Legal Business

Buyout star Adrian Maguire to join Kirkland in body blow to Freshfields

Buyout star Adrian Maguire to join Kirkland in body blow to Freshfields

One of the most touted private equity names in the City, Adrian Maguire, has quit Freshfields Bruckhaus Deringer to join Kirkland & Ellis just over a year after his former colleague David Higgins made the same move.

Freshfields-bred and regarded as a loyalist to the firm, Maguire is leaving the Magic Circle outfit after more than two decades in what will be seen as a notable setback for its attempts to limit the damage of Higgins’ $10m move in December 2017.

For Kirkland it is another significant step forward in its attempts to bulk up its European M&A firepower. Clients of the highly-regarded Maguire include Cinven, Carlyle and Advent International.

The US firm, which last year became the highest grossing in the world as turnover hit $3.165bn, recently made another step in this direction, recruiting a corporate duo from Linklaters to launch its second continental base in Paris.

The firm’s profit per equity partner now sits at $4.7m, giving it the chance to offer huge packages to marquee deal partners.

Coupled with the hire of Higgins, Maguire’s move also sees the Chicago-based giant turn to more mainstream deal advisers, a move reflected in the anointment of Jon Ballis as chair, who is expected to usher a more consensual style than current chair Jeffrey Hammes when he takes over in 2020.

A spokesperson for Freshfields said: ‘Adrian has been a valued friend and colleague over the course of his career with us and we wish him all the best in his new role. We have had a phenomenal year advising clients in 2018, and the strength and depth of our private equity practice is second to none. Adrian’s departure does not change that.’

Maguire took a six-month sabbatical from Freshfields from June to November last year, and a partner at the Magic Circle firm pointed out that the team had its best year ever despite Maguire’s absence. Highly-rated players still at the firm include partner Charles Hayes.

Yet the symbolism of the move for the City legal scene is hard to overstate. If even a Magic Circle loyalist like Maguire can be persuaded to switch to a US rival, fresh questions will be raised about the London elite’s ability to retain key talent. Freshfields had in 2017 gone through a shake-up of its partnership designed to help it keep its star partners from the clutches of higher-paying US rivals. This latest departures suggests it was too little, too late.

marco.cillario@legalease.co.uk

For more on Kirkland & Ellis’ meteoric rise, see ‘Wrecking ball’ (£)

Legal Business

Deal View: Warlords in Paris – Kirkland’s long march to the French capital

Deal View: Warlords in Paris – Kirkland’s long march to the French capital

For a 109-year-old giant that fielded just 12 offices at the beginning of 2017, Kirkland & Ellis has had an expansive 18 months. Of course, there is never a better time to invest than the year in which your firm became the highest-grossing legal outfit in the world as Kirkland did in 2018 after posting $3.165bn. But it is still notable that of the five branches launched since Jeffrey Hammes took over as chair in 2010, three were announced since May 2017.

While earlier Boston and Dallas launches reflect a well-established ambition in its home market, news of Kirkland’s plans for a new arm in Paris signal a more symbolic extension of empire. Only Kirkland’s third branch in Europe, it comes more than two decades after London and almost 14 years after its Munich debut.

Legal Business

After the hammer, a scalpel – Kirkland confirms long-groomed successor to ‘visionary’ chair Hammes

After the hammer, a scalpel – Kirkland confirms long-groomed successor to ‘visionary’ chair Hammes

In probably the worst kept secret in Chicago legal circles, Kirkland & Ellis has confirmed that partner Jon Ballis will become its next chair when highly-rated incumbent Jeffrey Hammes steps down in February 2020.

Ballis’ elevation was officially confirmed last week, though Legal Business reported the succession plan back in July. Nevertheless, the Chicago-based private equity specialist faces a challenge in taking over from a leader who transformed Kirkland from regional challenger to unquestioned global elite.

Hammes’ decade at the helm of Kirkland’s 15-member ruling body will come to an end after a one-year extension to his third three-year term.

Taking over in 2010 from veteran litigator Thomas Yannucci, the ambitious Hammes exerted absolute power in a firm which prides itself on lean management, driving its growth to this year become the world’s top-billing law firm at $3.165bn.

