Legal Business

Global London: The Big Long – Inside Sidley’s daring attempt to relaunch as a private equity leader

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US firms Kirkland & EllisSidley Austin

Summer 2015. Four US lawyers meet at Nobu restaurant in London. Sidley Austin management committee chair Larry Barden and Europe head George Petrow have invited two City-based lifers from long-time Chicago rival Kirkland & Ellis: private equity (PE) partners Erik Dahl and Christian Iwasko. On the table is a plan to shake up Sidley’s loss-making London operation by building a PE practice from scratch. Dahl and Iwasko are sceptical, but their patience with Kirkland has been worn thin by its latest round of top-dollar hires.

A few weeks later, Dahl and Iwasko sneak out of a Kirkland partner conference in Chicago to meet Barden and Petrow again. Doubt is giving way to enthusiasm: Sidley is prepared to invest an eye-catching sum and give the duo free reign. Six months later, the deal is signed. Dahl, Iwasko and four other London partners join Sidley in February 2016.

Legal Business

Kirkland breaks $5m PEP and outguns Latham again to stay world’s highest-grossing firm

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Financial results 2018/19 Kirkland & Ellis

Kirkland & Ellis has hiked revenues by more than $500m to remain the world’s highest-earning law firm, as global turnover surged to $3.76bn.

The Chicago-bred giant today (21 March) revealed results for the 2018 financial year, confirmed a 19% hike in revenues against $3.165bn the previous year. Profit per equity partner (PEP) topped $5m for the first time, up 7% to $5,037,000 on the $4.7m for 2017. Revenue per lawyer was up nearly 3% to $1.63m.

The firm would not disclose regional breakdowns for revenue but London is believed to have outpaced global growth considerably, growing revenue from around the $300m mark last year to about $380m. It has been one of Kirkland’s fastest-expanding offices, growing a striking 139% since 2013 with headcount in the City growing 28% in 2018 alone to reach 304 fee-earners. This compared with a 15% global headcount increase adding more than 300 lawyers to reach 2,306.

The stellar year has been on the back of a thrusting private equity M&A market and a number of standout restructuring matters, particularly in the retail space, in the UK and in the US.

Kirkland also set a blistering pace with internal promotions in the City with a sizeable 10-strong round of City promotions within a huge 122-strong global investment in keeping with its fast-track partnership model.

In London, the marquee hires of David Higgins from Freshfields Bruckhaus Deringer and Nicola Dagg from Allen & Overy, a move marking the Chicago-bred giant’s first foray into investing in IP litigation, have been symbolic in 2018.

The hire of private equity’s most wanted, Adrian Maguire to follow in the footsteps of his former boss Higgins earlier this year meant that Kirkland continued to make waves into 2019.

Latham last month announced it had added $323m to its top line in 2018, momentarily becoming the highest grossing law firm in the world, as PEP rose 6% to $3.45m. Revenue per lawyer rose 6% to $1.33m, as lawyer headcount rose 4% to 2,540. Last year revenue rose 9% to $3.06bn and PEP 6% to $3.24m.

Nathalie.tidman@legalease.co.uk

For more on Kirkland’s ascent to the top of the Global 100, see  Global 100: Wrecking ball – Inside Kirkland & Ellis’ creative destruction

Legal Business

Comment: Beyond barbarian – Another stride as Kirkland signs private equity’s most wanted

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The News Leader Kirkland & Ellis

If the news in late 2017 that Freshfields Bruckhaus Deringer private equity veteran David Higgins was joining Kirkland & Ellis was an insult to his Magic Circle firm, the announcement barely into 2019 that Kirkland was following up with his colleague Adrian Maguire looks like grievous injury.

The record-breaking transfer of Higgins was a symbolic reverse and a significant demonstration of Kirkland’s determination to push into mainstream sponsor work in Europe. Yet it was not entirely unexpected – there had been indications that Higgins was becoming disenchanted due to issues with Freshfields’ finance practice and a lack of a more meaningful leadership role. Where he went was more surprising than the matter of his departure.

There is no such caveat with Maguire, who without doubt topped the hiring wish lists of the elite private equity teams in the City. As Kirkland celebrated, Simpson Thacher & Bartlett is in mourning to have missed the opportunity and the firm is not alone.

If Higgins could be (just about) cast by critics as seeking the kinder deliverables of management and a final chapter to his career, Maguire is in his mid-forties prime and a universally-liked operator in a field that breeds abrasive individualists by default.

He was regarded as a team player and staunch Freshfields loyalist. As such the consensus among buyout veterans is that this loss is considerably more damaging for the City giant than the Higgins episode.

Reasons given for the abrupt change of heart are apparently some familiar concerns regarding the calibre of Freshfields’ finance practice at a time when expectations of Anglo-American debt coverage have never been higher. Some point to the presence of his old friend, Rory Mullarkey, at Kirkland, in addition to a host of familiar Freshfields hands having already moved, as making the understated Maguire comfortable to sign up. Despite earlier protestations of loyalty, over a lengthy sabbatical beginning in early summer the die was cast.

It is not even that by the standards of the stratospheric numbers that get kicked around in private equity you can class the move as an obvious dash for cash. Maguire was regarded as less money motivated than many peers and his hire was a good deal cheaper than the $10m transfer of Higgins. Other firms would have matched or exceeded his package.

Freshfields has inevitably moved into damage-limitation mode.

Certainly, the appointment is a demonstrable sign of the extent to which Kirkland’s thrusting culture and ambitions are edging closer to establishment norms, a core aim of chair-elect Jon Ballis. As one Kirkland hand notes: ‘We’ve always wanted to hire [Maguire]. Five years ago he wouldn’t have even returned our call.’

Freshfields has inevitably moved into damage-limitation mode and, despite a period in which only the charitable could say it has been a confident few years at Fleet Street, has a solid case to make in the context of private equity.

For mainstream European-centric sponsor work, it remains the pacesetter, with an enviable roster of clients, deals and talent (though the excessively-derided Clifford Chance still stands up considerably better than most peers allow). But the gap with key US rivals continues to close and on European deals with a clear US influence, it is no longer first choice.

Overall, Freshfields’ response remains unsatisfying and in places bordering on
the naïve. The ground is shifting underneath it sufficiently that it will need a more substantive strategic answer to such losses of talent in future. In contrast, Kirkland is to announce another year of robust growth. The firm has taken another notable step forward.

alex.novarese@legalease.co.uk

Legal Business

Beyond barbarian: Kirkland signs PE’s most wanted

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The News Leader Kirkland & Ellis

If the news in late 2017 that Freshfields Bruckhaus Deringer private equity veteran David Higgins was joining Kirkland & Ellis was an insult to his Magic Circle firm, the announcement barely into 2019 that Kirkland was following up with his colleague Adrian Maguire looks like grievous injury.

The record-breaking transfer of Higgins was a symbolic reverse and a significant demonstration of Kirkland’s determination to push into mainstream sponsor work in Europe. Yet it was not entirely unexpected – there had been indications that Higgins was becoming disenchanted due to issues with Freshfields’ finance practice and a lack of a more meaningful leadership role. Where he went was more surprising than the matter of his departure.

Legal Business

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

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Corporate Freshfields Bruckhaus DeringerKirkland & Ellis

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

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Deal View Kirkland & Ellis

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

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Leadership Kirkland & Ellis

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

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Strategic recruitment Kirkland & Ellis

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

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Corporate Eversheds SutherlandKirkland & EllisSlaughter and MayTravers Smith

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

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Partnership promotions Kirkland & Ellis

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‘ (£)