Since Scottish Power’s creation in 1989, the utility’s three-strong in-house team has been extremely busy.
The company was created out of the South of Scotland Electricity Board at the end of the 1980s privatisation trend.
Since then it has embarked on an aggressive acquisition policy. Its latest purchase – Oregon-based generator PacifiCorp – is typical of this.
With the £4.2bn deal – on which Freshfields advised – Scottish Power became the first UK utility to venture into the US. Its next step is to dispose of the generator’s Australian operation.
Freshfields has represented Scottish Power since its 1991 flotation and worked on the acquisitions of Manweb in 1995 and Southern Water a year later, and the flotation of 49.9 per cent of Scottish Power’s telecoms arm Thus.
Group legal and commercial director James Stanley says it is essential to have a big City name on board for an M&A in order to “pack a punch”.
He says: “I had a debate with Freshfields about fees and so on and they said ‘we have a blue chip reputation and that is on the line as well as yours’.”
He adds: “We are grossly unreasonable. There are times that I will say ‘I do not want that, I want more’. There is less of that to do in blue chip firms like Freshfields because they are totally in control.”
Although many of the company’s core firms are used for their knowledge of the power industry, which Stanley describes as “very complicated and regulated”, they have to earn their place on the panel.
“We beauty parade the whole time, making them compete against each other and third parties, who do sometimes get the work,” says Stanley.
One such third party was Olswang, which won a tender to act with Freshfields on the Thus flotation.
But being a core firm does not guarantee an invitation to a beauty parade. For example, Freshfields was not invited to bid for the Southern Water divestments.
Instead the work was won by Berwin Leighton. It was a considerable win – 15 months after the purchase of Southern Water 15 non-core businesses, with a group turnover of £72m, had been sold.
Because it is a Scottish company Stanley is keen to use firms north of the border. Glasgow firm McGrigor Donald acted for the firm on its 1998 purchase of Demon Internet.
“It did a small percentage of work but we liked that so we gave it Demon. But we would not do that for a major Stock Exchange transaction – Freshfields is always going to get that.”
On the PacifiCorp deal Scottish Power used an overseas firm for the first time when it appointed New York law firm Millbank Tweed Hadley & McCloy.
Although the group has not made any announcements concerning future interest in the US, some industry insiders believe that the company could well strike again.
The US is more open to expanding UK utilities than Europe, which is still bogged down by regulation and dominated by state-owned operations.
Despite the range of firms acting on the deals, much of the groundwork is carried out by the small in-house team of two further “very good, very impressive Scottish lawyers”.
Stanley adds: “My team and I come in on judgement calls, taking things round the houses and making firms work better.
“A lot of firms tend to baby their clients a bit. Many are happy to be led but we are not.
“We are looking at pushing the boundaries.”
Group legal and commercial director
|Legal function||Three lawyers|
|Head of legal||James Stanley, group legal and commercial director|
|Reporting to||Ian Robinson, chief executive|
|Main location for lawyers||Glasgow|
|Main law firms||Freshfields (corporate), Rowe & Maw (construction and asset litigation), Shepherd & Wedderburn (corporate dispute and electricity), McGrigor Donald (sales and acquisitions), MacRoberts (employment), Biggart Baillie (electricity)|