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Deal view: Linklaters rues loss of corporate golden generation but in Covid era inherent strengths remain

Thomas Alan finds resilience at the heart of Linklaters, but without meaningful change the firm risks breathing life into unfavourable clichés.

‘It could and should have been a golden generation,’ laments one former Linklaters corporate partner, now at a US firm. ‘But that generation has been decimated.’

The sentiment summarises the received wisdom among ex partners and corporate counterparts in the City. Some go so far as to make unfavourable comparisons between the firm’s corporate practice and ‘grey’ accountants, while others draw parallels between Links and England’s underachieving football team between 2000-2010.

Such comparisons are easy to make, with the firm’s class of 2008-10 being subject to a series of high-profile departures over the years. The group was first heavily targeted in 2015/16, when Kirkland & Ellis hired corporate real estate star Matthew Elliott, Nordic private equity head Roger Johnson, private equity partner Stuart Boyd and big-biller David Holdsworth. Meanwhile, charismatic dealmaker Charlie Jacobs moved into senior management later that year.

More recently, Weil, Gotshal & Manges lured one of the remaining standout lawyers from the generation, hiring M&A star David Avery-Gee to the firm’s City office in October of last year . A month prior, another of the group – prominent deal lawyer Iain Wagstaff – passed away following a cycling accident.

Undoubtedly, what was a hotbed of talent – arguably above that of its peers – has been diminished. ‘They don’t have the bench of well-known, high-impact people,’ says one head of corporate in the City. ‘They do a competent job but they’re not hungry, they’re not coming after our clients like some firms do.’

Culture trumps strategy

The argument has been repeated and rehearsed to the point of cliché: Links’ group of technically-gifted lawyers are more interested in managerial roles than an entrepreneurial pursuit of fresh business, and the business-minded among them are forced to look elsewhere. The culture depicted by some is a caricature, but there remains a genuine belief it could be doing more to foster ambition in its corporate heart. It is a point even current partners believe has been an issue, albeit an historical one.

‘There is a more entrepreneurial spirit now in a way a number of years ago there was less of one,’ says corporate partner Simon Branigan. ‘Partners are given confidence and licence to go and get the opportunities. People in years gone by would have been more cautious. That’s been a real and palpable change in the last three to five years.’

Branigan is among the more widely-tipped in Linklaters’ core corporate team, alongside teammates Dan Schuster-Woldan and Nick Rumsby. Between them, the trio act for clients such as Capita, Scottish Power, Yum! Brands, Greene King and Advent.

But externally many remain unconvinced the culture has changed in light of significant departures. Former partners describe a stubbornness at the centre of the firm which mistakes stasis for resilience, an attitude exemplified when in 2016 partners vetoed radical changes to the firm’s remuneration structure. The introduction of a gate at the firm’s eighth progression in the lockstep and five-year reviews for those at the top of equity were introduced, but ‘superpoints’ and bonuses for high-performing partners were dropped.

The cultural problems described by some are championed as ‘collegiality and collaboration’ by many at the practice, particularly Aedamar Comiskey, who has headed corporate since 2016, having first joined the firm in 1990. Comiskey is much admired within the practice, and partners credit her for bringing a ‘positivity’ which had been lacking in previous years. Some go as far as to tout her as a future senior partner.

More strategically, partners credit changes made by Comiskey, Jacobs and managing partner Gideon Moore to pivot away from the benchmarking of partner performance that characterised the tenures of their predecessors, in particular former chiefs Tony Angel and Simon Davies. Instead, partners have been encouraged to focus on buiding teams to create and maintain client relationships.

‘The last four years have been very good. It’s been a strong period for the business and a strong one for the team,’ says Comiskey. ‘In terms of what we focus on, we think about where most of our business comes from and we look at our big institutional relationships which we have been lucky to have for a number of years.’

Though the refrain of ‘collegiality and collaboration’ from the firm’s leaders sometimes sounds trite, undoubtedly consistent coverage across jurisdictions and ties between practices result in deep client relationships. Forty-five corporate partners in London and 90 across its global network see Links maintain relationships with clients such as HSBC, Lloyds Banking Group, deVeres and G45. Recent deals out of the practice include acting for pub retailer Greene King on its £2.7bn offer from CKA, while in Germany the firm acted for Thyssenkrupp as private equity houses Cinven and the RAG foundation acquired its elevator business for €17.2bn.