In Legal Business’s cover feature on Kirkland this summer, a former partner described Hammes as ‘When he comes into a room, he high-fives. He does not take no for an answer. Leads from the front and his decision is the only one that matters.’

Hammes joined Kirkland’s Chicago base in 1985, making partner in 1991, and quickly made his name with marquee client Bain Capital and for fronting Kirkland’s expansion through California. He led the San Francisco arm after its 2003 launch and opened the Palo Alto branch in 2008.

He is credited with some bold moves during his time as chair, including making heavy investments to bring in a string of high-billing partners and in the repositioning of its London branch from a service office to a core element of Kirkland’s business.

He also expanded the firm’s network, overseeing launches in Beijing, Houston, Boston and, more recently, Dallas and Paris.

A member of the management committee since 2015 and another Bain relationship partner, chairman-elect Ballis started his career at Illinois rival Sidley Austin before joining Kirkland 20 years ago. He had been tipped to replace Hammes for months and played a part in some of the firm’s recent headline laterals, including the $10m hire of Freshfields Bruckhaus Deringer’s veteran David Higgins last year.

Ballis is, however, expected to usher in a more consensual style than Hammes, in line with Kirkland’s transformation from challenger to the highest levels of global law.

The early anointment of the next chair is not unusual for Kirkland, with Hammes himself positioned to take over from veteran litigator Thomas Yannucci as early as 2006. ‘There is no election,’ one former partner told Legal Business. ‘People “emerge”, it is very rarely a surprise. Everybody knows what is going to happen before it happens.’

marco.cillario@legalease.co.uk

For more on Hammes’ leadership and Kirkland’s dramatic rise, see ‘Wrecking Ball’ (£)

Legal Business

World’s top-billing law firm Kirkland finally makes Paris debut with Linklaters corporate duo

World’s top-billing law firm Kirkland finally makes Paris debut with Linklaters corporate duo

After years of internal debate Kirkland & Ellis is to launch in Paris with the hire of one of Linklaters’ key corporate partners.

In a market largely defined by star individuals, Vincent Ponsonnaille has quit the Magic Circle firm alongside fellow corporate partner Laurent Victor-Michel to spearhead the launch of Kirkland’s second outpost on the continent.

It is a highly significant move for the Chicago-bred giant, which has traditionally been conservative when it comes to expanding its footprint, fielding only six offices outside the US. Paris will be its fifteenth global office, coming three months after launching its ninth US base in Dallas, Texas.

Linklaters is one of the best-regarded London firms in France alongside Clifford Chance. Ponsonnaille’s 17 years at the firm, including 12 as a partner split between London and Paris, featured several large mandates, including the €1bn sale of The Body Shop from L’Oreal to Brazilian cosmetic company Natura and Linklaters’ first ever mandate for PE house BC Partners in 2016. Victor-Michel, meanwhile, was made partner last year and worked with Ponsonnaille on mandates including L’Oreal.

Kirkland’s only other European base, meanwhile, launched in Munich in 2005 with the aim of getting more sponsor work in Europe and to follow key private equity client Bain Capital. It remains a small office with around 35 lawyers focusing on a few key sponsor clients.

Several observers, however, have been saying for months that the firm needs more people on the ground if it is to make a breakthrough in the European corporate space, following its landmark $10m hire of former Freshfields Bruckhaus Deringer buyout star David Higgins in December last year.

Interest will turn to how much Kirkland’s entrance into France will affect the local market, and how many others will follow Ponsonnaille and Victor-Michel. However, it should be remembered that the development of the firm’s Munich base has been slow and troubled. The memory of the seven-partner exit to Sidley Austin in February last year is still vivid.

marco.cillario@legalease.co.uk

For more on Kirkland’s meteoric rise, see ‘Wrecking Ball’ (£)

Legal Business

Deal watch: Slaughters and Kirkland drill into giant $12bn offshore plc merger as Travers and Eversheds maximise L&G’s pensions buy-out

Deal watch: Slaughters and Kirkland drill into giant $12bn offshore plc merger as Travers and Eversheds maximise L&G’s pensions buy-out

Slaughter and May and Kirkland & Ellis have led on the $12bn combination of UK Plc offshore drilling companies Ensco and Rowan Companies as Travers Smith and Eversheds Sutherland wrap up Legal & General’s £2.4bn buyout of Nortel Networks UK Pension Plan.

