For a few dollars more

In three years US firms have become a major force in European private equity and they have done it through the hire of the sector’s major players. The Lawyer analyses the practices of the City’s most influential dealmakers

If the first quarter is any indication, 2006 is sure to be a volatile year for the private equity market. Two of the sector’s leading private practice lawyers have defected to US firms, causing many of the leading private equity houses to review their own loyalties.

Private equity houses have more financial firepower now than ever before. The British Venture Capital Association claims its members are involved in the management of some £90bn worth of funds in the UK.

However, it is the US houses that are flexing the most muscle this side of the Atlantic, and US law firms are proving to be the greatest beneficiaries.

Texas Pacific Group was this month revealed as having raised a new buyout fund of more than $14bn (£7.86bn), the single biggest pool of capital raised in global private equity. Kohlberg Kravis Roberts & Co (KKR) has also been throwing its weight around, with a string of UK and European deals.

Simpson Thacher & Bartlett is the prime example of how US law firms are utilising their US relationships to muscle in on the local private equity market. The firm has successfully transferred its gatekeeper-style relationship with KKR across the pond, with the bond reinforced by the 2005 hire of Tony Keal from Allen & Overy.

US heavyweights Weil Gotshal & Manges and Kirkland & Ellis are now looking to replicate Simpson Thacher’s success using the same formula, snaring two of the City’s brightest stars.

Weil was first off the blocks in securing the hire of Lovells partner Marco Compagnoni. The move assuages the US firm’s wounds from 2004, when it came within a whisker of luring Matthew Layton and James Baird away from Clifford Chance. However, Weil did secure former Travers Smith partner Mark Soundy in the autumn of 2004 to assist managing partner Mike Francies with his ever-increasing workload.

Meanwhile, in March The Lawyer revealed the news that Linklaters head of private equity Graham White was defecting to Kirkland – the worst-kept secret of 2005-06 so far.

If the first four months of 2006 has brought this much tension and drama, the next eight months are sure to be crackers. And the advance of the US firms looks unstoppable.

Charlie Geffen: Ashurst
A true Brit loyalist, but has a burgeoning US client base

Ashurst partner Charlie Geffen requires little introduction. As head of the silver circle firm’s private equity practice he is remarkably modest, even though his enviable client list boasts the likes of Apax Partners, Bain, Cinven and Candover Partners, as well as Electra, General Atlantic, Legal & General Ventures and Stirling Square Capital Partners.

In March Geffen capitalised on his developing relationship with Blackstone Capital Partners, securing another leading role to advise opposite Clifford Chance on the US buyout giant’s £267m acquisition of UK holiday park operator Center Parcs. The deal offered Ashurst the opportunity to build on its links with Blackstone after acting on the group’s £260m acquisition of Legoland last year. Geffen also advised Blackstone on its acquisition of Merlin Entertainments, the operator of 28 visitor attractions across Europe, including the London Dungeon.

Geffen won his first deal for Apax last year since securing a place on the private equity house’s panel last June, after acting on its recommended offer for HIT entertainment, the company behind Bob the Builder.

Geffen and Apax had less success, however, on the proposed ITV takeover. In March 2006, a consortium consisting of Apax, Blackstone and Goldman Sachs, advised by Milbank Tweed Hadley & McCloy and Slaughter and May, launched an unsuccessful bid for ITV. Consortium member Apax sought separate legal advice from relationship partner Geffen.

Meanwhile, Ashurst’s work for the Gala Group in 2005 demonstrates the energy and commitment Geffen’s team puts into client relationships. Over a nine-month period, Ashurst, led by Geffen, advised Gala (and its private equity owners Candover, Cinven and Permira) on the company’s £2.18bn acquisition of Coral Eurobet; the acquisition by Permira of a 33 per cent stake in the company; its proposed IPO; and no fewer than three leveraged financings.

Graham White: Kirkland & Ellis
White’s move from Linklaters to Kirkland underlines the buying power of the us firms

Linklaters global head of private equity Graham White caused waves in the UK private equity market in March when he confirmed long-running speculation that he was leaving the magic circle firm to help establish a private equity practice at Chicago giant Kirkland & Ellis.

