Pressure on Treasury to make procurement process transparent sees go-to firm sidelined
Slaughter and May has lost out on the mandate to advise the Government on its £3.2bn loan to Ireland, with Allen & Overy (A&O) securing the deal in a surprise move by the Treasury.
Slaughters has been widely seen as having a lock on high-end Treasury work since the start of the banking crisis in September 2007, when it acted on the restructuring of Northern Rock. Between then and December 2009 the firm pulled in £33m in fees from Treasury work alone.
It is understood that A&O won the Irish mandate without the Treasury putting the work out to tender. Global banking chief Mike Duncan and special global counsel Philip Wood, who headed the banking group in the 1990s, are leading on the transaction.
Wood, an expert in sovereign restructuring, is thought to have had a major influence on the Treasury’s decision.
Sources at Slaughters said the firm is “not downhearted” after being overlooked for the work.
“Because of the focus around the Government, the pressure on the client to source other firms on their panel would have been immense,” said a Slaughters partner. “The key thing is that it doesn’t affect our work for government across all sectors, but the bank bailout work might be at an end.”
The Treasury attracted criticism last year from the Liberal Democrats, then in opposition, after it emerged that Slaughters had netted £22m in fees between 2007 and 2009.
One senior banking partner at another City firm said: “If you think of the political pressure to have an overt procurement process, you can’t say you’ll go to the same place every time.”
Restructuring partner Charles Randell led the Slaughters team on a series of high-profile Treasury deals, including Northern Rock and the recapitalisations of HBOS and RBS.
A&O and Slaughters were among five firms to win places on Treasury panels announced last November to handle work resulting from the bank bailouts. Herbert Smith, Hogan Lovells and Simmons & Simmons completed the quintet.
It is understood that the Irish mandate was seen by the Treasury as a bespoke piece of work and not a panel appointment.
Arthur Cox is believed to be advising the Irish government on its €85bn (£72bn) bailout.