The drilling merger – an all-stock deal and a court-sanctioned scheme of arrangements – will see the shareholders of Ensco and Rowan own 60.5% and 39.5% respectively of the combined business.

Kirkland & Ellis clinched a significant win in UK plc land in advising Rowan with a team including City partners David Higgins, David Holdsworth and Dipak Bhundia. The deal was led out of Houston by corporate partners Sean Wheeler and Doug Bacon and included Dallas partner Ryan Gorsche and New York-based executive compensation partner Scott Price and tax partners David Wheat, Lane Morgan and Mike Carew.

Latham & Watkins is advising Rowan on antitrust aspects, with a team including corporate partner Michael Egge in Washington, Brussels managing partner Lars Kjolbye, and London partner Jonathan Parker.

Meanwhile, Slaughters is acting for Ensco with a team led by corporate partners Hywel Davies and Christian Boney and including partners William Turtle (competition), Jonathan Fenn (pensions) and Mike Lane (tax).

Elsewhere, a Legal & General deal on Monday (8 October) saw the UK insurer complete a £2.4bn buyout of pensions relating to the now-defunct telecoms equipment provider Nortel.

The buy-out relates to around 15,500 pensioner members and around 7,200 deferred members of the pension scheme, which entered a Pension Protection Fund (PPF) assessment after Nortel went into administration in 2009, pending litigation and insolvency proceedings.

The Travers team advising the trustees was led by Dan Naylor and Susie Daykin and also included partner Peter Hughes. Advising Legal & General was an Eversheds team led by Hugo Laing.

Naylor told Legal Business that the deal represented the biggest ever PPF plus arrangement, in which the pension scheme members receive more options, via a member option exercise, and better benefits than the PPF compensation would have offered. A further transaction is likely to follow as more recoveries are made.

The deal is also the second biggest pension buyout ever, after the £2.5bn transaction with Legal & General relating to pensions of US-headquartered automotive supplier TRW in 2014.

Hughes and Naylor, the latter then an associate, were also part of the team advising the trustees of the TRW Pension Scheme, while Laing, then an associate at Clifford Chance, was part of the team advising Legal & General on that deal.

Another major deal this week saw Kirkland, Latham and Allen & Overy score key roles on the sale of shareholdings in fin-tech company FNZ to Canadian pension fund La Caisse de dépôt et placement du Québec (CDPQ) and private equity investor Generation Investment Management.

The deal sees Kirkland advise the sellers, FNZ and funds advised by HIG Capital and General Atlantic, led by London corporate partners Gavin Gordon, Carl Bradshaw and Tom McCarthy. A Latham team led by Michael Bond advised CDPQ and Jonathan Wood at Weil Gotschal & Manges advised Generation. Karan Dinamani at Allen & Overy advised the CEO of FNZ.

The acquisition is the first investment by CDPQ-Generation, the sustainable equity joint venture launched by CDPQ and Generation.  Kirkland has a nine-year relationship with FNZ, having advised on HIG Capital’s initial investment in 2009, General Atlantic’s investment in 2012 and FNZ’s recently announced deal to acquire European Bank for Financial Services (ebase) from comdirect bank.

nathalie.tidman@legalease.co.uk

Legal Business

Kirkland continues inexorable rise with record 122-strong promotions round – including 10 in London

Kirkland continues inexorable rise with record 122-strong promotions round – including 10 in London

In a move befitting of its unstoppable upward trajectory, Kirkland & Ellis  has scored a new record in partner promotions, making up a striking 122 partners, of which 10 are in London.

The overall tally across the Chicago-bred firms 14 international offices is an increase on last year’s mammoth round, which saw 97 new partners created, with 13 minted in the City.

In keeping with Kirkland’s successes in transactional work, four of the new London partners are M&A and private equity lawyers, with Tom Bartram, Dipak Bhundia, Melanie Johnson and Tom McCarthy promoted.

