Herbert Smith finance partner Jason Fox has a cunning plan. Will it work?

Herbert Smith’s finance chief Jason Fox is a man on a mission. He wants his group to be one of the top five finance practices “by brand and by turnover” in London by the end of his five-year term.

And although he has the blessing of senior partner David Gold, who wants finance to make up around 20 per cent of the firm’s worldwide turnover (it currently accounts for around 8.5 per cent), that is no mean feat.

According to The Lawyer UK 100 Annual Report 2005, Herbert Smith’s London finance practice, which turned over just £17.5m in 2004-05, is languishing in eighteenth place (see table).

Herbert Smith’s finance group has traditionally focused on projects-related work, notably in the energy sector; but if the group wants to compete with the finance big boys, it must extend the practice’s capability into other areas, such as acquisition finance, structured finance and securitisation. And with Fox already in the second year of his tenure, the clock is ticking.

But Fox, who succeeded Clive Barnard in April 2005, is resolute. Since he took the helm, Herbert Smith’s finance practice has been riding on a high. In London the group’s turnover shot up by 20 per cent to £21.2m during the 2005-06 financial year, helping the firm to beat its own target of £19m. And, as Fox points out, this impressive growth was achieved before the arrival of the firm’s recent lateral hires.

Herbert Smith’s finance practice has been on a hiring spree recently. Project finance specialists Alexander Currie and Andrew Newbery joined the firm earlier this year from Linklaters and Norton Rose respectively.

More significantly, though, as first reported by The Lawyer (5 December 2005), the firm also lured Denton Wilde Sapte leveraged finance specialists Chris Fanner and Tim Yeo. The hires were a coup, as they heralded the end of the Herbert Smith’s two-year hunt for debt finance partners. The duo, who have acted for the likes of ABN Amro, HBOS, Lloyds TSB, Royal Bank of Canada and Royal Bank of Scotland (RBS), are expected to join the firm later this year.

Fox is delighted with the group’s performance under his leadership. “It’s been the best year ever, both in terms of the financial performance and the development of the practice itself,” he enthuses.

The practice’s progress over the past year has been remarkable by any standard, but it did start from a pretty low base. Fox acknowledges this, but argues that recognition should still be given to the progress that has been made. “You have to recognise what’s already been achieved. Five years ago we were a support practice for corporate,” he says.

Although Fox deserves much of the credit for his group’s recent success, he attributes some of this achievement to the investment made prior to his appointment. For instance, rising acquisition finance star Malcolm Hitching, who joined the firm from Norton Rose in 2003, was hired under Barnard’s leadership. Indeed, Hitching, Fox’s right-hand man, has been instrumental in building that part of the practice.

Fox also says the new management team brought in across the firm at the time he took over from Barnard brought “renewed impetus to the growth”. Head of litigation Sonya Leydecker and corporate chief Michael Walter started their roles at the same time as Fox.

“I’m firmly behind Jason. He’s set a challenging but realistic target,” to be Allen & Overy or Clifford Chance but we should be in the frame for the top four or five place.”

The practice has also scooped a raft of first-time instructions during the past 12 months. In securitisation/ structured finance new clients include ABN Amro, Lehman Brothers and RBS, while in the acquisition finance arena the firm now counts Goldman Sachs, Morgan Stanley and UBS as new clients. On the panel front, Herbert Smith has been added to the rosters for ABN, Bank of Ireland and Société Générale, among others.

But despite this impressive start, Fox still has a long way to go. Based on the 2004-05 figures for London-based finance practices, Herbert Smith’s turnover needs to increase by £50m during the next four years to be in equal fifth place with Lovells.

Fox claims he is not fazed by the task and would like to see turnover grow by another 20 per cent during 2006-07 in London. But this would still only take the group’s revenue to £25.5m. “What other core group at a major law firm is growing at this rate?” he says.

Fox plans to achieve this growth mainly through lateral hires. Indeed, the firm has continued its hiring spree well into 2006 and is close to appointing an acquisition finance partner in Paris. However, Fox admits that, as many other firms are finding, securing a structured finance partner is proving to be more of a challenge.

Internal partnership candidates may wonder why they have not featured much in the growth plans, with just one lawyer promoted in the finance team this year. But Fox denies that internal candidates are being overlooked. “We can’t achieve the growth we’ve been talking about organically. But it’s not at the expense of the internal pipeline,” he claims.

There has been considerable market scepticism about Herbert Smith’s finance division’s ability to boost its reputation outside projects-related work. But with Fox’s energy and determination, combined with a ready-made team in Fanner and Yeo, the silver circle firm is now one to keep an eye on.

 Key Deals

  • Advised Yell Group on the financing and corporate aspects of its €3.1bn (£2.11bn) bid for Spanish Yellow Pages publisher TPI.
  • Acted for Goldman Sachs, Royal Bank of Scotland and UBS on the £4.2bn financing of PSA’s bid for P&O.
  • Advised Sumitomo Chemical on the Rabigh Project – the $5.8bn (£3.08bn) project financing of a Saudi Arabian petrochemical refinery.
  • Represented ABN Amro, Bank of Scotland and BNP Paribas on the $850m (£451.57m) borrowing base facility for Tullow Oil, the UK’s largest to date.
  • Top 20 finance groups: London
    Rank Firm London finance turnover (£m) No of London partners London finance RPP* (£K)
    1 Clifford Chance 164.0 90 1,822
    2 Linklaters 143.5 67 2,141
    3 Allen & Overy 142.5 89 1,601
    4 Freshfields Bruckhaus Deringer 74.0 47 1,574
    5 Lovells 67.6 45 1,502
    6 Norton Rose 52.5 43 1,221
    7 Berwin Leighton Paisner 43.5 36 1,208
    8 White & Case 41.8 30 1,393
    9 Sidley Austin 39.0 23 1,695
    10 Denton Wilde Sapte 37.7 35 1,077
    11 Simmons & Simmons 36.0 29 1,241
    12 Shearman & Sterling 34.4 14 2,457
    =13 Slaughter and May 31.0 23 1,347
    =13 Latham & Watkins 31.0 18 1,722
    15 CMS Cameron McKenna 30.2 25 1,208
    16 Ashurst 26.1 16 1,631
    17 Cadwalader 20.0 8 2,500
    18 Herbert Smith 17.5 18 972
    19 DLA Piper 14.8 22 672
    20 Watson Farley & Williams 14.6 16 912
    *RPP: revenue per partner
    Source: The Lawyer UK 100 Annual Report 2005