Before its 1999 merger with Denton Hall, Wilde Sapte was very much known for its top-tier finance work. After several years of aggressive competition and dozens of partner departures, though, the Denton Wilde Sapte finance practice seems to have lost much of its shine.
As one magic circle finance partner puts it: “If you wind back enough years, they had quite a tidy practice. Then all the key names drifted out and are now at A&O [Allen & Overy], Clifford Chance and Linklaters. Dentons is a mid-market player now.”
For its part, Dentons appears to be accepting its mid-market fate, although the memory of past glory days still makes it uncomfortable for the firm to accept relegation to the financial mid-tier.
“Being a dull bank lending practice is fashionable again,” says Dentons co-head of banking Nick Grandage. “Either by luck or design we’re in a stronger position – some of the practices we haven’t been as big in have slowed down, and some of the things we’ve been strong in, such as restructuring, have become stronger.”
Notably, as the finance bubble expanded, Dentons had failed to build a meaningful securitisation and investment banking practice, with the figures bearing this out.
Until the credit crisis hit, many firms across the City saw their finance revenues boom, whereas Dentons’ decreased steadily for several years. In the 2005-06 financial year, the contribution finance made to Dentons’ total fees decreased by 2.8 percentage points, and in 2006-07 finance’s revenue dropped by 3.4 per cent against the previous year’s total.
In the 2008-09 financial year finance revenue dropped by 3.2 per cent to £41.1m, just outside of the ;10 ;largest ;UK ;finance practices. Dentons claims this was caused by the transfer of its project finance team (which had generated around 6 per cent of revenue in the finance practice) to energy, infrastructure and projects.
While the relative lack of exposure to racy financial products dented the firm’s revenue in the build-up to the financial crisis, in the aftermath it has proved beneficial. At the 2007-08 half-year stage, the finance group’s revenue is up by 8 per cent on the previous half-year, says Grandage.
Some other initiatives are also starting to pay off. Last year, in light of the woeful performance of the finance team, the firm vowed to stake its future on Africa (The Lawyer, 13 August 2007). Grandage’s trade finance team in particular has benefited from this move: he claims Dentons’ trade finance group is now the largest in the City with four partners. Around 20 per cent of the group’s fees are now generated from international trade instructions with an African dimension.
An even luckier draw for Dentons has been its large restructuring practice.
“It’s one of their greatest strengths,” admits one rival City partner, citing market-leader Graham Paine and well-known insolvency ;specialist ;Mark Andrews as key players in Dentons’ team.
While a large number of Wilde Sapte restructuring alumni have left for other City firms over the years (see box), Paine and Andrews are still supported by a team of 11 partners.
Nevertheless, as much as the firm’s finance practice suffered in the upturn, it may benefit during a downturn. A magic circle finance rival says: “If you look at quality, their restructuring practice is a lot better than the rest.”
In the past year the firm has won an instruction to advise Northern Rock’s board members on the bank’s restructuring and sale negotiations, as well as advising on the insolvency of five major structured investment vehicles. It has also been handed conflict counsel roles for the administrator for Landsbanki and Kaupthing’s administration.
Apart from the restructuring team, aircraft finance saw its turnover increase in the first half of this year, while the figures in property finance and derivatives nudged up marginally.
Unsurprisingly, as elsewhere in the City, other areas such as what Grandage terms “dull bank lending”, the largest single practice, fared less well and failed to grow, while capital markets and acquisition finance have shrunk at their cores – although the latter’s lawyers have been assisting on restructurings.
Around 75 per cent of Dentons’ finance revenue is generated in London, with Denton Hall having had legacy offices in Dubai for more than 40 years. Grandage says that, unlike many newer arrivals in the Middle East, the name Denton Wilde Sapte is recognised by check-in staff at the airport
But ;while ;that ;kind ;of recognition is nice, it will only get a firm so far. International firms have been frantically ploughing into the Middle East and successfully grabbing market shares, making client ;development ;more important than ever.
Dentons remains committed to the region, having moved banking partner Simon Cook to Dubai in September and hired Islamic finance ;partner ;Muddassir Siddiqui ;from ;the ;Islamic Development Bank in Jeddah (see page 5).
But even those and other moves must be weighed against the long and heavy history of partner losses at the firm, many of whom went straight to the magic circle.
Historically, the reason for Dentons’ finance downfall was increased competition in the sector both for clients and talent. After the banking environment cooled and cosy relationships such as the one with NatWest were disentangled, Dentons was forced to fend for itself in the hyper-competitive panel game. While the firm is understood to be on the panels of most major UK banks, according to most observers Dentons ultimately loses out to its bigger rivals when it comes to translating panel places into solid instructions.
Going forward, though, the firm is realistic. Grandage says Dentons is not content to be second best, but at the same time he realises that the firm cannot take on every single competitor.
“We do the things we do, and we do them well,” he concludes.