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Q&A: A long-term commitment – Severn Trent’s in-house team share the thinking behind the new five-year sole adviser mandate with Eversheds

FTSE 100 water company Severn Trent recently re-appointed Eversheds as its sole adviser for a five-year term, commencing 1 April. Deputy general counsel Stuart Kelly and legal counsel Kristin Garret talk to Kathryn McCann about the mandate, getting monthly updates and the key performance indicators (KPIs) the firm will be judged on.

Stuart, why did you decide to stick with the sole advisor mandate, despite strongly considering at least two firms?

I would say this is the most extensive tender process that Severn Trent has done, it was robust and exposed all of our day to day work to the market. We engaged with a wide range of firms and that has led to the outcome that Eversheds will be appointed for five years for the entirety of our work that was subject to the tender.

We did originally expect to end up with at least two firms, as the debt recovery work is very small in volume and we thought that it was the type and volume of work that really should have been more attractive to a smaller, local firm. But that has proved not to be the case. The proposals that we had simply weren’t as good as the current arrangement. Ultimately it didn’t end up as we expected.

Why commit to a longer five-year term?

SK: There are a couple of points there. The first one to make is that we are in an industry regulated in five-year periods. One of the drivers was budget certainty because we know what our economic landscape looks like for the next five years and we need to work within that. We are also asking an awful lot from our legal service providers – a lot of commitment and a lot of investment and I think that goes hand in hand with a long-term commitment from us as well.

Kristin, what factors differentiated Eversheds from the rest of the proposals?

We were looking for three key things really: financial efficiency, budgetary certainty and a real quality offering. In terms of the financial efficiencies and budgetary certainty, Eversheds’ proposal for each of the five lots was the most competitive. In terms of the value added services offered, the proposal was very attractive as well. They offered to help us with our business processes, carry out reviews with us, provide online resources, horizon scanning and providing feedback, and also give us access to leadership and development coaching for the in-house legal team.

Another aspect of the proposal we were really keen on is the commitment to continuous improvement and innovation. What the proposal gave was a willingness to be measured against KPIs and to provide real detailed management information, each on a monthly basis, with analysis as to how we can use that to drive continuous improvement.

What sort of KPIs will the firm be judged on?

KG: Some of them are very simple KPIs around agreed fee estimates, not going over those fee estimates unless it has been agreed, the timing of when advice is given, how commercially focused the advice is and it being tailored to the right audience.

SK: There are also KPIs relating to innovation and contribution to continuous improvement. These are at the other end of the scale and really differentiated the proposal.

What is the next thing that Severn Trent will instruct Eversheds on?

SK: The industry is preparing itself for competition. We are currently a monopoly but competition is starting to make its way into the water industry and that’s important. Eversheds will be one of the key advisors preparing Severn Trent to be successful in a competitive market.