City analysis: Freshfields and Linklaters take turns on Goldman’s top deals

The magic circle duo dominate the list of Goldman Sachs’ ECM advisers – and when they’re not acting for the banks they’re likely to be found on the issuer side instead.

Middleditch: for RBS
Middleditch: for RBS

Goldman Sachs is, perhaps, the most prized of any firm’s clients. But which firms are most favoured? Although the bank is famously secretive, The Lawyer, with the help of financial ­information provider Perfect Information, has compiled some revealing data on Goldman’s relationships with outside law firms on equity capital markets (ECM) deals, showing a hotly contested two-horse race between long-time rivals Freshfields Bruckhaus Deringer and Linklaters.

At the top end, the list reads a bit like a roll of Scottish Premier League champions from the 2000s, just with a little more consistency and Freshfields and Linklaters in place of Celtic and Rangers.

The top six UK ECM deals by ­transaction size that Goldman was involved with – including primary and secondary offers going back to 2008 – reveal some rather civilised turn-taking by the magic circle rivals, with the bank oscillating between the firms.

Freshfields advised the underwriting syndicate on the biggest Goldman deal in the City since the start of 2008 – Lloyds Banking Group’s £13.51bn rights issue. Goldman lined up alongside banks Merrill Lynch and UBS on the bank syndicate, which was guided by Freshfields ­corporate partner Julian Makin.

But worry not: Linklaters was far from invisible on that particular deal, acting as issuer’s counsel for Lloyds, fielding Matthew Bland and Jeremy Parr.

In fact, of Freshfields’ nine deals acting for a syndicate that included Goldman going back nearly four years, Linklaters was issuer’s counsel on three occasions. Conversely, Linklaters acted as underwriter’s counsel on 14 Goldman deals, coming up against Freshfields on four occasions. Either one or the other (or both) was active in 28 of 52 deals on either side – which means 54 per cent of all transactions, and 61 per cent of deals where either side hired outside lawyers onEnglish law.

Banking ranking

Focusing on the bank side, either Freshfields or Linklaters was English-law adviser to the underwriters on 44 per cent of all UK ECM deals, or 50 per cent of deals where outside lawyers were consulted.

Linklaters won the role for the banking syndicate on Goldman’s ­second-biggest City deal since 2008, with corporate partner John Lane acting for underwriters Goldman and JPMorgan Cazenove on HSBC’s £12.85bn rights issue.

Norton Rose poked its head out as issuer’s counsel, putting forward ­corporate partner Martin Scott as lead partner alongside City corp-orate partners Nick Adams and Chris ­Randall, and Hong Kong-based ­corporate partners Richard Crosby and Liza Lee.

But it was business as usual for deal number three by transaction size, with Freshfields and Linklaters again locking horns on RBS’s £12.25bn rights issue in 2008. Freshfields corporate partners Simon Witty and Sarah Murphy and financial institutions partner Will Lawes acted for underwriters Goldman, Merrill Lynch and UBS, while Linklaters banking partner Robert Elliott and corporate partners Anne Drummond and Matthew Middleditch, along with US capital markets ­partner Tom Shropshire, acted for longstanding client RBS.

Freshfields’ instruction by Goldman and its banking peers should not raise too many eyebrows on this occasion: it would be practically unheard of for RBS to hire any firm other than Linklaters for such a record-breaking deal. Linklaters had previously advised on RBS’s takeover of ABN Amro in 2007, to which the rights issue was seen as a response.

Next level

The Lloyds, HSBC and RBS rights ­issues were standouts, coming in at £13.51bn, £12.85bn and £12.25bn ­respectively. There is a big jump down to the next deals when ranked by size, with Standard Chartered and Centrica both rolling out rights issues in the low-billion range.

But it was the same names that ­appeared: Linklaters’ Middleditch was the lawyer for the underwriters on Standard Chartered’s 2008 rights issue worth £1.83bn, acting for Goldman, JPMorgan and UBS. Linklaters split the role in two, with corporate partner William Buckley advising ­another underwriter on the deal – key Standard Chartered shareholder Temasek, a Singaporean sovereign wealth fund. Slaughter and May acted for the issuer.

Standard Chartered’s next rights issue in 2010, valued at £3.33bn, also gave the underwriters’ counsel role to Middleditch, with Slaughters again on the opposite side. JPMorgan and UBS were again instructed alongside Goldman as underwriters.

Freshfields’ Witty was once more hired alongside Monica McConville (now at Shearman & Sterling) by Goldman and six other banks on ­Centrica’s £2.23bn IPO in 2008 – the fifth-biggest Goldman ECM deal in the UK since Perfect Information’s records began. Why was it Freshfields’ turn? You guessed it – Linklaters’ Owen Clay and John Lane were acting for Centrica.

