Legal Business

The future of law will need long-term investment

The future of law will need long-term investment

A little over five years ago Legal Business produced a cover feature dubbed ‘How to improve a law firm in 17 easy steps’. The piece – intended as a series of practical proposals to improve the working of law firms – has aged as well as anything printed in these pages.

And while point one – on overhauling lockstep partnerships for the age of global law – has been borne out, it is the second proposal, to phase out full profit distribution models, that is more pressing to the profession. Problems with lockstep are a peculiar challenge for London’s elite. In contrast, the historic model that has prevailed in legal partnerships of distributing the near-entirety of profits to partners annually speaks to an entire industry in danger of tipping itself over a cliff.

Legal Business

The DLA interview: On this rock I build…

The DLA interview: On this rock I build…

Simon Levine (SL), co-chief executive, DLA Piper: I had a bit of fun and looked at the article you wrote on me when I first started [as DLA Piper’s co-chief executive, published in March 2015].

Legal Business (LB): Are you trying to catch us out? Because we got into this job to be inconsistent.

Legal Business

Deal watch: Healthy pickings for Travers and DLA on Unilever’s £150m graze buyout as firms navigate Interserve rescue saga

Deal watch: Healthy pickings for Travers and DLA on Unilever’s £150m graze buyout as firms navigate Interserve rescue saga

Travers Smith and DLA Piper have sated their appetites on The Carlyle Group’s £150m disposal of graze while a raft of advisers sat tight as a further twist in the Interserve saga unfolded.

Unilever last Tuesday (5 February) sealed the deal to acquire ubiquitous healthy snack brand graze, having fended of competition from rival bidders Pepsi and Kellogg in an auction launched in the latter part of last year by Harris Williams.

The buyer, which also owns Marmite, mustard maker Colman’s and Wall’s ice-cream, was reputed to have paid exactly half the £300m asking price for the snack company.

Private equity house Carlyle, which sold graze via its Carlyle European Technology Partners fund, turned to longstanding relationship firm Travers and a team led by partners Ian Shawyer (pictured) and George Weavil. While not an obvious asset to be owned by a tech fund, Shawyer notes that graze, having started life in 2008 as a direct to consumer snack box delivery service, has a tech-based flavour in that it is based on data strategy and uses tech to mine customer preferences of its products.

The company has evolved to stocking the shelves of more than 30,000 UK retailers as well as US shops including Target, Walgreens and 7-Eleven.

Carlyle last year started sounding out the market for a successor fund – Carlyle European Technology Partners IV – with a view to raising €1.3bn to invest in companies with significant growth potential.

While Latham & Watkins is the firm most associated with Carlyle Group for international work, Travers has carved a niche advising the group on European deals.

Bob Bishop, DLA’s global co-chair of corporate, led the team advising Unilever, while Phil Hails-Smith, corporate and commercial partner at Joelson, advised graze’s management.

Meanwhile, the rescue of beleaguered UK construction plc Interserve has encountered a snag. Coinciding last Wednesday (6 February) with Interserve’s agreement in principle of a deleveraging plan that could save it from a Carillion-style collapse, hedge fund investor Coltrane Master Fund sought to leverage its 17% stake to requisition a general meeting that could see most of its directors ousted.

The latest example of shareholder activists making their presence felt on this side of the Atlantic, Coltrane has called for Interserve’s entire board, apart from chief executive Debbie White, to stand down and that David Frauman and Stuart Ross be appointed as directors.

The rescue mission has kept firms including Ashurst, Slaughter and May, Allen & Overy and Akin Gump Strauss Hauer & Feld busy for several months. If approved by shareholders, it would involve £480m of new shares issued to lenders in a debt for equity deal aimed at reducing debt from £600m to £275m.

Advising Interserve are an Ashurst corporate team led by Tom Mercer and a Slaughters team led by restructuring partner Ian Johnson. A&O is advising the lenders with a team led by Trevor Borthwick, while Akin Gump, led by Barry Russell, is advising the noteholders.

Freshfields Bruckhaus Deringer restructuring partner Adam Gallagher is advising the pension trustees of Interserve.

