John Kitching: HgCapital

After 20 years as a partner at Lovells, John Kitching shunned retirement to go in-house at client HgCapital. By Margaret Taylor

After a career spent at the private practice deals table, with its notoriously dire work-life balance, most corporate lawyers look forward to a long retirement of novel reading, foreign holidays and general stress-free enjoyment.

Most, that is, except former Lovells corporate partner John Kitching. After more than 20 years at the City firm, in 2000 Kitching chose a new career as group general counsel and compliance officer for private equity firm HgCapital over a retiree’s life of leisure.

“I was a partner at Lovells from 1976 to 2000,” explains Kitching. “Round about 2000 I was 54 and I’d had enough of late nights and weekend meetings so I decided to retire from law and see what else I could do. I was lucky because that was about the same time that the management team of Mercury Private Equity was spinning out of its then owners, Merrill Lynch, to become HgCapital.”

Mercury was one of Kitching’s key private equity clients while at Lovells and it was a natural progression to make the move across. One of the benefits of going in-house, according to Kitching, is that he has come to know the business really well. Oh, and the hours are pretty good, as he works only two days a week.

“I get involved in the decision-making process in-house so I get to know the feel of the organisation much more,” he says. “When I was an outside lawyer I thought I knew people and what they did pretty well, but I didn’t really know the structures in which they operate. Also, because I’m not involved in the actual day-to-day grinding out of the deals my hours are better and by being one step removed, I can take a more objective view of things.”

Although Kitching does not get involved directly on the transactional side of HgCapital’s work, with external lawyers responsible for sealing the company’s deals, he does act as an interface between the deals teams and the investors. For example, if an investor is reluctant for one of the funds to make an investment in a particular jurisdiction, Kitching will step in, in exceptional cases putting a stop to the deal.

He also takes responsibility for ensuring HgCapital’s deals are structured in a way that will be suitable for investors as well as being tax-efficient in the long term. In jurisdictions such as Luxembourg Kitching must make sure the funds satisfy residency requirements.

“A transactional lawyer is like a midwife – he produces the deal then passes it on and goes off to work on the next one,” he explains. “It’s the in-house lawyers who have the baby and must make sure that it works.”

Another aspect of the job relates to money laundering. None of the cash raised from investors is released to the funds teams until Kitching confirms it has passed money laundering controls. “The world has become more used to such controls,” he says. “Our deal teams know the procedures have to be done and money laundering is raised fairly early on.”

While HgCapital has never had to turn down an investor or a deal over money laundering issues, Kitching has made a number of reports to the Serious Organised Crime Agency (Soca).

“Something came up in due diligence that could have been an offence and the only safe harbour in that kind of situation is to report things,” he explains. “That’s not surprising and it hasn’t ever stopped a deal going through.”

HgCapital is reasonably acquisitive for a mid-tier private equity firm. In 2006 the firm’s funds made five buyout investments in Norway, the UK and Germany, as well as four disposals. So far in 2007, it has made three private equity acquisitions as well as a number of purchases for its renewable energy fund, Hg Renewable Power Partners. It has also made six disposals.

With all this activity comes an increased profile, as well as a higher risk of being at the receiving end of the litigators. “We try to avoid litigation but have had some minor shareholder disputes and one contractual dispute,” admits Kitching. “We use Lovells for litigation because we still have a lot of confidence in the firm on the litigation side.”

Despite his history with the firm, Kitching was forced to remove Lovells from HgCapital’s panel following the departure of star partners Oliver Felsenstein for Clifford Chance and Marco Compagnoni and Jonathan Wood for Weil Gotshal & Manges. This sparked a panel review that saw Lovells ousted in favour of Clifford Chance and Weil, with Linklaters, Dickson Minto and SJ Berwin retaining their positions.

“I was very sad about it,” says Kitching, “but the fact that so many important people left Lovells gave us no alternative but to have a panel review.”

John Kitching
Group general counsel and compliance officer

Name: John Kitching
Organisation: HgCapital
Title: Group general counsel and compliance officer
Sector: Private equity
Funds under management: e2.5bn (£1.69bn)
Reporting to: The executive board
Number of employees: 70
Annual legal spend: £5m-£7m, depending on the number of transactions
Global legal capacity: One
Main law firms: Clifford Chance (Germany), Dickson Minto, Linklaters, SJ Berwin, Weil Gotshal & Manges
John Kitching’s CV:

Rugby, Caius College Cambridge
Work History:
1969-1976: Associate, Lovells
1976-2000: Partner, Lovells
2001-present: Group general counsel and compliance officer, HgCapital