The strange decline of A&O banking

And so the Kirkland & Ellis recruitment saga draws to a close with the hire of leveraged finance partner Stephen Gillespie from Allen & Overy (A&O).

And so the Kirkland & Ellis recruitment saga draws to a close with the hire of leveraged finance partner Stephen Gillespie from Allen & Overy (A&O).

Kirkland’s trawl for leveraged buyout (LBO) partners is the only story that private equity and banking lawyers have been talking about for the past few months. The revelation on (27 April) that Kirkland had snared Gillespie set the lines buzzing once more.

While A&O moved into damage limitation mode, there was jubilation over at rival Clifford Chance (CC), where Gillespie is held in high esteem. It’s true that Gillespie has been less visible on frontline fee-earning for a couple of years, but in the past 10 months or so he was back leading bank deals.

The wider issue is clearly this: A&O has lost serious ground to CC. A&O banking partners work like dogs, but the lack of a sponsor practice (with the exception of Robin Harvey’s PAI relationship) has done it damage.

No other finance firm has lost so many prominent partners in such quick succession. The most senior leveraged lawyers there now are the former Norton Rose crew, headed by Tim Polglase. By contrast, CC has suffered only one London banking defection in five years, when promising junior partner Stephen Lucas quit for equity partnership at Linklaters.

But it’s not just about the lack of a sponsor practice. A&O has traditionally operated in silos: you’re either an LBO specialist or you’re in the global loans group. That line has blurred slightly in recent times, but it is still in marked contrast to CC’s more flexible approach.

A&O has also lost market share to CC with the two biggest deal machines in the City: Royal Bank of Scotland (RBS) and Barclays Capital (BarCap). The major challenger to CC’s relationship with BarCap is now not A&O, but Linklaters. A&O keeps a toehold in RBS through Jacqui Evans, but Ashurst and CC have hoovered up the rest.

Frankly, A&O’s banking group has suffered from a lack of leadership since David Morley moved up to become managing partner four years ago. Stephen Kensell is the nearest A&O has to a charismatic all-rounder in the Morley mould, but unlike CC the A&O banking department is hardly blessed with an overabundance of personality. Put it this way: banking partners across the City are speculating on who’s next to leave A&O. Indeed, why would a headhunter look elsewhere?