In full boom

The buoyant M&A market helped corporate practices enjoy a bumper year, with the magic circle once again rising to the top

Thanks to the M&A boom, the UK’s 20 top-grossing corporate practices basked in the heat of a bull market during the last financial year. Indeed, as M&A fever swept across the City, some of the corporate big guns almost had more deals than they could handle.

Magic circle firm Linklaters topped the rankings for the second year in a row with its global turnover jumping by 16.1 per cent from £322m to £374m. Revenue per partner (RPP) in corporate, meanwhile, shot up from £1.75m to £1.83m. Although the corporate figure includes competition, non-contentious employment and employee incentives, there is no denying that the department, led by partner David Barnes, had a storming year. Linklaters’ deals highlights included advising Old Mutual on its acquisition of Skandia for E4.8bn (£3.24bn) and Gold Fields’ successful seven-month defence against Harmony’s $8.1bn (£4.29bn) hostile takeover approach.

However, Linklaters’ private equity practice was the thorn in its corporate department’s side. After months of speculation, the firm’s global head of private equity Graham White and sidekick partner Raymond McKeeve quit the firm to join the London office of Chicago giant Kirkland & Ellis, as first revealed on (27 March 2006). Corporate partner Charlie Jacobs is babysitting Linklaters’ private equity practice until the magic circle firm hires partners to replace White and McKeeve.

Linklaters was not alone in losing private equity partners to US firms. Lovells’ private equity practice, which used to be the jewel in the top 10 City firm’s crown, was blown to pieces after a string of high-profile departures, including Marco Compagnoni’s to Weil Gotshal & Manges in February. While at Lovells Compagnoni acted regularly for Advent International, the Barclay Brothers, Terra Firma, HgCapital and 3i. His book of business has been estimated by several sources to be around £4m per year. The decline of Lovells’ private equity practice also led to the firm losing its place on the HgCapital and Advent International legal panels.

But Lovells hit back. In July it attempted to rebuild its practice with the appointment of three new partners. White & Case partner Alan Greenough has been appointed as head of private equity to succeed Compagnoni. Additionally, the firm has hired DLA Piper Rudnick Gray Cary London-based private equity partner Tom Whelan and Fried Frank Harris Shriver & Jacobson senior associate Stephanie Keen, who will join as a partner.

The appointments could not have come soon enough. Lovells’ corporate practice, in London at least, could benefit from a wake-up call. The group has slipped behind Herbert Smith’s corporate practice in the rankings, having billed £120.8m during the last financial year. What is more, corporate RPP has only inched up from £991,000 to £1.03m. Indeed, Lovells conceded that London revenue increased by just 2 per cent because of the lacklustre performance of its corporate practice in London.

Magic circle stays strong
In stark contrast, Freshfields Bruckhaus Deringer‘s corporate practice, which posted a £7m slump in revenue in 2004-05, had a storming year. Although the firm’s corporate practice continues to rank behind that of arch rival Linklaters, it reported a 17.1 per cent hike in turnover, from £258m to £302m. Freshfields’ London corporate practice, which billed £118m, has frankly been an outstanding deal machine. The team, lead by Tim Jones, was on just about every big-ticket M&A deal that was around, including DP World’s takeover of P&O Ports and the £1.9bn acquisition by Reckitt Benckiser of Boots Healthcare International (BHI).

Freshfields is also advising the London Stock Exchange (LSE), which has received bid approaches from the likes of Euronext and Deutsche Börse. Meanwhile, the firm’s private equity house continued to strengthen its relationship with Cinven, advising the buyout house and BC Partners on the £2.93bn buyout of Amadeus, the largest Spanish leveraged buyout to date.

Freshfields’ equity capital markets group, meanwhile, has also been riding high. Indeed, the firm’s apparently less cautious attitude to the controversial online gaming clients gifted it mandates to advise both PartyGaming and on their LSE debuts last year. But not all firms shared Freshfields’ stance on the sector. New York heavyweight Skadden Arps Slate Meagher & Flom, and more recently Herbert Smith, shied away from IPOs in the sector because of uncertainty over the legality of internet gambling in the US.

The dark cloud appears to have lifted from Richard Cranfield’s corporate team at Allen & Overy (A&O). The global corporate practice capitalised on its success in 2004-05 and posted another bumper set of year-end results. The group reported a 20 per cent jump in revenue from £245m to £294m, helping it to take the number three spot, ahead of Clifford Chance in The Lawyer rankings. The magic circle firm also has an impressive RPP figure, which shot up from £1.67m to breach the £2m barrier.