A lawyer with a famously gruff demeanour (as one UK client puts it, “he is a man of few words”), White has undisputedly been the star of private equity at Linklaters, advising key clients such as CVC Capital Partners, Apax Partners, JPMorgan and TDR Capital.

Most notably, he has recently advised CVC on the sale of Kwik-Fit and Apax on the €951m (£657.1m) acquisition of Mölnlycke Healthcare.

Combined with the loss of rising star Raymond McKeeve, who is also defecting to Kirkland, the loss of White has hit Linklaters’ private equity standing hard. The firm is relying on former White protégé Richard Youle – just promoted partner – to fill the gap .

White and McKeeve have been a tandem act for some years, having joined Linklaters together in 2001 when they moved across from SJ Berwin. Prior to that they were both at Dickson Minto, proving another of The Lawyer‘s stars of private equity Alastair Dickson to be a solid mentor.

White is one of McKeeve’s most vocal supporters, although McKeeve’s client list speaks for itself and includes such notable houses as Montagu Private Equity and Permira. McKeeve most notably led Linklaters’ advice on the purchase of Somerfield by a consortium comprising Apax Partners, Barclays Capital and the Tchenguiz Family Trust.

White was known to be instrumental in petitioning for McKeeve’s promotion to Linklaters’ partnership in 2004. He is similarly supportive of Youle, who remains at Linklaters, who was promoted to the firm’s partnership this year and who acted for Hermes Private Equity.

Linklaters’ private equity practice push was also devolved onto young partner Carlton Evans, who is close to MidOcean Partners.

Matthew Layton: Clifford Chance

Nearly tempted by Weil, Layton stayed put at Clifford Chance. Now unlikely to take calls from US headhunters ever again

Clifford Chance partner Matthew Layton is the driving force behind the magic circle firm’s rated private equity capability. An affable character, he can be hard to pin down, simply because he is so busy advising on a constant flow of deals, usually for key clients Permira and PPM Capital.

Layton has recently been advising on a string of disposals for Permira, including its £90m sale of storage company Whittan Storage Systems to Stirling Square Capital Partners. He is also understood to be advising Permira on its so far unsuccessful bid for struggling retailer HMV Group.

However, the magic circle firm has received the most attention of late for its developing relationship with Kohlberg Kravis Roberts & Co (KKR) after the US buyout house instructed the firm on its failed bid for Kwik-Fit last year. Although unsuccessful, the mandate was a coup for Clifford Chance because, although the firm has advised KKR on a string of overseas deals, it has not acted for the buyout house on many deals in the UK.

Layton also scored the mandate to advise satellite operator Inmarsat on its £1bn flotation on the London Stock Exchange last year, after advising Apax and Permira on their acquisition of Inmarsat in 2003.

However, Layton himself created headlines in 2004 when, along with Clifford Chance head of global private equity James Baird, he was at the centre of the worst-kept secret of the year, when the duo only pulled out of a move to Weil Gotshal & Manges at the last moment.

Both Layton and Baird remain key recruitment targets for the series of US firms keen to establish UK private equity capabilities, but they have so far resisted the lure of packages rumoured to be anywhere up to a cool $5m (£2.8m).

As the key figurehead of Clifford Chance’s solid private equity team, Baird boasts a string of notable clients, such as CVC Capital Partners. So far this year, Baird has secured an instruction from CVC on its much speculated £3bn bid for UK bookmaker Ladbrokes.

Mike Francies: Weil Gotshal & Manges

A public M&A lawyer who reinvented himself as a private equity star upon his move to Weil

Weil Gotshal & Manges’s stated ambition is to become “the world leader in private equity and the number-one private equity firm in London and Europe”. With London managing partner and private equity dynamo Mike Francies behind the helm of the UK and European push the firm might just hit its target.

Francies has a legendary appetite for work, with the firm’s key clients in the UK including Apax, Lion Capital, Bridgepoint and Candover. In the US, Weil acts for Hicks Muse Tate & Furst and Providence, among others.

