| March 2007 Issue 172 |
While law firm courting of Middle Eastern clients is not new – during the 1970s and 1980s US and European economies were awash with petrodollar-backed investment in Western trophy assets – the new-found sophistication and institutionalised nature of many large clients in the region has taken even the most progressive global law firms by surprise. And the sums of money being stock-piled for investment are simply eye-watering. The secretive Abu Dhabi Investment Authority, for example, is estimated to be worth up to $800bn, enough to buy the entire FTSE 100 with a bit of leverage. Little wonder its advisers, Shearman & Sterling and Simmons & Simmons, are coy about their respective relationships with the client. ‘It’s a very secretive organisation and you get the feeling that if you’re admitted you are entering the circle of trust,’ one source says. Less secretive clients are Dubai International Capital (DIC), which last month had a high-profile bid for Liverpool Football Club dashed at the eleventh hour. Its adviser Freshfields Bruckhaus Deringer has already been instructed on over £1bn-worth of deals for the client in the past year alone. In addition, the firm advised P&O on its £3.9bn takeover by DP World, represented by Linklaters. Herbert Smith, meanwhile, advised the banks, and it is no surprise that all three firms have opened offices in Dubai in the past 18 months. Despite continued high oil prices, government-backed investment funds, in particular, are aware that oil reserves will not last forever. Hence savvier deal advice and a strategy of buying up Western assets with a long-term view, in turn creating a transactional explosion dominated by global UK and US law firms. The implications on the ground are two-fold: first, that Gulf veterans such as Norton Rose and Denton Wilde Sapte – which have had top partners defect to Herbert Smith and Lovells respectively – are losing market share in the region to powerful global rivals. As one partner tells LB: ‘The work is tailormade for Magic Circle firms.’ Secondly, with anti-American feeling running high in the region – something not helped by the blocking of the sale of P&O’s US ports business on the grounds it shouldn’t be under foreign ownership – the UK global elite could benefit from a reluctance on behalf of clients to pursue US investment opportunities. As for firms still contemplating a move into the region, the chances are you are already too late. James Baxter, editor
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