While there are clear parallels with fellow UK construction company Carillion, which fell into liquidation in January 2018, advisers are quick to note that the underlying business of Interserve does not suffer from such severe liquidity shortfalls and has not been subject to the same mismanagement.

‘A similar rescue plan was being considered for Carillion but didn’t work because that business was in far worse shape. This is what it looks like if it is possible to save the company’, said one partner of the Interserve restructuring.

Howard Kennedy and Browne Jacobson also last week won mandates acting on HMV’s rescue buyout by Canadian record company Sunrise Records & Entertainment Limited.

The move follows the music retailer’s demise into administration at the end of last year when Addleshaw Goddard partners Fraser Ritson and Alison Goldthorp were drafted in to advise the administrator KPMG.

The transaction will see Sunrise Records acquire 100 HMV stores across the UK while 27 stores were not included in the deal and have now shut down.

Howard Kennedy is advising KPMG, with a team led by corporate partner Jonathan Polin while Browne Jacobson corporate finance partner Roger Birchall is advising Sunrise Records.

High street cake purveyor Patisserie Valerie last month called in KPMG after it was unable to shake off significant fraud plaguing the business, with Gateley advising the administrator.

nathalie.tidman@legalease.co.uk

Legal Business

Cyber-attack hacks at DLA profit as strong UK performance lifts revenue 5%

Cyber-attack hacks at DLA profit as strong UK performance lifts revenue 5%

Growth in DLA Piper’s UK business has pushed the firm’s international LLP top line to £919m, but 2017’s cyber-attack has weighed on profit.

The firm’s international (non-US) revenue for the year to 30 April 2018 grew £42.2m, or 5%, of which £29m related to the UK business. Stripping out the impact of foreign exchange, however, which the previous financial year added an enormous £75.5m to revenue, fee income was up £33.1m, or about 4%.

Profit was up £11.4m to £315.8m, even as operating costs increased £31.9m to £600.5m. DLA chief financial officer Paul Edwards told Legal Business it had been a strong year of underlying growth, particularly as currency movements had much less impact than the previous year.

But he said the firm’s 2017 cyber incident, which occurred during this year’s results period, had impacted profit.

‘I couldn’t even give you a number on this but I do know it cost us,’ he commented. ‘Had that not happened we’d be talking about, I believe, an even stronger year.’

Edwards said growth in UK fee income of about 10% was one of the strongest performances in the firm’s international regions, while Europe and Asia-Pacific saw more modest, single-digit growth. He was particularly pleased with the firm’s performance in Africa, which more than doubled during the period.

‘It’s a rounding number in the big picture of the whole firm but for us it’s a complete endorsement of our strategy: our Johannesburg office really did see some big growth.’

The firm’s borrowings increased to £32.6m from £14.4m in the year, ahead of a big period of investment which has included moving into new London offices and rolling out new IT equipment across the firm worldwide.

Key management personnel, which includes the senior partner, managing partner, members of the executive committee, international practice group heads, country managing partners and service directors took home a 22% pay increase, up to £44m from £36.1m.

Total staff numbers at the firm rose to 5,120 from 4,955, while fee earner numbers recovered from a slight dip the previous year to reach 2,135 from 2,026. Staff costs increased 6% to £329.2m.

Edwards said the firm was pleased with the first nine months of this year but economic uncertainty was front of mind.

‘We’re now reporting to the board on a month-by-month basis, there’s the shadow of Brexit,’ he commented. ‘The world’s not in a great place.’

hamish.mcnicol@legalease.co.uk

Legal Business

‘A global solution’: Pinsents hires six partners for Frankfurt launch as DLA expands in Dublin

‘A global solution’: Pinsents hires six partners for Frankfurt launch as DLA expands in Dublin

Pinsent Masons has hired six partners from a range of firms for a new Frankfurt office, the firm’s third opening in Germany since 2012.

Frankfurt follows moves into Munich and Düsseldorf for Pinsents in 2012 and 2016 respectively. The new office will focus on the technology, energy and real estate sectors initially with an eye to developing in financial services.