Arguably Francies’ most notable deal of late was advising Lion Capital and Blackstone Group on their successful £1.27bn purchase of Cadbury Schweppes’ European drinks business late last year. The deal was the first bid that Weil had won for the private equity houses, after acting for Lion Capital and Blackstone earlier in 2005 on their failed bid for Allied Domecq, which was eventually sold to Pernod Ricard.

In fact, despite securing upwards of 160 mandates in total in 2005, the London office has still struggled to close less than one in three deals. While this is disappointing, Francies is confident that 2006 will prove more successful.

Weil recently bolstered its private equity capability with the capture of former Lovells partner Marco Compagnoni and his sidekick Jonathon Wood in February. The two-partner haul takes Weil’s private equity capability in London to five partners, including Francies, Mark Soundy and Will Rosen.

The hires cap a series of private equity hires by Weil across Europe in the past two years, most notably David Aknin from Linklaters’ Paris office in 2003.

Weil also secured the hire of former Travers Smith partner Mark Soundy in June 2004 to become Francies’ right-hand man. While Soundy has good connections, particularly with Apax, which assisted Weil to secure a place on its panel early last year, he was recruited primarily on the strength of his seemingly boundless charm.

However, Soudy was central to securing Weil’s first successful deal for Candover last year – its ?220m (£150.2m) buyout of the high technology optics division of Thales – on which he advised alongside partner Graham Defries.

Alastair Dickson: Dickson Minto

With the most domestic practice of the bunch, Dickson’s success cannot be replicated by other UK firms

The most elusive of The Lawyer‘s stars of UK private equity, Dickson Minto senior partner Alastair Dickson, has mentored some of the City’s other leading lights: Linklaters’/Kirkland & Ellis’s Graham White and Raymond McKeeve and Allen & Overy’s Derek Baird.

The 17-partner corporate boutique, and Scotland’s king of the private equity market, have acted on a range of the top deals of late, most notably for longstanding client BC Partners in deals either alongside or opposite rival private equity house Cinven.

For example, Dickson advised BC Partners on its acquisition of healthclub chain Fitness First for £835m from Cinven; its bid in conjunction with Cinven to buy out the world’s largest travel bookings company Amadeus for ?4.3bn (£3.02bn); and its sale of private hospital chain Partnerships in Care to Cinven for £552m.

Dickson Minto also has a longstanding relationship with Charterhouse Capital Partners, having advised on such deals as its £1.35bn buyout of insurance and holiday group Saga. Although Charterhouse opted to instruct then Lovells corporate partner Derek Baird (now at Allen & Overy) on its acquisition of pubs owner Barracuda from PPM Capital.

Meanwhile, corporate partner Peter Uri acted alongside Dickson to advise French private equity house PAI Partners on its successful £800m acquisition of Kwik-Fit from CVC Capital Partners. PAI won the auction over rival bidders Kohlberg Kravis Roberts & Co, advised by Clifford Chance, and Bridgestone.

Marco Compagnoni: Weil Gotshal & Manges

Convinced that a US platform was essential for his practice, his defection to Weil was inevitable

Marco Compagnoni had probably taken his team as far as it could go at Lovells. Now that he is on the brink of completing his move to Weil Gotshal & Manges, he is targeting a leap into private equity superstardom.

Compagnoni has brought another star in the making in Jonathan Wood to Weil, who is sure to form an important part of the firm’s drive to create the world’s leading private equity team.

Lovells’ lack of strength in depth was always going to be a problem for Compagnoni. His charm and the lack of much private equity experience left behind at Lovells mean that he should retain most of his clients following the move. These include 3i, which named Compagnoni as one of five individuals on its panel.

Perhaps Compagnoni’s biggest coup to date was his role advising the Barclay brothers on their £729m acquisition of The Daily Telegraph. This was the culmination of a string of deals, which included the £750m Littlewoods acquisition in October 2002 and the £590m acquisition of GUS’s home shopping division.

Compagnoni’s other clients at Lovells included Advent International, HG Capital, ING and Terra Firma. His billings have been touted by several sources to be some £5m per year.

Compagnoni has always received unbending loyalty from his clients, which have praised his thoroughness and his attention to the big issues.