Linklaters and Olswang are among the advisers that “are all culpable” for the collapse of BHS, according to a report published by MPs today (25 July).
The findings follow weeks of hearings run by the Work and Pensions Committee and Business, Innovation and Skills committee, which saw partners from Linklaters, Olswang, Eversheds and Nabarro all appear before a group of MPs in May.
In the report, advisers, directors and “hangers-on” are described as being “all culpable” for the failure of BHS, which resulted in its administration this year.
“The truth is that a large proportion of those who have got rich or richer off the bank of BHS are to blame,” it stated.
Lord Grabiner, the non-executive chairman of Arcadia’s holding company Taveta, is also described as giving “a complacent performance” and “represented the apogee of weak corporate governance” when Retail Acquisitions (RAL) bought BHS for £1 in 2015.
RAL was a new client for Olswang at the time of the sale and the firm is noted for the “detailed and rigorous” due diligence exercise it ran prior to the purchase of the retailer.
The firm urged caution on matters such as insolvency, concessions agreements and pensions schemes, leading MPs to conclude that “neither Grant Thornton nor Olswang can be blamed for the decision by RAL to go ahead with the purchase.”
However, the firm and financial adviser “were increasingly aware of RAL’s manifold weaknesses as purchasers of BHS”, the report continued.
“They were nonetheless content to take generous fees and lend both their names and their reputations to the deal.”
Reputations and fees played an important part of the inquiry as a whole. The report argued advisers relied “solely on each other’s presence”, which led Olswang and Linklaters to brush over the reputational risk of RAL boss Dominic Chappell as a buyer.
It acknowledged the firms carried out the “know your client” checks, but alluded to the “cursory nature of checks” by publishing a transcript of the discussion that took place between Linklaters and Olswang.
In the transcript of a handwritten note from Linklaters’ call to Olswang in March last year, it stated: “Olswangs grilled [Chappell] hard. He has been v. open”.
MPs claim that one of the issues was that the presence of big-name legal players gave other advisers comfort going into the deal.
“Linklaters appears to have taken comfort from Olswang,” the report read, while Taveta and Sir Philip Green said the presence of “Olswang and Grant Thornton helped give Dominic Chappell credibility”.
Another issue was the large fees at stake, as “advisers were heavily incentivised to progress the deal”, the report continued.
“They were dependent on a successful transaction because RAL did not have resources to pay them otherwise”.
Fees played a big part in the inquiry, with both Linklaters and Olswang asked to provide details of the amount they were paid after advising seller Arcadia and buyer RAL respectively.
Linklaters confirmed it was paid £1.2m, while Olswang refused to provide details. Olswang’s reluctance to confirm several details publically was addressed in the report, which said it recognised “the duty of confidentiality advisers to their clients”.
But it added that it was with regret that both Olswang and Grant Thornton “sheltered behind these duties when their interests – and that of the public – would have been better served by full and frank disclosure to legitimate parliamentary scrutiny”.
Sir Philip Green later claimed the firm and Grant Thornton received approximately £8m in total from RAL, with the law firm picking up £1.2m for the sale alone.