West drops CC on buyout as Macfarlanes takes the prize

Macfarlanes has sealed its first deal for West Private Equity, a mid-market house that generally uses Clifford Chance for its larger European deals. Macfarlanes acted for West on its equity investment in Southern Cross Healthcare Limited. The £80m buyout also saw Eversheds beat DLA to advise the vendor. Allen & Overy had a major role advising the investment vehicle and M&A boutique Strand Partners.
West invests in the UK, Germany and the Netherlands and has so far used Clifford Chance for most of its high-value pan-European work, although Ashurst Morris Crisp set the fund up. Clifford Chance also does West’s work in Germany and the Netherlands, but the house has previously used other law firms in the UK on small deals.

The Southern Cross deal is one which some observers expected Clifford Chance to act on. Although Clifford Chance has one of the UK’s premier private equity practices, lawyers outside the firm have suggested that the department is overstretched and loses out on some UK deals. A Clifford Chance partner, however, claimed the firm was happy for West to use other lawyers where it made financial sense to do so. On Macfarlanes’ involvement on Southern Cross, the partner claimed, “we’re quite happy with that position”.

Southern Cross Healthcare was represented by healthcare specialist Anthony McGurk of Eversheds and the company’s management was represented by Andrew Carpenter at DLA. DLA has acted for Southern Cross previously and partner and healthcare specialist Michael Paul Riddert has a strong relationship with Philip Scott, a member of Southern’s management team.

But Eversheds worked on the creation of Southern Cross in 1996 and has been the company’s main law firm ever since. McGurk is the relationship partner. The two firms will now fight it out with Macfarlanes to see who picks up Southern Cross’ corporate work post-buyout, although Eversheds has a particularly strong relationship with the management.

Partner Charles Martin led the deal for Macfarlanes and West Private Equity. The investment vehicle, which was structured through Strand Partners, was advised by A&O on both the corporate and property aspects of the deal. Debt finance was provided by the Royal Bank of Scotland, which was advised by Lovells.

The healthcare sector is one of continuing interest to private equity firms and Duke Street recently bought out Thornberry’s residential care business. McGurk said: “This deal demonstrates continued interest in the service sector from private equity firms, despite the overall slowdown in the market.”

Carpenter said: “This deal was meaningful for the sector, Southern Cross is one of the bigger operators.”