The other City partners are James Esterkin (real estate finance), Philip McEachen (financial services regulatory), Andrea Renold (investment funds), Mike Robert-Smith (antitrust/competition), Michael Taufner (capital markets) and Jennifer Wilson (technology & IP transactions).

The rest of Kirkland’s promotion round have been made up in the firm’s international offices spanning Boston, Chicago, Dallas, Hong Kong, Houston, Los Angeles, Munich, New York, Palo Alto, San Francisco, Shanghai and Washington DC.

The 2,200-lawyer US firm has an unusual model in that it makes up large ranks of salaried partners before considering promotions to its tightly-held equity. Operating a fast track, associates can make salaried partner six years after qualification – bucking the wider trend of pushing back promotions.

The firm had 359 equity partners at the end of the 2016 financial year, and 461 salaried partners. Those making it to equity benefit from one of the world’s most profitable law firms where plateau earnings now top $10m. The latest promotion round means that Kirkland has made up 390 partners in the last four years – compared to an entire global partnership of 394 at Freshfields Bruckhaus Deringer.

This year the entire magic circle made up 89 partners in total, eclipsed by Kirkland. Kirkland’s ten City promotions is the same number as Linklaters this year, more than Clifford Chance and double the number promoted by Allen & Overy and Freshfields Bruckhaus Deringer in their home market.

Finance partner Neel Sachdev told Legal Business: ‘Our accelerated career track offers our young lawyers a transparent and meritocratic path to partnership.  We aim to empower our lawyers with partnership so they have the opportunity to be client facing and lead deals in the market at an earlier stage in their careers.  This also allows us to see how they operate as partners and to help nurture those skills.

‘We are increasingly competing for young talent with other industries such as tech companies and private equity firms, not just the traditional careers of doctors and accountants. The offer of a real prospect of partnership early is attractive to talent and we are seeing ambitious lawyers elect out of firms with no realistic prospects of partnership at that stage,’

David Higgins, corporate partner and co-managing partner of the London office, added: The message at Kirkland is that we are all about empowering our talent. It is an optimistic approach that inspires energy and confidence in the culture. It’s about keeping and nurturing our talented lawyers so that everyone benefits.’

The promotions are on the back of a particularly outstanding year for the juggernaut, which in the 2017 financial year hiked revenues by more than $500m to overtake Latham & Watkins as the world’s highest-earning law firm, with revenues surging to $3.165bn.

The firm stormed ahead with a 19% hike in revenues against $2.65bn the previous year. Profit per equity partner (PEP) also surged nearly 15%, to $4.7m from last year’s $4.1m, making it one of the world’s most profitable law firms. At the time, headcount rose year-on-year by 13.5% to 1,997 lawyers, while revenues per lawyer increasing to 5.2% to $1.585m.

The pace-setting performance underpinned by booming private equity and leveraged finance markets underlines a 20-year ascent that has seen the thrusting US law firm expand dramatically beyond its Illinois roots to become a potent force in New York and London.

The firm has certainly made its presence felt on both sides of the Atlantic in recent months, never more strikingly when it in December hired Freshfields Bruckhaus Deringer private equity veteran David Higgins with a market-setting $10m package.

Other major London hires have included Linklaters’ real estate M&A rainmaker Matthew Elliott in 2015 and Freshfields’ restructuring partner Sean Lacey last May. The firm hit the headlines again in January when it enlisted Cravath, Swaine & Moore M&A star Eric Schiele in New York.

London has been one of Kirkland’s fastest-expanding offices, growing 61% since 2013 to 189 lawyers in 2017. The practice currently generates over $300m. New York headcount has increased 42% over the last five years to 503 lawyers.

nathalie.tidman@legalease.co.uk

For more on Kirkland’s trailblazing approach, read ‘Global 100: Wrecking ball – Inside Kirkland & Ellis’ creative destruction‘ (£)

Legal Business

Comment: For good or ill, Kirkland is now redefining high-end law

Comment: For good or ill, Kirkland is now redefining high-end law

Though I’ve always known that soul-of-a-law-firm cover features are the biggest draw for our readers, the response to our Kirkland & Ellis epic in July has been striking. Not since ‘Branded’ two years ago exposed the state of King & Wood Mallesons’ European business has a piece in these pages provoked such an intense reaction. Our team did a good job but that also reflects the hold the K&E phenomenon has taken over the industry’s imagination. Having covered the law for a good number of years, I cannot think of a firm that has attracted such strong emotions split between appalled detractors and the growing band battered into submissive admiration.

