Staying up

Camerons, Nabarros and Hammonds were overjoyed to snap up roles on the Nomura-Le Meridien deal. Helen Power asks if the three mid-size firms can maintain their momentum

Last year's M&A figures make depressing reading for most corporate lawyers. Firms such as Freshfields Bruckhaus Deringer, which usually head the pecking order, saw big ticket M&A work slashed as the value of the deals the firm worked on fell from $258.9bn (£183bn) in 2000 to $132bn (£93.3bn) in 2001, according to Mergermarket's figures. With less work but just as many lawyers chasing it, the middle of the market was squeezed as both the magic circle and second-level firms pitched for what would have passed as mid-cap work the previous year.
But one transaction provides a fascinating example of how firms outside the magic circle can muscle their way in on a megadeal. In a year when deal values plummeted, Nomura's acquisition of the Le Meridien hotel chain for £1.9bn stands out. Although dwarfed by the likes of the BHP-Billiton and Bank of Scotland-Halifax, it was just the type of deal mid-tier corporate departments would kill to get in on. Sitting pretty on the Le Meridien deal were three firms that span the mid-tier and which have prospered in this scamble for work. CMS Cameron McKenna, Nabarro Nathanson and Hammond Suddards Edge may have widely diverging corporate strategies, but they have one thing in common – they all bucked a general M&A downturn to do better in 2001 than 2000.

Hotel king
Le Meridien was really Camerons' deal. Corporate rainmaker Richard Price led the transaction when his longstanding client Nomura was chosen as the preferred bidder for the Le Meridien chain of 150 hotels, which includes the Waldorf in London, Hotel Ritz in Madrid and the Etoile hotel in Paris. Freshfields and Berwin Leighton Paisner represented Le Meridien and both Hammonds and Nabarros had modest roles on the deal.
According to Thomson Financial's M&A figures, Camerons was ranked at a miserly 33 for 2000 on completed deals with a UK target. Last year, however, the firm climbed to 25th. The firm did fewer deals in 2001 – 34 compared with the previous year's 57 – but worked on deals of a higher value, clocking up $5.7bn (£4bn) last year over 2000's $5.2bn (£3.7bn).
Price, who brings in a significant chunk of corporate work for the firm, acknowledges that Camerons' decent showing has been “a bit of luck and a bit of judgement. A large part of Camerons' work is medium-ticket, and when the big-ticket work disappeared, the medium held up.”
Certainly, it helped that longstanding corporate clients such as Nomura were very active on the M&A front in 2001. Equally, some of Camerons' biggest deals were for new clients. For instance, the firm acted for the National Air Traffic Services (Nats) on its acquisition by not-for-profit consortium Airline Group, a transaction handled by banking partner Andrew Ivison and corporate partner Mike Rich. Camerons also bagged a new client when Perrier Vittel, part of Nestlé, acquired US company Ionics-Aqua Cool Pure in a transaction led by corporate head Guy Billington.
A deal that failed to make it on to the Thomson Financial table was National Grid Group's $3bn (£2.1bn) acquisition of US power group Niagara Mohawk. The deal was announced in 2000 but completed only last month, when the Securities and Exchange Commission finally gave it regulatory clearance. It was handled by corporate star Sean Watson, who also acted for Enterprise Inns on the acquisition of Morgan Grenfell PE-Pubs interests.

“It's a bit of luck and a bit of judgement. A large part of Cameron's work is medium-ticket, and when the big-ticket woek disappeared, the medium help up”
Richard Price, CMS Cameron McKenna

In truth, one of Camerons' most gratifying deals of the year also does not figure in the Thomson top 10. Last May, rising star Louise Wallace bagged Camerons its first corporate transaction for the Sara Lee Corporation from right under the nose of the company's traditional M&A adviser Clifford Chance. Wallace advised on the disposal of Sara Lee's UK bakery business, which made more than £50m in sales in 2000, to Dublin-based Hibernia Foods for an undisclosed sum.

Camerons and the Continent
Price believes that Camerons' European expansion is the bedrock of the firm's success. “We're now really starting to see the benefits of the CMS alliance, which makes us part of the largest European legal grouping,” he says. In line with the strategic thinking of most law firms, Price points to the German connection as the most crucial in Western Europe, but he also says that the large CMS Eastern European network has provided vital referrals for London.
Future strategy, says Price, will be to build on existing strengths to target more high-value transactions. Underpinning this, Camerons will have to ramp up its relationships with the banks. Price concedes: “We always want to do more work for financial institutions.” Last month the firm secured a place on the revamped Royal Bank of Scotland advisory panel. A modest step forward given the size of the panel. But Price argues: “You have to get on there in the first place to have a chance to maximise your position.”

