SJ Berwin’s client list under threat as fund formation trio moves to Kirkland” />Rising like a phallus on the north Thames cityscape, the Gherkin has swiftly become the image used to symbolise the powerhouse that is the City of London. From within the nowiconic building’s walls the seeds of another potential powerhouse have been sown in the form of Kirkland & Ellis‘s newly arrived private equity team.
The US firm poached SJ Berwin’s fund formation stars Mark Mifsud, Richard Watkins and Justin Dolling earlier this year. The partners arrived at their new home last month and the firm has embarked on a mission to make its mark on the European funds market.
Kirkland has grown significantly recently, with the London office almost doubling in size in the past two years. But despite hiring Linklaters private equity partners Graham White and Raymond McKeeve, also formerly of SJ Berwin, as well as Allen & Overy leveraged finance partner Stephen Gillespie last year, the firm’s private equity focus has been transactional, with litigation, arbitration and restructuring being the other key practice areas.
In terms of fund formation, the firm has raised funds for the likes of CVC, Madison Dearborn Partners, Sun Capital Partners and Vestar Capital Partners in the past, but it has done so from its base in the US. Until now it has had no UK or European fundraising presence at all, but the addition of three high-profile lawyers and seven associates, some of whom also joined from SJ Berwin, is set to change this.
So where does this leave SJ Berwin? Having lost three of its leading fund formation partners, can the firm hold on to its position – and its clients – in this notoriously personal relationship-orientated sphere?First things first. A look across the private equity landscape shows a number of firms involved in the transactional side of the business. Clifford Chance is a major player and is joined by the likes of Ashurst, Baker & McKenzie, Freshfields Bruckhaus Deringer, SJ Berwin and Travers Smith. At SJ Berwin, Clifford Chance alumnus Tim Wright is a dominant force, advising private equity houses and management teams on buyouts, buy-ins, public-to-private transactions and M&A deals within the UK as well as globally.
When it comes to fund formation, arguably the more specialist arm of private equity, the list of advisers is much shorter, with Clifford Chance and SJ Berwin dominating.
According to Mifsud, Kirkland’s US private equity practice is market-leading and the intention is to make its European offering top tier too.
“We joined Kirkland & Ellis because of the evolution we see happening in the funds market,” he says. “Everything has a US perspective now as the market’s becoming more international. About 40-50 per cent of the work on every fund we do has a US source, even the European funds. Previously we had to get US counsel involved on every fund we did. The attraction for us here is the high-quality international platform that allows us to leverage our skills.”
Mifsud adds that, by working for a firm that is headquartered in the US, the team will be able to offer clients a more joined-up service as the single point of contact.
But what about the clients? The list at SJ Berwin makes for impressive reading, with the likes of Candover, Apax Partners and Bridgepoint all receiving fund formation advice from the firm. Given the personal nature of relationships between private equity houses and their advisers, market speculation has it that much of that list will follow Mifsud and the team to Kirkland.
While Mifsud refuses to reveal which clients are moving across, he does say that a number, including venture capital and big leveraged buyout funds, have already made that decision. Among the clients he has worked for are Candover, Electra Partners Europe and Aberdeen Murray Johnstone Private Equity. However, Jonathan Blake, senior partner at SJ Berwin, says the impact on the firm’s client list has been relatively slight.
“Fortunately clients generally see themselves as clients of the firm,” he says. “There were one or two that were very closely connected with the team that left and they might be going with them, but the majority see themselves as SJ Berwin clients.”
SJ Berwin will be shoring up its relationships with Candover and Apax as a matter of priority.
Blake contends that the impact the departures have had on the private equity team has not been drastic. “There are 10 partners and 30 associates in that team, so their departures are in that context,” he says. “I can’t say it was nothing, but equally it’s not like we’ve lost half the team.”
While Mifsud, Watkins and Dolling have not been directly replaced at SJ Berwin, the firm made seven corporate associates up to partner at the end of April, more than double the number of promotions it made in any other practice area. In spite of this, Blake says the intention has not necessarily been to replace the trio that departed.
“It isn’t specifically a question of replacing them because this is a big team,” he says. “We have a lot of people with strong reputations and we’re constantly looking to grow the team. We were before they left and we continue to do that.”
Despite this, as one funds lawyer points out, SJ Berwin’s reputation has suffered over the past year. “If you look at ratings, two years ago SJ Berwin would have had three people featured – Jonathan Blake, Mark Mifsud and Blair Thompson,” he says. “Blake’s now moved up to senior partner, Mifsud’s joined Kirkland & Ellis and Thompson has moved into the industry at TDR Capital.”
Whether SJ Berwin is the loser and Kirkland the winner remains to be seen. Funds are raised every two to three years, so the impact will not be felt immediately. What is clear is that SJ Berwin will have to work hard over the coming months to maintain its impressive client list.
Despite Blake’s protestations to the contrary, most relationships in the private equity world are personal rather than institutional.