The critics loathe the outfit in part for upending some accepted notions of how global law firms are supposed to excel. But most of the distaste springs from the potency of a challenge emerging from outside the profession’s established London and New York elites. Kirkland’s success, however, isn’t just about defying norms. In some areas, Kirkland took platitudes of focus, meritocracy and leadership and turned them into realities. Sometimes brutal realities but that’s reality for you.

Kirkland’s rise also speaks to the fact that the 30-year expansion of the private equity industry proved an unbeatable vehicle on which to hitch legal ambitions. Also fundamental has been a model utterly geared to the dramatic impact that talented, driven and entrepreneurial individuals can have with the right platform. Perhaps Kirkland’s ascent will prove the high watermark of law’s star culture before technology digitises magic into process. If not, rivals should accept there is more to Kirkland’s peculiar culture of excellence than bling and sharp elbows. Nowhere is that more obvious than in its dual tournament model of early associate advancement, the closest Kirkland has to a secret sauce. After locking in talent with a quick crack at non-equity status – a contrast to many peers stretching out the partnership track – talent gets further vetted with the carrot of ultra-lucrative full equity.

Though many criticise the model, as a neutral observer I struggle to find its supposed flaws; Kirkland’s equity/fee-earner leverage isn’t even all that high. But then the legal industry has ignored mounting evidence that delaying advancement of the younger ranks is losing sizeable chunks of valuable talent because that suited older partners.

Even such assets do not make Kirkland unassailable. Fast-growth models are inherently prone to instability and easily store up problems for when expansion eventually stalls. The swirl of gossip surrounding the recruitment of Freshfields playmaker David Higgins has yet to die down; a flame-out in London would be damaging.

It is also easy to imagine problems with lean and robust leadership presiding over a bunch of divas when the handover of much-vaunted chief Jeffrey Hammes takes place. Managing the touted shift to a more consensual style will take some doing. Still, given its gravity-defying emergence over the last 20 years, it will require very good reasons to bet against them. For now, Kirkland is setting the agenda – global peers are merely following in its wake.

alex.novarese@legalease.co.uk

For more on Kirkland & Ellis please see ‘Wrecking ball – Inside Kirkland & Ellis’ creative destruction’

Legal Business

Deal watch: City high-flyers land jumbo £4.4bn BA pension deal as Blackstone’s buying spree continues

Deal watch: City high-flyers land jumbo £4.4bn BA pension deal as Blackstone’s buying spree continues

City heavyweights Allen & Overy (A&O), Clifford Chance (CC) and Eversheds Sutherland have landed key roles on Legal & General’s £4.4bn buy-in of the British Airways pension scheme as advisers cash in on a brace of Blackstone deals.

UK insurer Legal & General is taking on £4.4bn of historic pension liabilities relating to the Airways Pension Scheme (APS) in a bulk annuity designed to reduce risk in the scheme.

A&O and Eversheds are advising the trustees, with A&O’s team led by insurance partner Philip Jarvis and counsel Kate McInerney. For their part, Anthea Whitton and Francois Barker are heading the Eversheds team.

The CC team advising Legal & General is being led by corporate partner Katherine Coates and pensions partner Sarah McAleer.

The deal also covers existing longevity reinsurance contracts of roughly £1.7bn entered into by APS via a captive insurer with Canada Life Reinsurance and PartnerRe, which were incorporated into the buy-in arrangement. Closing of the deal will mean that APS is now 90% hedged against all longevity risk.

‘This deal is very significant in the market and part of a trend of which there are push and pull factors,’ one City partner told Legal Business. ‘On the push side, there are trustees out there looking to de-risk and on the pull, market conditions are making deals like this economically viable transactions.’