Unsurprising then that corporate generates the lion’s share of material income at the firm. The practice is responsible for approximately 40-45% of the firm’s revenue, and since Comiskey took over the practice that output has increased 20%.

And while much is made of Jacobs’ move into management, the now senior partner often leveraged more junior talent to help nurture his client relationships. Of the group – referred to as ‘The Charlie Boys’ by one ex-partner – Tom Shropshire, Schuster-Woldan, and Branigan are among those that still remain, and according to most they successfully maintain the relationships Jacobs helped forge.

Says Jacobs: ‘I don’t know whether we can claim to be unique, but in all firms people fill the space left by others. With me becoming senior partner, we have had a new generation of partners who have filled that space. I still very much keep in touch with clients. They have a great leader in Aedamar and there is strong talent coming through the ranks. It’s a broader practice than it used to be and I’m happy with that.’

PE struggles

Another received wisdom is that while David Higgins and Adrian Maguire were building a standout private equity practice at Freshfields Bruckhaus Deringer, Linklaters left itself underweight in sponsors as the firm instead prioritised its core corporate practice and banking. ‘You can’t say you have the best corporate practice if you don’t have a top-rate private equity practice,’ one former partner puts it tersely.

In private equity the firm currently has 12 partners and 40 associates in London, and 35 partners across Europe. The last three years have seen the firm do work with Advent, Permira, HG, PSP and Softbank. Including transactions, financing and disputes, around a third of the firm’s global revenue comes from sponsors.

With that platform, practice head Alex Woodward gets Linklaters to punch well above its weight. A particular area of strength is the ability of the practice to operate on different types of deal, with resources in M&A and IPO work meaning the firm can advise on entry and exit points for sponsors.

Woodward is among the handful of partners at the firm whose work thoroughly runs against the narrative Linklaters is devoid of standout talent or dynamic characters. But herein lies the paradox the firm is struggling to resolve: its success is partially responsible for the challenges it is increasingly facing. Inherent resilience has bought Linklaters the time to postpone the tough decisions. While it is true the firm has enjoyed a relatively quiet spot for big exits over the last two years, that resilience has an expiry date.

Perhaps the largest issue presents itself in the form of the US. While criticism of a lack of character or talent often resembles trash talking, suggestions the firm lacks a strategic boldness fall uncomfortably close to the mark. Freshfields hoped to crank up the pressure on Wall St in December last year with its four-piece Cleary Gottlieb Steen & Hamilton hire, potentially at the cost of internal turbulence. Though Freshfields’ attempt may be too little too late – and cracking the US market is an issue hardly unique to Linklaters – it at least signals some intent from the firm, something to date Linklaters has not displayed.

Currently the firm has a presence in New York and Washington, with NY acting as a base for PE buyouts and M&A for European clients, while regulatory support, antitrust work and white collar comes out of Washington. Jacobs summarises: ‘In the US, you either keep the size we are, or you go big – halfway measures make no sense. To date, we have decided not to go large. This is revisited from time to time.’

The fear will be the opportunity for a bold play in the US has already been missed, and that while the firm remains married to an inflexible remuneration structure, higher paying rivals will always be able to lure Links’ best talent – as happened with its golden generation.

But a wide client base and strong core has bought Links time. Though the most subdued among its Magic Circle peers, there was resilience to be found in Linklaters’ most recent financials: revenue was up a marginal 1% on the prior year to £1.64bn, while pre-tax profit stood at £726.9m. Profit per equity partner, however, was down 5% to £1.6m. Given the battering the firm’s year-end took, such results make for a respectable showing.

As the economic crisis continues, major plcs and banks will need disaster response advice from legal counsel, and clients like that make for lucrative and reliable pipelines of work. Linklaters has such clients in abundance, and it also remains true that US firms tend to fare worse in major downturns than their UK counterparts, meaning the Linklaters could avoid adding to its large alumni network among major American firms.

Linklaters may have entered the Covid-19 era listing somewhat, at best playing for time as more profitable and ambitious rivals began to circle. But with the industry put on the defensive, the value of time is hard to overstate. For now, if the clichés ring true, Links could well be thankful for them.