A merger has a significant effect on any company, but so does a demerger, particularly when the company is the size of energy giant National Power. Its decision to demerge last year led to the creation of two distinct companies, Innogy and International Power, and the in-house legal capability was carved up between the two entities.
The domestic business Innogy remained in Swindon, while International Power moved to new offices in London. Along the way International Power lost a large number of its lawyers, who were unwilling to make the move out of the South West (The Lawyer, 23 October).
International Power’s in-house legal department was then split once again. General counsel Rosemary Cook joined the company in 1996 and worked in National Power’s international projects. She became head of the project legal team in October 2000, while Stephen Ramsay joined as company secretary to head the corporate legal team. Despite the huge blow dealt by the departure of much of her office, Cook is surprisingly candid. “The vast majority of our old project group didn’t make the move from Swindon to London. We were forced to recruit a new London-based team and to be honest, we were surprised at the speed we managed to do it,” she says.
The lawyers were no doubt attracted by bonus arrangements worth up to 100 per cent of their annual salary – an initiative aimed at recognising and rewarding performance. Cook is proud of the team she managed to win from firms such as Clifford Chance, Freshfields and Berwin Leighton, especially as they were hired within a short timescale. But she also realises that much of her task in the coming months will be to integrate them successfully into the company. “I am looking forward to settling in the new team. We are building a department with a way of working that suits the new management,” says Cook.
The creation of International Power will affect the in-house departments’ existing relationships with external law firms. Linklaters & Alliance, long the favourite of National Power’s in-house department, has seen its role usurped by rival magic circle firm Clifford Chance, which was appointed as the company’s main corporate adviser in October 2000.
As Ramsay was new to the company he was not restricted by past loyalties and was immediately drawn to Clifford Chance’s US profile. Ramsay says: “National Power used Linklaters but we decided that because of our change of culture, board and management, a change of our main adviser was also needed. We chose [Clifford Chance] because we had an existing relationship to build on, we liked the team that it presented and, as we aimed to work a lot more in the US, its link with US firm Rogers & Wells was very attractive.”
Clifford Chance has already worked on the US placement of a convertible bond for International Power in November 2000 with a value of £250m. But Linklaters did not lose out entirely, acting for banks Lehman Brothers and Schroder Smith Salomon Barney on the same deal. Ramsay says that Linklaters was recommended by International Power because of its expertise in the area and distinct knowledge of the company both pre and post demerger.
Linklaters is continuing to deal with issues which arose before the demerger, such as the high-profile pensions litigation due to appear before the House of Lords in February. Ramsay says that winning this litigation remains one of the main aims for the corporate legal department this year. The litigation dates back to a surplus in the pensions scheme in 1994 and involves a claim of £475m shared with Innogy.
International Power is continuing to formulate its policy for outsourcing work, but Ramsay and his corporate staff, unlike their colleagues in projects, are unwilling to work from a formal panel basis.
Ramsay says: “Morgan Cole advises us on property matters in the UK, particularly relating to our new London office which had a very complex property background. We also use Burges Salmon, which is working on a construction law dispute for us at the moment. In general, we use firms which have a good reputation and more competitive rates. We are a value-driven organisation.”
However, much of International Power’s legal work is not focused in the UK. As the name suggests, it is an international company, with principal offices in Houston, Prague, Madrid, Istanbul, Kuala Lumpur and Sydney. Many domestic firms in those regions are used by the company, including US firm Skadden Arps Slate Meagher & Flom, Mallesons Stephen Jaques in Australia and Andrews & Kurth in Houston.
But Ramsay says that the company prefers to work with a limited number of firms. “We are not spreading work too widely, we prefer to build relationships and this can only be done when you work with a certain amount of firms.”
Cook and her project team have, in contrast to Ramsay, just begun a tender process to appoint a panel of advisers.
Clifford Chance is already on the projects panel as a cost-saving measure. Cook believes that since most law firms charge higher rates for pure corporate work it is in the company’s interest to combine the two areas to save money in the long-term.
Other firms are yet to be chosen. Cook says: “There are four or five remaining slots. The list has not been drawn up, but the short list includes Freshfields, which is already doing some work with us, Linklaters, Shearman & Sterling, Ashursts, Milbank Tweed and Allen & Overy. It won’t be a very large panel, we like to have close relationships with our advisers and to give them enough work for them to have a feel for the business.”
Cook’s desire for a panel of four to five slots will inevitably see at least one of the firms removed from the final panel in the coming months. Competition for the business of one of the world’s largest independent power developers is set to be intense.
And it seems that a large amount of work will be coming the way of those who succeed. Even Ramsay admits that life is not always easy for the in-house lawyers at International Power. “We are quite stretched. The legal workforce has been reduced dramatically by the demerger, so life is never going to be quiet,” he says. But both lawyers agree on one thing – that’s the way they like it.
Ramsay, S and Cook, R
Company secretary and general counsel
|FTSE 100 ranking||95|
|Company secretary||Stephen Ramsey|
|General counsel||Rosemary Cook|
|Reporting to||David Crane, chief operating officer|
|Main location for lawyers||London|
|Main law firms||Andrews & Kurth, Burges Salmon, Clifford Chance, Linklaters & Alliance, Mallesons Stephen Jaques, Morgan Cole and Skadden Arps Slate Meagher & Flom|