A founding team of six partners has been hired from multiple firms for the launch. Volker Balda joins from KPMG Law, where he was M&A head for Germany and co-head of the global corporate law practice, M&A partners Markus Friedel and Sven Shculte-Hillen join from Dechert, M&A partner Ronald Meissner joins from Oppenhoff & Partners, real estate partner Tobias Nuss joins from Beiten Burkhardt, and intellectual property partner Nils Rauer was hired from Hogan Lovells.

Pinsents’ Germany head Rainer Kreifels commented: ‘Establishing a presence in Frankfurt has been part of our vision for Germany from the outset. The new office in addition to our Munich and Düsseldorf locations will increase the strength and depth of our offering for clients locally and internationally.’

The firm has grown to 38 partners and more than 100 lawyers in Germany over the last six years, including five lateral hires in the past 12 months. Key mandates have included advising German tech company About You on a $300m funding deal and completing three Frankfurt Stock Exchange initial public offerings.

Last year, Fieldfisher and Covington & Burling also opened offices in Frankfurt.

Elsewhere, DLA Piper has hired four partners from different firms to join its Dublin office, which recently launched with the hire of David Carthy from William Fry.

Conor Houlihan joins from Dillon Eustace to lead DLA’s finance and projects practice in Ireland, Éanna Mellett joins as a corporate partner from Matheson, while former A&L Goodbody partners Mark Rasdale and Ciara McLoughlin join the intellectual property and technology and employment practices respectively.

Carthy, DLA’s Ireland managing partner, told Legal Business the firm intended to build a substantial practice in Ireland. He joined DLA in July to help refine the strategy and said the Irish market was ‘ripe for change’.

‘Clients are looking for a global solution and want more choice. DLA works differently from a lot of the Irish players. Clients are increasingly asking, “Can you help me in different jurisdictions?”’

Carthy expected to make further hires and saw the practice growing to at least 100 lawyers over the next couple of years. Financial services, technology and life sciences are a particular focus for the office, with Dublin seen as a key global hub in those sectors.

Carthy added: ‘The Irish economy is doing very well at the moment. Obviously Brexit has added major uncertainty, but there’s still plenty of activity.’

DLA was the fifth firm to open in Dublin after the Brexit vote, following in the footsteps of Lewis Silkin, Simmons & Simmons, Covington & Burling and Pinsents.

hamish.mcnicol@legalease.co.uk

Legal Business

Levine goes unopposed to win second DLA managing partner term

Levine goes unopposed to win second DLA managing partner term

DLA Piper international managing partner Simon Levine has been re-elected for another four years following an uncontested election.

Levine’s reappointment was confirmed today (8 October) after nominations for any challengers closed on Friday (5 October).

A contested election would have seen hustings begin this week before the managing partner was confirmed a month later.

The firm’s board had said it was pleased Levine (pictured) sought a second term. Earlier this year, eight partners had competed in DLA’s first contested senior partner election in a decade, sparked by Juan Picón’s shock departure for Latham & Watkins less than two years into his term. Firm stalwart Andrew Darwin was ultimately elected senior partner.

On his re-election, Levine commented: ‘DLA Piper is a fantastic firm with ambitious plans for the future. I look forward to continuing to work with Andrew and US leadership to achieve our goals and provide our clients with a high quality service that enables them to deliver, accelerate and grow.’

Darwin commented: ‘The board is pleased that Simon has been re-appointed for a further four years after a successful first term. On a personal level, I am also delighted that we will continue to work together in what has already become an effective team.’

Levine assumed the top job in 2015 from the man who led the firm’s rapid globalisation over 18 years, Sir Nigel Knowles. DLA was transformed into one of the world’s largest law firms under Knowles’ watch and his standing down was referred to as the firm’s ‘Sir Alex Ferguson moment’.

In April this year, DLA bounced back from the previous year’s global turnover drop with double-digit percentage growth in net profit. The firm’s global revenue rose to $2.63bn in 2017, up 7% on last year, while the firm added £75.5m to its international LLP’s top line on the back of exchange rate movement – accounting for 69% of the international revenue improvement for the year ending 30 April 2017.

