Getting a cut of Virgin’s wasted £14m

“If you outbid somebody at auction you are smart if you do it by £1, less smart if by £1m & pretty worrying if by £750m!” Sir Richard Branson tweeted this morning after Virgin Trains lost out to FirstGroup in its bid to hold on to the lucrative West Coast mainline contract.

Virgin reportedly bid roughly £4.8bn for the rights to operate the line from London to Scotland, beaten by First’s £5.5bn offer, putting an end to a 15-year period in which Branson’s group has managed the franchise. He wrote in his blog (it’s all about social media these days) that matching the bid would have meant “almost certain bankruptcy”.

It could also mean the end of Virgin’s rail operations, with Branson describing the tender process as “too costly and uncertain” for it to consider rebidding in the future. Advisers at Herbert Smith will no doubt want another stab at a cut of its £14m bid costs and may just try to persuade the longstanding client to give it another go. Plus there’s the possibility of a judicial review as Virgin attempts to appeal the decision.

Burges Salmon, meanwhile, will be fielding rather happier calls today after its client First came out as the winner, with partner Simon Coppen leading the Bristol firm’s team advising on the bid. Eversheds partner Anne Harris advised the Department for Transport on the tender process, while Ashurst took a role for another unsuccessful shortlisted bidder, the Netherlands’ Abellio.

Some 75 per cent of rail franchises are set to be renegotiated over the next three years, so there’s still time for lawyers to get their shares of bidders’ expensive tenders. The question is whether no-frills bidders will match Virgin’s £14m efforts.

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