APS was established in 1948 and it was closed to new members from 31 March 1984. The scheme had 24,196 members, of whom 1.4% were active members, 3.6% deferred members and 95% pensioners.  At the end of March 2018, APS had assets totalling £7.6bn.

Elsewhere, the blistering private equity market saw A&O win the mandate to advise private equity giant Blackstone on its €1bn acquisition of a majority stake in Baltic bank Luminor. The deal involves funds managed by Blackstone and other institutional investors acquiring a 60% stake in the bank, with Nordic banks Nordea and DNB each retaining a 20% stake.

A&O’s private equity partner Karan Dinamani led on the deal – the Magic Circle firm’s inaugural deal for Blackstone on the buyout side – which builds on a long-standing relationship acting for Blackstone’s lenders on real estate transactions.

Commenting on the frothy PE market, Dinamani told Legal Business: ‘A lot of private equity players are looking to acquire right now and the London market is roaring. The fact that a private equity player is acquiring a majority in an European Central Bank regulated bank makes the deal interesting and complex.’

With €15bn of assets, Luminor was created in 2017 through a combination of Nordea and DNB’s operations in the Baltics.

Meanwhile, a £1.5bn deal that saw Blackstone Property Partners and Telereal Trillium acquire Network Rail’s commercial business estate sealed roles for Kirkland & Ellis, CC, Eversheds and Gowling WLG.

CC and Eversheds acted as legal advisors to Network Rail, with CC’s team comprising partners Franc Peña, Angela Kearns and Adrian Levy and Nick Bartlett leading for Eversheds.

Kirkland and Gowling advised buyers Telereal and Blackstone, with the Kirkland team led by corporate partner Michael Steele and including corporate partner Carlos Gil Rivas. Mike Twinning led the Gowling team.

The portfolio includes 5,200 properties, the majority of which are converted railway arches.

The sites are being sold on a leasehold basis, with Network Rail retaining access rights for the future operation of the railway. The proceeds are being put towards the UK railway upgrade plan.

nathalie.tidman@legalease.co.uk

Legal Business

For good or ill, Kirkland is now redefining high-end law

For good or ill, Kirkland is now redefining high-end law

Though I’ve always known that soul-of-a-law-firm cover features are the biggest draw for our readers, the response to our Kirkland & Ellis epic in July has been striking. Not since ‘Branded’ two years ago exposed the state of King & Wood Mallesons’ European business has a piece in these pages provoked such an intense reaction. Our team did a good job but that also reflects the hold the K&E phenomenon has taken over the industry’s imagination. Having covered the law for a good number of years, I cannot think of a firm that has attracted such strong emotions split between appalled detractors and the growing band battered into submissive admiration.

The critics loathe the outfit in part for upending some accepted notions of how global law firms are supposed to excel. But most of the distaste springs from the potency of a challenge emerging from outside the profession’s established London and New York elites. Kirkland’s success, however, isn’t just about defying norms. In some areas, Kirkland took platitudes of focus, meritocracy and leadership and turned them into realities. Sometimes brutal realities but that’s reality for you.

Legal Business

Global 100: Wrecking ball – Inside Kirkland & Ellis’ creative destruction

Global 100: Wrecking ball – Inside Kirkland & Ellis’ creative destruction

They said rapid growth is hard if you are already big. Last year it hiked revenue 19% from $2.65bn. They said profitability is about focusing on quality over growth. As it became the highest grossing law firm in the world, fee-earner headcount surged 13.5% to over 2,000 and profit per equity partner (PEP) was up nearly 15% to $4.7m. They said a sprawling international footprint is essential if you want to secure high-end mandates. It has just 14 offices – only five outside the US – and generated $3.165bn in 2017. They said global law firms need bank clients. It is famously dismissive of banks and their onerous panels.

Perhaps the most intriguing aspect of Kirkland & Ellis’ meteoric rise over the last decade is how it turned BigLaw’s playbook on its head. The Chicago-bred giant has not only outperformed the profession’s elites in London and New York but challenged the very assumptions underpinning the legal industry’s decades-spanning pecking order.