struggling will not change overnight, but Clifford Chance at least seems to be moving in the right direction.
CLIFFORD CHANCE: THE NEXT GENERATION
- Patrick Sarch, corporate finance partner, made up in 2005. Clients include Barclays. Part of the team advising Kraft
- Kem Ihenacho, private equity partner, made up in 2007. Clients include Bridgepoint among others
- Nigel Wellings, M&A partner, made up in 2006. Acted for Chinalco on its aborted Rio Tinto tie-up
- Rob Crothers, corporate finance partner, made up in 2008. Part of the team advising Kraft
- Amy Mahon, private equity, corporate finance and M&A partner. Rejoined CC after two years at Macquarie Bank
- Lee Coney, corporate finance and M&A partner, made up in 2007. Clients include DTZ and Citi
- Spencer Baylin, corporate finance and M&A partner, made up in 2002. Advising T-Mobile on the mooted tie-up with Orange
- Brendan Moylan, M&A partner, made up in 2005. Advised Macquarie Bank on National Grid mobile mast business buy