Hammonds steams in
So what of the other players on that deal? Hammonds had a limited role on the Le Meridien deal when the firm advised Abbey National Treasury Services on its investment, but saw plenty of other high-quality corporate action. The firm was ranked just 38th last year, but climbed to 24th this year. Like Camerons, Hammonds worked on fewer deals in 2001 than the previous year, but they were of better quality. In 2000, Hammonds handled 122 UK target or acquirer deals, worth a total of $3.8bn (£2.7bn), while in 2001 it handled 80 deals, valued at $5.7bn (£4bn).
Head of Hammonds' UK corporate finance practice Nick Allen says: “We had a good private equity practice at Hammonds, but the merger with Edges [Edge Ellison] has massively strengthened the straight M&A practice to the extent that this is now the strongest part of the business.”
However, the firm's top 10 deals say the most about which UK offices generate and handle corporate work. Those deals are spread across the firm's London, Birmingham, Manchester and Leeds offices, and Allen says this is a fair reflection of the firm's broader corporate breakdown. He says that London accounts for about 45 per cent of the work, with the rest split equally between the three regional offices. “It's a reflection of the practice as a whole that each office has great clients and quality lawyers,” he boasts. “Our London office is strong enough that we don't have to tell other offices to send over the good deals.”
Allen is a key player at the London office, where he manages the firm's relationships with crucial clients such as WPP Group and Compass. The office in the capital also handles prized institutional clients, including Abbey National and Royal Bank Private Equity. As one might expect, most of the institutional clients are dealt with out of the London office.
However, the regional offices are left with some quality clients. Birmingham partner David Hill is the client relationship partner for prized corporate client and global manufacturing giant Jabil Circuit. The Leeds practice remains the hub of the firm's private equity practice, but also gives partners like David Armitage a chance to do mainstream M&A, such as the Gilde-Autoplastics deal. In Manchester, the position is reversed, allowing partners like William Downs and Stephen Levy to do a small amount of private equity work alongside a mainstream M&A portfolio.
Not content to rest at number 24 in the M&A tables, Allen says Hammonds' ambition is to “keep on moving up the value chain”. His strategy is to adopt a more sector-specific approach to growth, particularly targeting energy and power clients. If that is the case, the firm is taking a gamble on future consolidation in the sector, particularly in renewables.

Nabarros escapes property tag
And then there is Nabarros, which acted on Le Meridien for longstanding client Alchemy. The firm was ranked 44th last year, but climbed to just eighteenth on UK deals for 2001. Nabarros handled 24 deals worth $2.8bn (£2bn) last year, but 42 this year with a value of $6.8bn (£4.8bn).
Famously, Nabarros' traditional strength is in property work, but it is beginning to break out of its pigeonhole. For the last couple of years, it has followed a three-pronged approach, chasing corporate work in technology, media and telecoms (TMT) and projects as well as in property. Property remains the bedrock of the practice, making up around 45 per cent of the work, while projects and TMT make up just over 25 per cent each. Nabarros partners and assistants frequently move across the TMT, property and projects sectors; in fact, most of the lawyers have done deals in two or three sectors.
Corporate partner Iain Newman has spearheaded the drive in TMT. Despite the TMT downturn, Newman says: “The private equity houses continue to invest, but admittedly they're doing so much more slowly.” Newman manages the relationships with key private equity clients such as Alchemy, Cazenove and New Media Ventures. In addition to his involvement on Le Meridien, Newman led one of the firm's largest deals of 2001, which is also not included in Thomson's statistics. He advised Land Securities on its £2.3bn Telereal deal, a sale-and-leaseback joint venture with BT, which acquired BT's property portfolio.

“We've always been known as a nice firm to deal with, but there comes a point where this is baggage and you want to be more assertive about what you do”
Garteh Jones, Nabarro Nathanson

Indeed, many of the biggest deals have been in property, with corporate partner Gareth Jones leading on three of the firm's top 10, as classified by Thomson Financial. Nabarros also singles out commercial property partner Chris Luck as a key contributor to this year's success.
The projects practice is led by Mary Bonner on the rail side and Robert Tudway on the electricity and infrastructure side. Jones admits that the firm has “got a little way to go on the projects side”, but says that energy deals in particular are of increasing importance. While Jones acknowledges the benefits of a counter-cyclical corporate base, he claims that there has been a cultural sea change at Nabarros, which was always known for its 'nice guys'. “There's a new sense of impetus here,” he says. “We've always been known as a nice firm to deal with, but there comes a point where this is baggage and you want to be more assertive about what you do.”

Are they the challengers?
There is no easy recipe for success – a dash of luck, strong counter-cyclical practices and European expansion have helped Nabarros, Camerons and Hammonds this year. Nothing they have done will leave the magic circle shaking in its boots and it may still all turn around as the economy changes or European strategies flounder. All three have fledgling European practices. Camerons' is by far the most advanced, but even so it has made little impact on the cross-border M&A market.
Camerons, Hammonds and Nabarros are never going to enjoy the sort of pukka standing of City blue-bloods such as Macfarlanes, but if all three can consolidate their European operations, then we will witness a hotting up of the competition to dominate the top of the second tier.

UK target, any acquirer completed
Firm name $bn (£bn) No of deals Ranking
CMS Cameron McKenna 5.7 (4) 34 25
Nabarro Nathanson 6.8 (4.8) 42 18
Hammond Suddards Edge 5.7 (4) 80 24
UK target, any acquirer completed
Firm name $bn (£bn) No of deals Ranking
CMS Cameron McKenna 5.2 (3.7) 57 33
Nabarro Nathanson 2.8 (2) 24 44
Hammond Suddards Edge 3.8 (2.7) 122 38
Euro target, any acquirer completed
Firm name $bn (£bn) No of deals Ranking
CMS Cameron McKenna 5.7 (4) 63 56
Nabarro Nathanson 2.8 (2) 24 74
Hammond Suddards Edge 4.1 (2.9) 127 68
Worldwide completed
Firm name $bn (£bn) No of deals Ranking
CMS Cameron McKenna 11 (7.8) 75 88
Nabarro Nathanson 2.9 (2) 25 152
Hammond Suddards Edge 4.4 (3.1) 131 137
Source: Thomson Financial