Linklaters on defensive as Freshfields makes incursion into blue-chip stable

With rivals trying to strike it rich by luring prize clients, Linklaters circles the wagons.

When Freshfields Bruckhaus Deringer won the instruction to act for BP on any potential hostile bids following the Gulf of Mexico oil disaster in the summer, the reaction from traditional adviser Linklaters spoke volumes.

An internal email at Linklaters was fired off almost immediately, explaining that the firm would still expect to act for the oil giant in the future. That may well be true, but the fact that the message was sent illustrates how big a blow losing the client – even for one deal – must have been.

Linklaters’ relationship with RBS, at least on the corporate side, is known to be one of the closest in the City. But even this ménage à deux could be under threat if the powers-that-be at the firm take their eyes off the ball again. It is something of which the wider partnership is very aware.

Questions were asked of Linklaters senior partner David Cheyne after Freshfields nabbed the BP mandate from under his nose, thanks to a charm offensive from the latter’s London corporate head Mark Rawlinson. Commentators both outside and inside Linklaters are aware of the significance, especially given the reputation the firm has for keeping its most highly prized clients close.

“You can look at the BP scenario and say, ’that must have hurt Links’, and that’s probably right,” admits one partner at the firm. “It was a big wake-up call and a lesson to everyone.”

One of the questions posed to Cheyne concerned whether such a close and important relationship can be maintained in tandem with the responsibilities inherent in the senior partner role.

It is an important question in relation to RBS, given that the man who holds the keys to the relationship – global banking chief Robert Elliott – will be standing for the top job next year. And given that the popular Elliott has a better than average chance of winning the vote, having lost out to Cheyne last time round, Linklaters needs to stay vigilant.

“It would definitely have a big influence if he did win,” says a City banking partner with links to RBS. “There are a lot of people snapping around Linklaters’ heels at the moment.

“A few other firms have got their houses in order. Links got its relationship together earlier and the likes of Clifford Chance and Allen & Overy were slow to respond at first, but that’s starting to change.”

The Linklaters partner confirms that the threat has not gone ­unnoticed.

“There’s always danger from other firms with all clients,” comments the partner. “RBS has never been exclusive to one firm.”

However, any suggestion that there is anything new in big firms trying to poach each other’s golden geese would be something of an exaggeration.

“There’s always been that type of pressure,” says a senior Linklaters partner. “The mythical time when a client was forever hasn’t existed for several years.”

Freshfields – the firm that increasingly seems to be engaged with Linklaters in a dogfight for the top spot among UK firms – won a high-profile mandate acting for RBS in the recent High Court ruckus over the ownership of Liverpool FC, with finance partner Alex Mitchell and dispute ­resolution partner Patrick Swain leading matters.

Sources at Freshfields play down the significance of the instruction, insisting that it derived purely from a role on the original ­acquisition in conjunction with Wachovia, another of its clients.

Perhaps unsurprisingly, Linklaters takes the same line over the deal. That said, it does not change the fact that a competitor’s name has appeared next to one of its blue-chip clients on one of the year’s most publicised deals.

But with one of the most respected M&A partners at any magic circle firm, Matthew Middleditch, looking after the corporate work, there are few fears in Silk Street that RBS will go the way of BP. Even to the rest of the magic circle, the prospect seems a distant one. “It’s a difficult one to penetrate,” one Freshfields partner readily concedes when discussing RBS and Linklaters. “The relationship’s well embedded.”

And in a sense, the alarm bells that rang following BP – and to a lesser extent the loss of its place on the BT panel a year earlier – could mean that Linklaters is even less likely to lose its concentration again.

“Other firms may be more proactive than Links, but that’s less true for investment banks or the capital markets bit of corporate,” says another City corporate partner. “I see Freshfields doing a better job of selling itself to key clients at the moment, but Links will get its act together. Anyone who thinks that they’re a pushover is a bit of an optimist.”

The received wisdom in the City seems to be that there are ­differences in approach between the two heavyweights. In broad brushstrokes, Freshfields is seen as more of an aggressor, while ­Linklaters prioritises maintaining its key relationships over going out to win new business.

“Perhaps in some ways, when you have a bigger client base you try to hold on to what you’ve got. When you have less you try to take what you don’t have,” speculates the senior Linklaters source ­somewhat provocatively.

The Liverpool deal may be a red herring, but in an M&A landscape that still looks pretty flat, even the most embedded relationship could be up for grabs.