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‘Expensive badge of legitimacy’: Olswang in firing line of BHS report

Legal advisers on the sale of BHS have been labelled an ‘expensive badge of legitimacy’ in the report investigating the retail giant’s demise.

Olswang, which advised Retail Acquisitions on its purchase of BHS in 2015 ahead of its collapse in May this year, and Grant Thornton were criticised for their work on the deal by MPs in the findings of the BHS inquiry.

The report said while the firms cannot be blamed for Retail Acquisition’s decision to go ahead with the purchase from Sir Philip Green’s Arcadia Group, they were ‘increasingly aware of Retail Acquisition’s manifold weaknesses as purchasers of BHS. They were nonetheless content to take generous fees and lend both their names and reputations to the deal.’

However, the MPs in charge of the inquiry laid the blame on Green (pictured). Labour work and pensions committee chair Frank Field MP said: ‘One person, and one person alone is really responsible for the BHS disaster. While Green signposted blame to every known player, the final responsibility for up to 11,000 job losses and a gigantic pension fund hole is his.’

The role of legal advisers has been questioned throughout the inquiry, with Linklaters acting for Green’s Arcadia Group.

The report said that the role of the legal representatives was to advise, and not to add legitimacy to people ‘who would otherwise be bereft of credibility. The presence of reputable advisers does not absolve the client from exercising judgement.’

MP Ian Wright, chair of the business innovation and skills committee added: ‘It’s clear that a large cast of directors, advisers, and hangers-on enriched themselves off the back of BHS, including Dominic Chappell and his fellow [Retail Acquisitions] directors.’

However, despite the criticisms, the report’s authors said due diligence on the sale was ‘detailed and rigorous’ but the final report produced ahead of the sale failed to fully explain the risks involved, particularly regarding the pensions scheme.

In a letter at the time of the sale, Olswang’s lawyers concluded that a lack of pensions information had further increased the risk to Retail Acquisitions.

The report adds the advisers received significantly higher fees for the successful completion of the deal, and both were dependent on the deal’s success due to Retail Aquisition’s lack of resources to pay them in the event of its failure. Green said Grant Thornton and Olswang recieved £8m between them, although the two firms have not clarified the total fees. The report said the terms of engagement suggested Olswang and Grant Thorndon would receive £1.75m for the deal alone.

The authors note despite multiple problems with the proposed sale and the lack of financing available from Chappell, the deal ‘proceeded and with great haste’. It stated advisers were ‘doubly dependent’ on a successful transaction because Retail Acquisitions did not have the resources to pay them anotherwise.

The report said: ‘It is clear from email exchanges between Grant Thornton and Olswang that both were preoccupied with how their fees would be paid following the completion of the transaction.’

It added:  ‘The two main advisers to the transaction denied being in contact with Sir Philip’s team about their fees before the transaction. It is apparent, however, that Green found a way to ensure that advisers’ fees did not act as a barrier to the transaction proceeding.’

At the time of press Olswang and Linklaters had not responded to requests for comment.

Grant Thornton said in a statement: ‘We undertook our work in the belief that we could help BHS’ management team to turn the business around, and find a sustainable solution for the pensions scheme. It is regrettable that this hasn’t been possible, but we wouldn’t have been a part of that work if we didn’t believe we had experience of real value to share with BHS and its management.’