Candover has linked up with Ashurst after decades of dealings with Clifford Chance.
NOW MORE than ever, private equity house Candover needs its trusted circle of legal advisers.
The UK private equity giant is entering one of the most turbulent periods in its history.
Last month, the group cut the valuation of its portfolio in half, writing down several investments to zero.
It has also been forced into a retreat from a new €3bn (£2.7bn) fund, having to hand much of the money raised back to investors.
Now, the Candover board has reportedly put the group up for sale. It is a stunning turnaround for an organisation that grew into one of the biggest names in private equity during the credit boom.
Ashurst has won the prize instruction advising Candover Investments, the group’s listed parent company, on the restructuring proposals.
It seems likely that Candover will be split in two, with all or some of the listed arm sold to another private equity firm.
Ashurst’s appointment has raised eyebrows among observers, who have become accustomed to seeing Clifford Chance on most of Candover’s recent deals.
Last year’s biggest transaction went to Clifford Chance partner Adam Signy, who has ties with the group going back more than 20 years. In March 2008 Signy advised a Candover-led consortium on its £1.6bn bid for oil services company Expro.
However, those close to the private equity house are not surprised by the Ashurst mandate.
“Ashurst has been the lawyer to the plc forever. It floated it and they’re very close at that level,” says one private equity partner who works for Candover.
Ashurst had a virtual monopoly on Candover’s work throughout the 1980s, while Clifford Chance and Signy came on board in the late 1990s.
The relationship was initially led by corporate head Geoffrey Green, then Charlie Geffen – now Ashurst’s senior partner – and finally by private equity partner Bruce Hanton. The latter is understood to be working on the potential sale of the group.
Clifford Chance would be entitled to feel a little hard done by, having been overlooked for the restructuring mandate, and in another blow for the firm, the most recent Candover fund establishment instruction went to Mark Mifsud at Kirkland & Ellis.
Indeed, Clifford Chance has worked hard to become the adviser of choice on Candover’s corporate and fund establishment work.
And Signy is well-known to Candover Investments chairman Gerry Grimstone, the privatisation guru who is also chairman of Standard Life – the Clifford Chance partner advised Standard Life in 2007 during its failed bid for zombie fund consolidator Resolution.
So why was Ashurst chosen? As well as having existing knowledge of the listed company, having floated it in 1984, it has the longest association with Candover.
The buyout group has no panel and, until recently, had no general counsel (see box below) so mandates are handed out by directors.
It is as much who you know as what you know – the directors have relationships with a number of different partners and instruct on an ad-hoc basis.
“It’s a group of individuals – everybody uses their favourites,” says a source close to Candover.
Macfarlanes has an association with Candover going back to the 1980s, and senior partner Charles Martin has acted on a number of deals, including the group’s bid for the Telegraph Group in 2004.
It is also understood that the firm is currently working alongside Ashurst, representing investors in Candover plc.
Latham & Watkins, which is not a name commonly associated with UK private equity, stands out among the other names on the list.
The firm’s Candover relationship is managed by corporate partner Graeme Sloan, who brought the client with him from Maclay Murray & Spens in 2006.
The following year he won a key instruction from the group, acting on the £283m buyout of Capital Safety from Electra Private Equity.
While at Maclays, he advised Candover on its investment in Wood Mackenzie, which means he could be in line for another instruction as the energy and life sciences consultancy is one of the portfolio companies recently put up for sale as Candover attempts to reduce its debt.
Even if Candover does not survive the recession, there will be no shortage of mandates for the few firms on its list of advisers.
Clifford Chance could yet recover from its snub on the group’s sale by acting for one of its bidders.
Client Blackstone is reported to be interested, alongside secondary investor Coller Capital and Goldman Sachs.
And Candover will have to sell more assets to meet its obligations, leading to paydays for the partners who advised on the original deals.
As one source close to the group points out: “They’ve got close to 20 businesses, which will be sold at some point. They’ll probably go back to the guys they used on the way in.”
The hunt for a general counsel
Candover Investments, the listed arm of the UK private equity group, has appointed its first general counsel, hiring Philip Price from hedge fund SRM Global.
Price, who was chief executive officer of SRM during its legal action against the UK Government over the collapse of Northern Rock, started work this month.
He has previously held in-house roles at UBS Investment Bank and Dresdner Kleinwort, and trained at McKenna & Co (now CMS Cameron McKenna).
Private equity investors, which traditionally have not employed in-house lawyers, have been scrambling to hire heads of legal recently in response to the economic crisis and the prospect of increased regulation.
Earlier this year, Apax Partners began the hunt for a global general counsel, and in October 2008 former Travers Smith partner Charles Barter joined Bridgepoint Capital as head of legal.
Price’s appointment follows the resignation of Andrew Moberly as Candover’s company secretary.