M&A practices see Barclays Capital as a worthy investment, says Gavriel Hollander
A quick history lesson from Clifford Chance senior partner Stuart Popham serves to demonstrate how quickly things can change in the investment banking world.
During a recent presentation to partners, Popham showed a list of the top 20 banks prior to the 1929 Wall Street crash, and then a similar list a decade later. Not only had all but a handful of names disappeared, but those that remained were, by and large, the same institutions you would have seen three years ago.
It is now two years since the modern-day equivalent of 1929: the collapse of Lehman Brothers. Popham’s cautionary tale tells law firms just how important it is to back the right horse in the wake of a seismic shift in the market.
As one magic circle corporate partner with investment banking links puts it: “The firms that are close to the banks that survive are the firms that will do well.”
And the horse the major City M&A practices seem currently to be going long on is Barclays Capital (BarCap).
The acquisition of the US arm of Lehman in September 2008 is one of a number of signs that the UK bank is the coming force. Expansion in the US has allowed it to throw its weight around in Europe too, with a wave of hires from competing banks showing its determination to boost its M&A standing.
In 2009 BarCap recruited Mark Warham and Matthew Ponsonby from Citigroup and Morgan Stanley respectively to spearhead its European M&A business. The raid on Citigroup high-flyers continued earlier this summer when BarCap snared its European financial institutions group (FIG) head Thomson Demeure.
The effects can already be seen. BarCap has risen from 11th to seventh in Thomson Reuters’ global M&A advisory rankings for the first nine months of 2010, nearly doubling its total number of deals and managing to become the only bank in the top 10 to increase market share. In deals with European involvement, the value of transactions on which the bank advised has leapt from $52.6bn (£33.6m) in the same period last year to $97.6bn this time round.
But while there may be a good deal of back-slapping at its Canary Wharf HQ over the fruits of the bank’s investment in M&A, what a more bullish BarCap means for its legal advisers is not entirely clear.
“Law firms chase banks,” says another magic circle M&A partner succinctly.
But the relationship is not as straightforward as it once was.
“In the good old days, bankers used to get their law firms on board to hold the client’s hand,” says the partner. “That doesn’t happen quite so much these days.”
With most corporate clients – especially those most likely to be on the radars of magic circle firms – becoming increasingly sophisticated procurers of legal services, the importance of the banker-
”In the good old days, bankers used to get their law firms on board to hold the client’s hand,” says the partner. “That doesn’t happen quite so much these days.”
With most corporate clients – especially those most likely to be on the radars of magic circle firms – becoming increasingly sophisticated procurers of legal services, the importance of the banker-lawyer relationship is more oblique.
Firms can be bumped off deals by banks – and they are – while the referral network still has some influence, even in a world where corporates have more rigid panel structures.
“It’s not as straightforward as it used to be,” says the corporate partner. “But it’s still important to show the banks love and attention when they want it.”
And the same partner says that such love and attention has been raining down on BarCap of late.
“They’re [BarCap] really pushing and building up hugely,” he says. “All the firms are beating their door down to be nice to them as they’re becoming a major player.”
Where the bigger practices can pick up instructions is through cross-border M&A work, when an overseas buyer targets a UK asset and needs local advice. However, the evidence is not yet sufficient to suggest that BarCap has enough clout to pull in favoured advisers on inbound work.
Despite this, the BarCap client teams across the magic circle are either growing or paying closer attention to the bank. But any renewed focus is seen as an investment rather than something that will reap immediate rewards.
“The view is that there’s a new player on the financial advisory block,” says one leading City corporate partner. “Insofar as they’ll [BarCap] be significant intermediaries in some kinds of deals – whether inbound or not – it’s a relationship that should be fostered.”
Clifford Chance appears to be ahead of the game when it comes to BarCap. The firm is the biggest legal provider for Barclays at group level, and has the more mundane advantage of being located a stone’s throw from its Docklands base.
Corporate partner Patrick Sarch leads the relationship, while the firm’s interest in the bank is underlined by the recent capture of corporate big-hitter Tim Lewis from Macfarlanes. Lewis has relationships stretching back a number of years with Warham and a number of other current BarCap stars.
Freshfields Bruckhaus Deringer also has a large corporate team with strong BarCap links. Partners Claire Wills, Julian Makin, Stephen Hewes and Philip Richards are among the big names with relationships with either the bank or its bankers.
Allen & Overy introduced a dedicated BarCap M&A team around 18 months ago, coinciding with the start of the bank’s resurgence, with corporate partners Richard Hough, Louise Wolfson and Mark Wippell leading the relationship.
Slaughters’ relationship with the investment banking arm is also new, but Warham has strong ties from his former jobs with both M&A chief Stephen Cooke and head of corporate Frances Murphy.
“All the magic circle firms are trying to extend their relationships there, but that takes time,” adds the magic circle partner. “No one’s emerged as the go-to firm.”
The reality is that no one will emerge as BarCap’s only dance partner, but equally, anyone who does not take notice of the bank’s irresistible progress could end up being left behind.
Global M&A financial advisers by deal value (Click image to enlarge)