The world is Skadden’s playground as European arm flexes US muscle

Ultimate deal machine can ride out M&A dip with European investment into the US, says Kit Chellel

The world is <a class=Skadden’s playground as European arm flexes US muscle” />Overpaid, overpowered and over here – Skadden Arps Slate Meagher & Flom’s London lawyers have the full weight of the US’s top M&A outfit behind them.

The New York-headquartered firm has been described as the ultimate deal machine, consistently leading the global M&A rankings.

Despite the downturn, this year has been no different. The latest Thomson Reuters figures show Skadden as the number-one firm for worldwide announced deals, advising on transactions worth a total of more than $246bn (£124.39bn) in the first half of the year.

Considering ;the ;firm’s ­reputation in the US, it can be ­difficult to distinguish Skadden’s London corporate lawyers from their US colleagues.

“The US client base generates a lot of business for them,” says one City partner at a rival US firm. “They take their international aspirations very seriously.”

So does this mean the City office exists purely to service the firm’s global and US clients?

Not according to European head of M&A Scott Simpson, who says: “We have a tremendous client base in the US. However, one of the things I’ve focused on for the last 18 years is developing a ­European client base for M&A.”

Recent evidence suggests the firm is having some success. It has climbed both the European and UK M&A tables in the last year, rising from eighteenth to a ­creditable ninth in Europe for announced deals.

In the past year Skadden’s ­London office has advised on ­several top-end deals with little or no US involvement. In July ­Simpson and fellow corporate rainmaker Michael Hatchard were instructed by banks advising ­Barclays on its £48.5bn proposed merger with ABN Amro.

And the firm’s landmark deal of 2008, announced just last week, saw Simpson lead a UK team ­representing a German client buying a company in the US. The firm had won a mandate from German pharmaceutical giant Fresenius on its $3.7bn (£1.87bn) acquisition of APP Pharmaceuticals.

When the London office opened in 1988 it was very much a US satellite.

“When we first came to town our mission was – there must be a place for a US M&A powerhouse,” says Simpson.

Now Skadden’s corporate group is a rising force – if not quite the standalone practice the firm’s ­London leaders would have you believe. Since 2001 the office has doubled in size, and 17 of its 27 partners are in corporate.

As in the US, the firm’s cosy relationships with bulge-bracket banks is key to its continued success.

Look at its role on the ABN Amro bid, or equally the Arcelor-Mittal takeover battle of 2006. Skadden had never acted for Arcelor before the London team was recommended by Deutsche Bank, Merrill Lynch and Morgan Stanley.
Other banks providing a flow of work in London include Citibank, UBS and Goldman Sachs.

But UK plc clients? A City-based corporate partner at ­another US firm notes: “They are never going to get their claws into the range of UK and European domestic FTSE and DAX companies that European-based firms can. They just don’t have the scale that Linklaters and Freshfields [Bruckhaus Deringer] have got.”

Arguably for corporate partners in London, this should not matter. Skadden wants to be involved in the biggest global deals, which are inevitably cross-border and reliant on major banks. In this arena the firm is already king.
The London team is being kept busy, for example, by the UK side of Anheuser-Busch’s defence against a hostile bid by Stella Artois owner InBev.

Former ;Clifford ;Chance ­managing partner Tony Williams, who now runs consultancy Jomati, tells The Lawyer: “Close ­interaction with the US is the way to be successful. There clearly is that. They’re getting the UK piece of the larger deals.”

Hatchard, who along with Simpson forms the rainmaking duo at the heart of Skadden’s City practice, says: “In the UK plc arena, as a generality we don’t have a stable of clients as such, but tend to be brought in because of our transactions capacity and cross-border skills.

“Our predominant involvement in UK public company work has been for cross-border purchases into the market or non-UK ­targets of a UK purchaser.”

Another key to Skadden’s success in London has been its measured approach to partner hires. Unlike some of its US rivals, the firm has eschewed the ‘all guns blazing’ approach to expansion and has grown relatively slowly.

Hatchard was the first English partner to sign up in 1994. “He joined from Theodore Goddard at a time when other US firms were ­saying, ‘It’s got to be magic circle’,” recalls Williams.

Skadden has continued to search for good lawyers rather than big names. Aware that the City office needed a bigger private equity practice, the firm poached Allan Murray-Jones from Lovells in 2001. He brought with him Doughty Hanson, now a major private equity client and a lucrative source of work.

But however highly rated the London team, Skadden’s lawyers could be facing a difficult few months. With its reliance on big-ticket M&A, Skadden is more exposed to the credit crunch than virtually any other firm.

“The greatest effect for them is going to be the flow of investment across the Atlantic – that hasn’t held up well,” says a US corporate partner.

There might be less cash ­coming from the US into Europe, but Simpson says Skadden’s ­revenues have been boosted
by a new trend for European ­investment in the US.
The Fresenius deal and InBev’s interest in Anheuser-Busch show that European companies are looking to the weakened US ­economy for opportunities. And Simpson says Skadden is ­uniquely placed to take advantage of this trend.
“We’re one of, if not the only firm that can field a team that’s based in Europe but that can do a ­successful ;public ;company takeover in the US,” he says.

So will Skadden ever match ­Clifford Chance, Freshfields and Linklaters as a UK corporate ­entity? Probably not.

But while the firm remains a ­fixture in the world’s biggest takeovers, its London partners are unlikely to care.

Scott Simpson, head of European M&A, Skadden Arps Slate Meagher & Flom

1990: Moves from New York to bolster Skadden’s City office.
1999: Instructed by Gucci in battle for control of the fashion house.
2002: Wins fourth place in the table of European ­corporate stars, advising
on deals worth e21.2bn (£13.6bn) in the first six months of the year.
2004: Acts on £2.3bn takeover of Mexican cement maker Cemex. Advised Cemex alongside Slaughter and May’s Chris Saul, who is now senior partner at the firm.
2005: Instructed by Skandia Insurance on £3.3bn takeover bid by Old Mutual.
2006: Rises to the top of the European M&A tables for individual lawyers, advising on nine deals with a total value of £52bn. Rewarded with a place in The Lawyer Hot 100.
2007: Called on by banks to advise on Barclays’ £45.5bn bid for ABN Amro.