DLA’s recent history has seen some other high-profile exits following Picón’s departure. Three significant contributors in real estate left this year for McDermott Will & Emery, followed by Anu Balasubramanian, a young private equity partner making a strong impression, to Paul Hastings.

Conversely, the firm recently bolstered its corporate practice with the hires of Freshfields Bruckhaus Deringer veteran Martin Nelson-Jones to its corporate practice and former Serious Fraud Office (SFO) division head Patrick Rappo from Steptoe & Johnson.

hamish.mcnicol@legalease.co.uk

Legal Business

Levine bids for second managing partner term as DLA kicks off election

Levine bids for second managing partner term as DLA kicks off election

DLA Piper’s partnership is headed to the polls again for its managing partner election, less than a year after eight partners competed in the firm’s first contested senior partner election in a decade.

Incumbent managing partner and co-chief executive of the global giant, Simon Levine, is standing for re-election. Nominations for candidates close Friday 5 October but if nobody else stands, Levine will be re-elected on 8 October.

If other candidates come forward, hustings will begin on 8 October, with the results of confirmed a month later. The managing partner term will run for four years from the start of next year.

Senior partner Andrew Darwin, who was elected to the position following a contested process in February , commented: ‘The board is pleased that Simon Levine intends to stand for re-election and, having worked closely with him during his first term, is very supportive of Simon continuing for a further four years, while respecting the right for other partners to put themselves up for election.’

Levine (pictured) assumed the top job in 2015 from the man who led the firm’s rapid globalisation over 18 years, Sir Nigel Knowles. DLA was transformed into one of the world’s largest law firms under Knowles watch and his standing down was referred to as the firm’s ‘Sir Alex Ferguson moment’.

In April this year, DLA bounced back from the previous year’s global turnover drop with double-digit percentage growth in net profit. The firm’s global revenue rose to $2.63bn in 2017, up 7% on last year, while the firm added £75.5m to its international LLP’s top line on the back of exchange rate movement – accounting for 69% of the international revenue improvement for the year ending 30 April 2017.

The managing partner election comes following a high-profile senior partner race at DLA earlier this year, sparked by Juan Picón’s shock departure for Latham & Watkins less than two years into his term. Eight partners contested that election, with London trio Darwin, international corporate head Bob Bishop and corporate partner Jon Hayes making the final three.

DLA’s recent history has seen some other high-profile exits following Picón’s departure. Three significant contributors in real estate left this year for McDermott Will & Emery, followed by Anu Balasubramanian, a young private equity partner making a strong impression, to Paul Hastings.

Conversely, the firm recently bolstered its corporate practice with the hires of Freshfields Bruckhaus Deringer veteran Martin Nelson-Jones to its corporate practice and former Serious Fraud Office (SFO) division head Patrick Rappo from Steptoe & Johnson.

hamish.mcnicol@legalbusiness.co.uk

Legal Business

Legal 500 Data: The data behind the story

Legal 500 Data: The data behind the story

DLA Piper top-tier global rankings from The Legal 500

DLA Piper has topped this year’s Legal Business 100 with revenue of £1,799.5m, an increase of 7% from last year. See our full coverage of the Legal Business 100.

Legal Business

DLA adds ‘practical’ regulatory expertise with hire of former high-ranking SFO lawyer

DLA adds ‘practical’ regulatory expertise with hire of former high-ranking SFO lawyer

DLA Piper has hired a former Serious Fraud Office (SFO) division head in response to multinational clients increasingly demanding ‘expertise on the ground’ with regulators.

DLA announced today (28 August) it had hired corporate crime and regulatory investigations lawyer Patrick Rappo from the London arm of US firm Steptoe & Johnson, which he joined in 2013. Prior to that, Rappo spent five years at the SFO, where he became joint head of bribery and corruption.

Rappo helped introduce deferred prosecution agreements in the UK while at the SFO, and in private practice has advised both corporates and clients on investigations and responding to government enforcement action, including from the US Department of Justice, SFO, and World Bank.

DLA head of financial services and regulatory investigations Tony Katz told Legal Business there was a growing trend for multinational corporations looking for lawyers which have expertise working with regulators. He said the firm had hired partners in the US who have acted in law enforcement agencies and regulators there, which had proved successful.

