Tom Parkinson, the general counsel at pan-European auction business QXL ricardo, has a Tigger-like optimism about his company. QXL is a website that consumers in 12 Euro-pean countries can use to buy and sell items over the internet, and like many other of the surviving dotcoms, it is still in the doldrums after last year’s sharp internet downturn.
QXL was floated in 1999 for £54.6m. Its value quickly shot up, and reached a massive £750m at the company’s zenith. It is now worth a mere £30m. This £30m has come from a rescue refinancing package the company received from a mixture of outside investors at the beginning of this year.
Parkinson joined QXL this summer, which some would consider slightly too late if you look at his skills. He is a corporate finance lawyer by trade, having worked in this department at Norton Rose until 1993. QXL was once a good corporate finance client to chase, making numerous acquisitions of smaller internet companies in 1999 and 2000. The group acquired Idefi SA, 62 per cent of ibidLive NV, 99.6 per cent of Bidlet AB and 66.2 per cent of ricardo.de AG.
This year has seen the company running at a loss, although it is creeping back into profitability with the help of the £30m refinancing. The company’s financial situation has forced it to be dormant in the corporate finance area during the past year, but Parkinson is characteristically buoyant about the possibility of the company doing such deals again. “The main aim is to go from being a big name, to a big name that makes money,” he says. “I think we’ll slide back into profitability soon. I’m a corporate finance lawyer and acquisition is what I do best.” He believes that the fact that QXL took him on shows that it expects to do more deals.
For now this seems a long way off, but financial analysts are more optimistic about the company’s future. QXL has recently changed its business model. In the past it bought and sold all the goods it auctioned on the internet itself. Now it operates on an agency-based model, taking commission from sales instead. This has helped the company cut its losses. It was running at a loss of £15.5m until the first quarter of this year, when it reported losses of £10.7m.
The company must reach profitability before its £30m cash reserves are depleted. This means that it cannot invest in any acquisitions until it is stable. Consequently, Parkinson has little chance to show off his corporate finance skills until profitability is achieved.
He insists that the day-to-day running of the legal side of the business is keeping him very busy. He has to make sure the site’s auction process remains compliant with the laws of the countries QXL operates in. He also has employment and consumer issues to deal with. In fact, he insists he is busier than he would have been 18 months ago, when QXL was a lot more profitable than it is now. “We outsourced a lot of day-to-day stuff before, when the company was doing a lot of corporate acquisitions. Now we keep it all in-house.
It is so much cheaper this way,” he says.
Both the presence of outside backers and the lack of corporate acquisitions this year have forced the company to slash its legal spend. And to put it bluntly, any external legal advice Parkinson seeks has to be cheap.
He says: “We spent about £1m in legal fees in 2000. The annual legal spend for this year will probably be about a quarter of that. We’re not doing any deals at the moment, and our expenditure has historically concentrated on acquisitions. As we now have outside backers monitoring how we spend our money, this is another reason to keep overheads low. Its easier to justify spending on legal fees when you’re valued at a very high price and when you can say you have money in the bank.”
The company’s main legal advisers are Brobeck Hale and Dorr, Linklaters & Alliance, McNeive, and De Brauw Blackstone Westbroek, a Linklaters member firm in the Netherlands.
“We use Linklaters for top steam corporate and M&A work, and Brobecks has been our main adviser for the listings of the companies we’ve acquired,” says Parkinson. “Obviously, we’re not using Linklaters so much any more. We’re just bouncing phone calls off them at the moment, although this will change if we do get into the position to do more deals.”
Parkinson rates one-partner e-commerce and media firm McNeive very highly, not least for its hourly rates that significantly undercut both magic circle and US firms. In fact, for the moment, McNeive looks to be QXL’s main legal adviser.
Liam McNeive, eponymous partner at McNeive, says: “We do most of the company’s commercial work. As it is not doing any corporate deals right now, we’re probably the main adviser.”
Parkinson says: “McNeive has a good specialist practice and has competitive rates. This is what companies need right now. The time where law firms could put junior assistants on pieces of e-commerce work and charge astronomical fees is over,” he adds.
Parkinson also thinks that e-commerce work itself could be over for many mainstream City law firms. “I don’t think we’re the only surviving e-commerce company that has been forced to cut back,” he says. “But technology-related law is not rocket science. I suspect that the lawyers doing e-commerce work at the height of the boom were general corporate and corporate finance lawyers. I should think they have probably all been moved out into corporate restructuring by now.”
This is probably the answer as to why Parkinson is so happy with his job. For a corporate finance lawyer with a technology bias, the in-house move to QXL was probably his best choice. It is hoped that his insolvency law skills will not be needed.
Head of legal
|Legal Capability||Three lawyers|
|Head of lega;||Tom Parkinson|
|Reporting to||CFO Robert Dighero|
|Main location for lawyers||London and Hamburg|
|Main law firms||Brobeck Hale and Dorr, De Brauw Blackstone Westbroek, Linklaters & Alliance and McNeive|