Wragges to riches story” />It was meant to be an all-out attack. Four years ago, with some bravado, Wragge & Co announced that it would launch a private equity offering in London – an offensive intended to net the Birmingham-based firm steady midmarket work. But since then has the private equity team’s impression on the City been more of a damp squib than a triumphant storming?
“When they set up they were really throwing down the challenge to the London private equity practices,” says a partner at a leading City firm. “But I haven’t really seen them.”
So just what has Wragges’ private equity team been up to since arriving in London? Since March it has acted on 15 deals with a total value of £1.82bn, according to its own statistics. Compare that with DLA Piper: this year its private equity practice has worked on 32 deals totalling €7.63bn (£5.14bn), according to Mergermarket.
Andy Stylianou, who heads Wragges’ team in London with partner Maurice Dwyer, points to his team’s instruction by Close Brothers Private Equity (CBPE) on the management buyout of pharma manufacturer Rosemont for £93m as indicative of the work they are doing. “It’s what we do best: top- quality midmarket work,” he says.
Stylianou certainly sees Wragges as a solid midmarket player, naming Addleshaw Goddard, DLA Piper and Macfarlanes as rivals for his clients, which in addition to CBPE include 3i, Isis Equity Partners and Lloyds Development Capital.
But does that add up to delusions of grandeur? CBPE is a respectable instruction, but as a flagship deal, coupled with an average deal value of £121m over the past six months, it puts the team in the lower midmarket.
“Would I call them midmarket?” ponders a partner at one of the firms Stylianou names as a rival. “That depends entirely on your definition of midmarket. It used to mean deals between £20m and £60m, but nowadays it can mean anything between £30m and £500m. Would I say Wragges covers the midmarket uniformly? No.”
Perhaps it is all a question of semantics. Wragges managing partner Quentin Poole thinks so. “If we’ve got to be realistic and say today we’re lower midmarket, then fair enough,” he says. “But I’d hope that in three or five years’ time we’d grow incrementally, maybe by about 30 per cent, to get to the top of midmarket work.”
How Poole intends to do that is another question. Wragges’ private equity team in London is small – it has just three partners, with Dwyer, Stylianou and the newly made-up Ian Piggin – but is arguably perfectly formed for the kind of deals it acts on now. CBPE partner Sean Dinnen says: “Wragges is very good at the work it does. They’re great commercial lawyers and their unity as a team is very good, which is important to me.”
Yet hoping for an increased turnover and deal value, and for a jump into a higher league, would also presumably mean an expansion of the team – a concept about which both Poole and Stylianou are enthusiastic.
But while they have managed to attract some decent associates – Sarah Massey was poached from Addleshaws, where she worked on 3i files – they have yet to make any lateral partner hires in private equity since the team launched in London. Piggin, the only new partner, worked his way up through the ranks, which Poole says is “the Wragges way”.
“We did talk to headhunters when we first came to London about lateral partner hires,” says Stylianou, “but we don’t really see that clients move with partners, unless you’re prepared to pay a premium.”
And that, in essence, is why the team in London is limited. Wragges is still very much a Birmingham-based firm with comensurate remuneration. The firm operates an all-equity partnership, with its average partner profit reaching £395,000. That said, the top of equity hits £630,000. “That’s not too shabby at all,” says one headhunter. “But in London they’re competing with the top City firms who can afford way more. All-equity is obviously important to them, but they need to sort that out in London.”
Poole admits his partners are not on drawings comparable with Slaughter and May‘s, or even Berwin Leighton Paisner‘s, but that an all-equity partnership remains “a big carrot”.
To go after blue-chip clients there is always the Addleshaws growth method. Addleshaws partner Simon Pilling admits that, pre-merger, Addleshaw Booth had only four partners and 16 associates in the London corporate office.
“We wouldn’t have had the credibility to do a deal such as Travelodge,” he says of the £675m secondary buyout on which he worked. “The merger gave us critical mass, and it helped us up the ante in terms of the clients we were able to go after and win.”
Unsurprisingly, Poole says that a merger with a full-service London firm is exceedingly unlikely. However, a tie-up with a niche practice – as it did originally in London with patent boutique Needham & Grant – would not be out of the question.
So where does that leave the London team? Certainly it has made headway since arriving in the capital. It has, according to Stylianou, “doubled or tripled” its workload since coming down, although the firm was not able to provide statistics to back up that assertion, other than the fact that the £1.82bn it had managed to turn over was 50 per cent more than last year.
The team has won Isis as a new client since Wragges’ London debut, and CBPE’s Dinnen said: “We wouldn’t have used them on London-based deals before they came to London, so that’s what they’ve gained from us by moving.” CBPE makes around four new investments a year and around three sales; Wragges gets about a third of those instructions.
It could hardly stay only in Birmingham. As healthy as that market is (there are 135 private equity houses with offices there), it is still finite, while London provides 50 per cent of Europe’s private equity. And UK private equity is becoming more London-centric, which is one of the reasons Wragges launched in the capital in the first place. That, however, means a more competitive market.
“Our view four years ago was that this was a significant investment and that we’d grow in the long term,” says Poole. “Were other practices quaking in their boots at our arrival? No. But do I think we’re starting to get a foothold? Yes. A solid practice and business model? Yes. Are we still investing in private equity? Absolutely, yes.”
And that is just as well, considering the competition.
