When Halliwells filed notice of its intention to appoint an administrator at the end of last month (TheLawyer .com, 25 June), Mike Ward, senior partner at HBJ Gateley Wareing, got straight on the phone to Shay Bannon and Dermot Power at BDO.
The notice of intention to appoint an administrator was filed on the same day as the quarterly rent bill was due, providing a temporary moratorium against the landlord and the bank coming in to seize assets.
But all parties were cognisant that failure to do a deal could see the clients and the work in progress walk out the door. A case in point was the fact that major banks kicked Halliwells off their panels when notice was filed. There was a risk that other clients might follow suit and the acquiring firms did not want to test their patience.
HBJ spent its time negotiating with BDO and with the elected representative of the Manchester commercial practice, Rod Waldie. In the space of three weeks heads of the firm’s business units travelled up to Manchester to meet with their counterparts. Apart from engaging Clearwater Corporate Finance to run some cashflow models, because of concerns about working capitalrequirements for the partners it wanted to hire, HBJ did not engage any external advisers. It has ended up with around 200 people, including 43 partners split across corporate, property, employment, IP, pensions and family. “What we’ve got is a complete mirror image of what we’ve got elsewhere,” explains Ward.
“We’ve never been interested in a volume business,” counters Ward. “I’ve never liked that because I tend to feel those organisations [the insurers] try to run your business for you. If we’d had to take the whole lot we’d have said no.”
BLG’s Jabbari is content with his lot. “I believe that the insurance practice was the jewel in the crown of Halliwells. At its core was the former James Chapman practice, and these partners were trying to do the kind of deal they should have done four years ago instead of merging with Halliwells.
“We see this as a business that can be immediately profitable, a strong business with recurrent income and limited costs of funding.”
No management structure has been established for the team joining BLG, around seven of whom will join as fixed-share partners.
The Hill Dickinson partners, including Halliwells managing partner Jonathan Brown, will also be absorbed into the new business, albeit with no direct management responsibilities. In Liverpool they will move into existing Hill Dickinson offices, while Hill Dickinson will acquire Halliwells’ Sheffield space at City Plaza. HBJ, in contrast, has decided to appoint Waldie to run the Manchester operation.
BLG and HBJ are currently sharing dozens of support staff, paid by BDO under a transitional services agreement, as well as space in the former Halliwells’ headquarters at Spinningfields, paying above market rent until 28 September, by which point they would be expected to renegotiate terms or move out.
“There’s no doubt that the current rent is higher than the market rate by a considerable margin,” confirms Ward. “We’re client-focused and the overheads are higher than the clients would like.”
Ward points to similarities between the legacy Halliwells client base and HBJ’s in terms of small- to medium-sized enterprises, but is excited about gaining more capital markets work through the Halliwells contacts once the market heats up.
The similarities do not end there. When HBJ took possession of new offices in Birmingham in 2003, it received an upfront financial incentive that it shared between its equity partners. But unlike Halliwells, it took the more prudent move of locking in recipients for a period of three years.
In contrast, when Halliwells filed notice only 15 of the original 40 recipients remained at the firm. Two of those 15 were executive chairman Ian Austin, who has since left for Heatons, and senior partner Alec Craig, whose whereabouts was unknown as this article went to press (one lawyer involved in the negotiations asked, “Who’s Alec Craig?”). The other 13 recipients have all joined HBJ (see Premium Partners box).
So should alarm bells be ringing for Ward that he is taking on not only Halliwells’ ill-fated property arrangements, but also that his firm took just three weeks to hire 200 people, some of whom he has yet to vet extensively?
“I do ask myself that question every five minutes,” he admits candidly. “It’s not something we’re taking lightly. This is the biggest financial transaction we’ve done in the history of the practice.”
He takes comfort from the fact that he has the backing of his partnership.
“We voted unanimously to do this,” he emphasises. “We’re all in it together and we don’t have any dissenting voices.”
For Halliwells: Rita Lowe, CMS Cameron McKenna
For RBS and Lombard: Chris Howard and Andy Hart, Freshfields Bruckhaus Deringer
For Hill Dickinson: Steven Cottee, LG
For HBJ Gateley Wareing and BLG: In-house advice
The partners who received the Spinningfields premium