Given the depth and breadth of Sir Richard Branson’s empire, it would be fair to assume that Virgin Group’s management is housed in vast, glamorous headquarters. But in fact it is tucked away in a modest office block just a stone’s throw from the Branson family home in London’s Notting Hill.
Virgin is still synonymous with music, although it may be best known for its travel arms – notably Virgin Atlantic and Virgin Trains. The group also includes a bridal service, an online wine merchant, a hot-air balloon company and a myriad of other smaller companies, as well as the better-known Virgin financial products and mobile telephone businesses.
Virgin’s in-house legal capability is headed by group legal director Helena Samaha, assisted by an Eversheds secondee, both of whom are based at Virgin Management, the group’s head office function.
Some of the group companies have their own in-house legal teams. But even then the number of lawyers across the group totals just 14. This minimal legal function is in stark contrast to the position five years ago, when Samaha joined Virgin. Then the group’s strategy was to increase the size of its legal function in order to reduce its external legal spend.
But six months after Samaha joined Virgin it decided to slash the number of its in-house lawyers. “The decision not to bolster the legal function proved to be successful and works well for us,” says Samaha.
Samaha’s day-to-day responsibilities are twofold: first, she handles the legal work on new ventures; and second, she oversees the group’s relationship with its external lawyers.
Surprisingly, the lawyers employed by the group companies do not report to Samaha. “We don’t dictate behaviour to the group companies; we adopt a collaborative style which fits in well with an entrepreneurial environment, and we work with the group companies to enhance shareholder value. Consequently, the group lawyers don’t report to me; rather, they report directly to their own boards,” she says, adding: “Though we do work closely on matters relating to the legal panel relationships, which I manage at group level.”
Virgin set up its first mandatory legal panel in 2001 following a radical overhaul of the way it works with external lawyers. For the first time, all the group companies were obliged to instruct 11 firms out of 60 drawn from recommendations. Virgin outsources around 80 per cent of its legal work to external lawyers.
“We did the initial review because there was no rhyme or reason as to how the group bought legal services,” explains Samaha. “There was also no visibility as to how much was being spent by the group as a whole.”
Since the initial review two years ago, Virgin now conducts a full review of its legal panel annually. Last year the group dropped Hammonds from its legal panel. “I do a review every year to determine whether firms should retender and if we should renegotiate fees,” says Samaha. “This flexibility is important in an organisation as dynamic as ours.”
Following the latest review, completed last month by Samaha, Bond Pearce and Finers Stephens Innocent were ditched from the panel (The Lawyer, 1 September).
The move to cut Virgin’s legal panel follows a decision to focus on its core businesses, which include transport, mobile telephones, entertainment and financial services. “The firms that have exited the panel have been affected by the consolidation in that they advised us in connection with some of the smaller businesses that we’ve disposed of,” says Samaha.
Virgin recently disposed of Heaven nightclub, Storm Model Agency, Rugby League team the London Broncos and Virgin Hotels in the UK.
Bond Pearce was first instructed by Virgin in 1999, when it was taken on to handle employment work. Meanwhile, Finers was retained by the group to advise on property matters. The West End firm scooped a place on the original panel following its merger with Nathan Silman, a retail property firm that historically undertook work for Our Price, once owned by Virgin.
A&O handles most of Virgin’s banking work along with its big corporate deals, while Macfarlanes handles tax and trust work. Harbottles, which also has a longstanding relationship with Virgin, advised the group throughout Branson’s unsuccessful attempt to run the National Lottery.
Dentons advises Virgin Group on property, rail, media and technology issues. Herbert Smith also handles railway work for the group. Virgin Group also picked Herbert Smith to fight its corner in its ongoing spat with T-Mobile over the ownership of their Virgin Mobile joint venture. Virgin beauty-paraded Ashursts, which advised the group on the original deal, along with Herbert Smith (The Lawyer, 17 March).
Herbert Smith won the instruction because of its litigation expertise and because Ashursts had a minor conflict. A&O, which was also invited to pitch, also lost out due to a conflict. This is the first major litigation that Virgin has been involved with since Virgin Atlantic won the infamous dirty tricks case against British Airways (BA) a decade ago. The partner leading the team for T-Mobile, John Turnbull of Linklaters, also acted for BA when it lost the case. It is also the first time that Herbert Smith has acted for the group in the High Court.
After several years of expanding into new sectors, Virgin’s strategy has shifted to focus on building the most successful UK businesses, such as Virgin Mobile, overseas.
“When I first joined Virgin Group, the strategy was to put the brand into as many businesses as possible. Now the thinking is to focus on areas where the brand fits really well, or where we’ve developed expertise – what we call our core businesses,” says Samaha.
As a result of the new strategy, Samaha is planning to establish some legal panels overseas. She says that, rather than having a global panel, the group will set up panels on a country-by-country basis, which will include Australia and the US.
Virgin, though, is still a way off from launching country panels, although Samaha is about to kick-start a review of the group’s relationships with US law firms. Currently, it principally uses Simpson Thacher & Bartlett and Skadden Arps Slate Meagher & Flom.
Virgin has evolved significantly since Samaha joined from Clifford Chance. “Virgin Management has changed in the sense that it feels like we’ve grown up and matured. There’s more structure than we had a few years ago,” concludes Samaha.
Group legal director
|Sector||Various (including travel, mobile phones and financial services)|
|Group legal director||Helena Samaha|
|Reporting to||Executive director for transport Stephen Murphy|
|Annual legal spend||£10m|
|Main law firms||Allen & Overy, Ashurst Morris Crisp, Denton Wilde Sapte, DLA, Eversheds, Harbottle & Lewis, Herbert Smith and Macfarlanes|