Thanks to a Slaughter and May conflict, A&O landed a lucrative role to act for Alliance UniChem on its £7bn merger with Boots. The deal was the first M&A transaction that A&O has handled for UniChem, and was one of the largest public M&A deals it has worked on in many years. Indeed, the firm landed itself in another conflicts row after it decided to advise GlaxoSmithKline on its failed bid for BHI. The Boots-UniChem tie-up was preconditional on the BHI deal, which was eventually sold to Reckitt Benckiser (The Lawyer, 10 October).

A&O’s private equity practice got the kick-start it so desperately needed thanks to the hire of former Lovells private equity partner Derek Baird, who quit his old firm in January. Within three weeks of joining A&O, Baird completed a follow-on deal for key client Charterhouse Capital Partners. The private equity house, which instructed Baird regularly during his time at Lovells, turned to him for its disposal of babycare products business Avent to Royal Philips Electronics for £460m. Philips was advised by Sullivan & Cromwell London-based partner Craig Jones.

Clifford Chance has the lowest global corporate turnover of the magic circle, although its revenue shot up by 22.5 per cent from £228.7m to £280.1m. This is well ahead of the target set by global head of corporate Peter Charlton, whose target is to increase revenue by at least 10 per cent every year. However, turnover continues to hover around 27 per cent of the firm’s worldwide revenue. Charlton is aiming for this to increase to 30 per cent by 2009.

As you would expect in an M&A boom, Slaughters’ corporate practice, which accounts for 51 per cent of firmwide turnover, had a stellar 2005-06. The ultimate deal machine reported a 10.7 per cent increase in revenue from £147.9m to £163.7m. What is more impressive is the firm’s corporate RPP. It falls just shy of £3m at a whopping £2.97m, the highest in the top 20.

Slaughters’ client base, which includes the likes of BAE Systems, BHP Billiton, Cadbury Schweppes, Corus, Legal & General and Unilever, continues to be the envy of its peers. But there was a danger of Slaughters’ stranglehold over the FTSE100 backfiring. Towards the tail-end of 2005 Slaughters’ clients were on the opposite sides of no fewer than four big-ticket M&A deals, including the Boots-UniChem tie-up, as well as the German mailing giant Deutsche Post’s £3.6bn bid for UK logistics group Exel. On the latter deal, Slaughters acted for Exel while Linklaters advised the bidder.

Midmarket reorder
Although there has been little change in the line-up at the top of the table, there are a number of significant movements further down the pecking order. DLA Piper, for instance, has shot up the rankings from number 14 to take the number nine spot.

As first reported by The Lawyer (14 August), DLA Piper posted a staggering 71.4 per cent rise in corporate revenue for its Europe, Middle East and Asia offices, up from £48.9m to £83.8m during the past financial year. DLA Piper is now setting its sights on deals of up to around £2bn in value and will send more small deals to the regions after the average size of its M&A deals rocketed by an astonishing 82 per cent, from £35.5m to £66m, in the UK during the past year. Earlier this year DLA Piper scooped a role to advise Bank of Scotland Integrated Finance on the £1.1bn bid for retirement homes developer McCarthy & Stone. The firm is also acting for The Alternative Hotel Group on its £767m takeover of De Vere.

Hammonds, meanwhile, has moved up from the bottom of the table and is now ranked at number 14. However, Hammonds’ astonishing rise up the rankings is not as impressive as it might first seem. Unlike in previous years, Hammonds’ practice now includes corporate finance, business recovery and insolvency, asset-based lending, banking, tax, competition, trade and regulatory. Little surprise, then, that the figures look better.

Indeed, it is worth pointing out that it is more difficult to make a meaningful comparison in corporate than in any other sector. Some firms, such as Hammonds, throw in everything but the meeting room biscuits. For internal accounting purposes, areas as varied as antitrust, energy and media are included. Eversheds‘ figures, for instance, include finance, while Macfarlanes‘ corporate revenue includes tax and pensions.

Taylor Wessing makes its debut in the corporate table this year. The firm’s corporate group came in at number 16 after billing £50.4m.

However, its corporate RPP is considerably less impressive. At just £420,000 the firm has the lowest RPP figure in the top 20.

The movement in the second half of the table has resulted in the disappearance of Addleshaw Goddard. The national firm’s corporate practice was ranked number 19 in last year’s table, but unfortunately £29.1m was not enough to secure a place in this year’s rankings.