As private equity house Apax embarks on its search for a general counsel, the sector’s lawyers are abuzz with who might land the plum in-house role.
The news, revealed by The Lawyer last week (2 March), that Apax is on the hunt for a general counsel has got private equity lawyers in the City in a fever of speculation. With private equity work at a low, most lawyers in this sector are twiddling their thumbs.
“There are a lot of meetings, but it’s all thinking and no action,” sighs one magic circle private equity partner.
So on the face of it, a job at the heart of one of the less-wounded private equity houses would be extraordinarily attractive. Quite what the criteria are, however, is unclear: the position has not been advertised publicly and is not likely to be.
Precedents for such a position are few and far between. It is only recently that private equity houses have started to employ general counsel, with Bridgepoint hiring Charlie Barter from Travers Smith to the role last October. Barter was your classic Travers deal lawyer, not a funds or regulatory specialist, although he points out that, as the official compliance and anti-money laundering officer, his role straddles both sides.
“But I do get involved in all the deals we do,” says Barter. “Most of my focus has been on our portfolio companies and new investment.”
Another deal-doer (and a former colleague of Barter’s from his days at Travers), Weil Gotshal & Manges private equity partner Mark Soundy is universally cited as a potential candidate for the Apax job.
For Alison Hampton, general counsel at HgCapital, the main requirement is judgement. “Private equity houses are sophisticated users of legal services,” she says. “What they want is someone who can really make key judgement calls without being too stressed about it. They want their own in-house sounding board, so they’re buying in their own partner, as it were.”
On that basis, the Apax job would be ideal for someone with bags of experience. “You’re looking at deal structures now that are very tangled,” adds Hampton. “It’s a bit like being at the beginning of the 1990s, so you need some wisdom and grey hairs.”
(Several lawyers also suggest Clifford Chance private equity partner Adam Signy as an ideal candidate in this regard.)
According to others working in-house in the sector, the challenges posed by the Financial Services Authority are greater than ever, as well as those thrown up by the public perception of private equity funds. Private equity executives may have been replaced by Scottish bankers as City hate figures for the moment, but regulatory scrutiny is still increasing, as Alchemy Partners partnership counsel Sue Woodman concedes.
“With all the adverse publicity around private equity, [hiring a general counsel] is a credibility thing. You need people who can fight back a bit and understand what’s relevant and what’s irrelevant,” she says. “People in private equity want to comply. It’s about finding your way through a huge amount of regulation and legislation.”
But what about the all-important package? The remuneration for the Apax job looks flexible. The Lawyer reported last week that it was likely to be in the £300,000 area, but that may alter according to the candidate. The key component is the carry, but that may not be the hot ticket that it once was.
As one private equity lawyer notes: “The carry is hugely deceptive. You’ve got to wait seven years to get anything out.”
Whoever takes the role as Apax general ;counsel ;will ;almost certainly be reviewing relationships with external counsel. This is not something that happened at Bridgepoint when Barter moved there last year, as the private equity house already had very defined relationships with Clifford Chance and Travers.
The Apax legal chief will almost certainly scrutinise the house’s panel – although ‘panel’ is a loose definition of the way Apax operates. It has always based its relationships on individuals. Linklaters banking partner David Ereira (formerly at Freshfields Bruckhaus ;Deringer) ;has cultivated long-term contacts with the house.
Similarly, Soundy kept the Apax relationship even when he moved from Travers to Weil in 2004. Weil’s ties with Apax look, on the face of it, to be reinforced by the fact that its Paris office acts for the French arm, but all industry insiders know that at Apax the London and Paris operations are distinct, both operationally and culturally.
The question is whether SJ Berwin’s hold on Apax has been diminished. Corporate partners Stephen Davis and Polly Daines acted last year on Apax’s sale of a stake to two sovereign wealth funds, Australia’s Future Fund and GIC Special Investments of Singapore. However, new Ashurst corporate head Stephen Lloyd acted on Apax’s £1bn offer for Emap in December 2007.
Equally, Kirkland & Ellis is in the frame in a way it never would have been even three years ago. SJ Berwin’s Mark Mifsud-led funds team decamped to Kirkland two years ago, and although Mifsud did not act directly for Apax, the funds capability has strengthened Kirkland’s offering.
On the transactional side, Kirkland has scooped a number of deals in recent years. Part of that was based on former Kirkland partner Raymond McKeeve’s relationship with Apax, through which the US firm landed the $900m (£636.79m) acquisition in 2007 of Qualitest and Vintage Pharmaceuticals.
McKeeve is now at R20, the Robert Tchenguiz vehicle. His former partner Graham White had a role advising Apax, Barclays Capital and R20 on Somerfield’s acquisition by Co-op.
In the meantime, underemployed private equity lawyers have plenty of time on their hands to keep speculating.