‘If we’ve got people who’ve worked at the international regulators and enforcement agencies then clearly they’ve got a very good understanding of how to deal on a practical level with those agencies,’ he commented. ‘They are also very well-versed in dealing on a cross-border basis because many of those investigations run by the SFO have an international element and work very closely with international agencies.’

Katz added that DLA’s corporate criminal investigations group, which would increase to five partners and 15 lawyers in the UK with Rappo’s hire, would benefit from Rappo providing ‘expertise on the ground’ to the firm’s international clients which had a presence here.

‘We see this as a priority area for the firm. The UK, even with the addition of Patrick, can still benefit from significant additional resources.’

Rappo commented: ‘DLA Piper’s global presence and impressive roster of clients provides a very exciting opportunity. The firm has been a leader in the corporate crime and regulatory investigations space for many years and I look forward to working with our very experienced international team to further strengthen the offering for our clients.’

Rappo’s hire is announced on the same day former FBI deputy general counsel (GC) Lisa Osofsky begins her term as the new SFO boss. Osofsky, whose appointment was finally announced in June, replaces former SFO director David Green QC, who is expected to shortly join Slaughter and May.

hamish.mcnicol@legalease.co.uk

Legal Business

Into the mainstream: another big New Law exit sees EY acquire Riverview Law

Into the mainstream: another big New Law exit sees EY acquire Riverview Law

Mere months after New Law pioneer Lawyers On Demand (LOD) secured private equity backers to position itself as a global player, fellow alternative legal services business darling, Riverview Law, has been acquired by Big Four accountancy firm EY.

The financial details of the deal, announced today (7 August), were not disclosed, but Riverview’s turnover is believed to have risen to more than £10m since it launched in 2012, meaning the acquisition is expected to carry a hefty price tag.

For EY, the purchase is touted as a means by which the accounting firm will look to enhance and scale its EY Law managed services offering. EY global head of alliances for tax, Chris Price, will become chief executive of the rebranded EY Riverview Law once the acquisition has been completed later this month. He will be working closely with the existing Riverview leadership as EY looks to service clients across the globe.

The acquisition also sees global law giant DLA Piper offload its stake in Riverview, with the firm previously owning 21% investment in the parent company, LawVest. That stake reduced to 14% after Riverview demerged with Kim Technologies, its highly-rated AI platform, in September 2017.

Riverview’s long-standing relationship with Kim was established when the New Law provider invested in the company in 2014. DLA has maintained a small minority stake in the technology platform following Riverview’s sale.

After launching in 2012, Riverview’s turnover has risen from about £200,000 to what analysts estimate is more than £10m. Riverview invested millions into Kim before the AI platform became separately funded as a global software business.

Speaking to Legal Business earlier this year, Riverview chief executive Karl Chapman (pictured) commented on law firms’ adoption of legal tech: ‘It is fascinating, there is a complacency driven by the profitability and margins that law firms make. It will take three to four years for that to really come home to roost and there will be some big winners in that changed environment.’

‘Corporate legal departments are moving at a much faster pace, they are adopting technology much quicker, and law firms will be required to catch up because the customer will require them to catch up,’ he said.

Cornelius Grossman, EY global law leader, commented: ‘Legal managed services is one of the fastest growing segments of the legal market. This acquisition underlines the position of EY as a leading disruptor of legal services; it will provide a springboard for current EY legal managed services offerings and bolster the capabilities that we can help deliver for EY clients.’

DLA’s decision to maintain an investment in Kim contrasts with Bryan Cave Leighton Paisner (BCLP), which sold its entire 62% investment in Lawyers On Demand (LOD) to buyout house Bowmark Capital in May.

Chapman added: ‘Put simply, we are excited by the next stage in our journey. We believe that the combination of the Riverview Law operating model, operating platform and people, alongside the EY brand, EY clients, existing legal services offering and global scale is a winning formula for the legal market.’

thomas.alan@legalbusiness.co.uk

For more on EY and the Big Four’s push into the legal services market, read  ‘Who’s afraid of the Big Bad Four? – Inside the accountants’ assault on law’ (£)