Lower down the pecking order, a number of other firms make appearances. Skadden Arps Slate Meagher & Flom advised Goldman, Morgan Stanley and JPMorgan Cazenove as underwriters’ counsel opposite issuer’s counsel Dechert on New World Resources’ London Stock Exchange flotation in 2008, the biggest IPO out of the data. What was the magic ­circle’s excuse this time? Answers on a postcard, please.

Skadden and Sullivan & Cromwell have scooped two underwriter-side deals each: Sullivan bagged the role opposite Cleary Gottlieb Steen & Hamilton on Mail.Ru’s £630.7m IPO in 2010, with Bill Plapinger and Vanessa Blackmore in charge for joint global coordinators Goldman and JPMorgan and bookrunners Morgan Stanley and VTB.

Freshfields and Linklaters, however, are not the only magic circle firms to win work from Goldman syndicates. Allen & Overy (A&O) gained roles on five ECM deals, the biggest being online retailer Ocado’s £369m IPO in 2010, where corporate partner Louise Wolfson acted for global coordinators Goldman, UBS and JPMorgan Cazenove opposite Slaughters.

Clifford Chance’s Adrian Cart-wright and John Connolly scooped the roles for underwriters including Goldman, Deutsche Bank and Morgan Stanley on Global Ports Investments’ £359.3m IPO in June 2011. Acting for Global Ports was a certain Fleet Street magic circle firm, fielding partner Sarah Murphy.

Rights and wronged

Will Lawes
Will Lawes

Firms outside the magic two, even those within the magic circle, are ­seriously lagging when it comes to rights issues. Perfect Information’s data shows that IPOs involving ­Goldman had an average transaction value of some £500m, whereas other ECM deals, including rights issues, averaged just under £2bn.

And when it comes to the chunkier deals, Linklaters and Freshfields win out. Out of 28 Goldman deals that were not IPOs, Linklaters won eight roles and Freshfields seven. Herbert Smith picked up the pieces with two instructions, while A&O, McCarthy Tétrault and Milbank Tweed Hadley & McCloy each scooped a single deal.

Goldman and friends dish out the mandates much more broadly on IPOs. Linklaters storms ahead on this measure, garnering six mandates, but A&O, on four deals, sneaks ahead of Freshfields with two. Clifford Chance, Skadden and Sullivan & Cromwell also held on to two instructions each.

A number of large ECM deals ­appear to have been carried out in-house on the English law side, ­according to Perfect Information data. Goldman and other joint book-runners Alfa Capital, Credit Suisse and VTB Capital appear not to have hired any English lawyers on ­Euroset’s £735.7m listing in March this year, in what was one of many ­recent London listings by Russian companies. Neither do the deal documents name any English lawyers for the issuer.

Witty: advised banks on Centrica IPO
Witty: advised banks on Centrica IPO

Ways and means

A couple of provisos. First, Perfect Information classes separate stages of a deal as separate transactions, meaning that some ECM deals appear as more than one mandate in our data.

Second, there are a number of banks on any one deal, meaning that it is generally unclear what role ­Goldman had in hiring the lawyers. The issuers rather than the banks ­instruct outside lawyers and pay their fees, with the banks simply okaying the choice of lawyers.

Issuers and banks want to work with lawyers they know and respect on both sides – hence the appearance of Linklaters and Freshfields on either side of the deals. The fact that Goldman is in the banking syndicate – and Linklaters and Freshfields are writing the contracts – just serves to highlight the size and importance of a deal rather than any relationship between the US bank and individual firms.

The job is a little easier if you sift out the deals where Goldman was not in a lead role, leaving only the IPOs and secondary offers where the bank was one of the lead managers, bookrunners or underwriters, or the global coordinator.
Using these figures, Linklaters is a mile ahead of the competition on eight deals, including a rights issue, a secondary placing and six IPOs – the biggest of which was Russian food ­retailer O’Key’s £267.5m London ­listing in November 2010, where ­Linklaters partners Tom O’Neill in London, Peter Allen in Moscow and Laurent Schummer in Luxembourg advised underwriters Goldman and VTB Capital opposite Skadden.

Dan Schuster-Woldan, now a corporate partner at Linklaters, also worked on the deal while on secondment in Goldman’s investment banking division, moving back to the firm the same year. Allen, meanwhile, ­defected to Freshfields’ London ­office about a month later. Nice that everyone is being so even-handed with these relationships.

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