Marco Cillario assesses the results amid another strong year for the City’s mid-tier
The latest financial results by UK law firms show leading mid-market players once again harnessing robust commercial activity to post a series of startling results well ahead of larger rivals.
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Macfarlanes has grown its revenue 20% to £201.5m in yet another sign of a strong financial year for mid-tier City firms.
Profits per equity partner (PEP) also rose 26% to £1.74m as the firm lifted operating profit 25% to £107m, cementing its position as one of the most profitable operators in the Square Mile.
‘All of our critical business generating areas have performed consistently strongly throughout the year,’ senior partner Charles Martin told Legal Business. ‘We have had a busy summer, and that makes a big difference.’
The growth outpaced last year’s performance by some margin, with Macfarlanes growing revenues 4% to £167.6m and PEP 7.6% to £1.38m in 2016/17.
Mandates keeping the firm busy included advising US cinema chain Regal Entertainment on the $3.6bn takeover bid from Cineworld and tech start-up Improbable on its $502m financing from SoftBank.
‘M&A has held up surprisingly strongly, private equity was buoyant, there has been a huge amount of fundraising, lots of exit activity,’ Martin said. ‘Virtually every industry is dealing with disruptive change, and one of the ways clients are responding to it is through M&A activity.’
The year also saw some unusual lateral market activity for the City stalwart. Macfarlanes launched a corporate crime and investigations practice in March with the hire of Eversheds Sutherland corporate crime head Neill Blundell but lost investment fund finance group leader Bronwen Jones to Reed Smith and rising deal star Emmie Jones to White & Case.
The firm also made the unusual move of announcing Martin’s successor as senior partner two years before the end of his term. Private client partner Sebastian Prichard Jones will take over in 2020, bringing to an end Martin’s 12 years at the helm.
Martin struck a cautious tone when discussing the prospects for the coming year, saying the firm expected it to be more challenging: ‘The year has started well, but it’s far too early to say.’
A number of other mid-tier players have posted strong financial results over the last few weeks. Fieldfisher hiked its top line 24% to turn over £207m, while Osborne Clarke reported 14% global revenue growth to €273m.
A group of elite firms both sides of the Atlantic, including Macfarlanes and Slaughter and May, face off as British engineering giant GKN has agreed to a $6.1bn merger of its automotive business with US-based car parts supplier Dana.
In a deal that will create one of the world’s largest auto parts providers, Macfarlanes’ corporate partners Graham Gibb and Richard Burrows acted for Dana as it announced today (9 March) that its shareholders will get a 53% stake in GKN.
Paul Weiss Rifkind Wharton & Garrison’s corporate partner Tarun Stewart also acted for the Ohio-headquartered company, while Skadden Arps Slate Meagher & Flom advised Dana’s board of directors with a team including M&A partners Stephen Arcano, Ann Beth Stebbins and Scott Hopkins.
Slaughters partners Martin Hattrell and Robert Innes acted for GKN alongside Cravath, Swaine & Moore.
Slaughters previously advised GKN on a £7.4bn takeover bid launched by British investment company Melrose earlier this year. Head of M&A Roland Turnill led the Slaughters team as GKN rejected the offer.
As part of its defence against the Melrose takeover bid, GKN announced earlier this month that it was going to split the two main parts of its business – its aerospace division and its Driveline unit, which supplies parts to about half of the world’s makers of passenger cars.
Melrose’s offer sparked a public debate with some worrying that Melrose would break up GKN to hike its value ahead of re-selling it within a few years. A cross-party group of MPs asked in a letter to business secretary Greg Clark that the bid be blocked, as the Pensions Regulator warned that the move could affect GKN’s ability to fund its pension scheme. Melrose now has about ten days to decide whether to raise its offer for GKN.
But GKN chairman Mark Turner said in a statement the combination of GKN Driveline with Dana ‘will create a US and UK-led global market leader in vehicle drive systems. The synergies between these two businesses and our complementary product portfolios make this a great deal for GKN shareholders.’
With customers including Fiat Chrysler and Volkswagen, GKN’s auto parts business generated £5.3bn in sales last year. According to the terms of the deal, GKN’s shareholders will now own around 47% of the new business, which will operate as Dana Plc, have its domicile in the UK and continue to trade on the New York Stock Exchange.
Macfarlanes has today (9 March) announced that Eversheds Sutherland corporate crime head Neill Blundell will be joining the firm in a move that will see him spearhead the launch of corporate crime and investigations practice at his new firm.
Blundell will focus on corporate criminal investigations and compliance advice, with particular emphasis on regulatory issues. Regarding the move, senior partner Charles Martin said: ‘The introduction of criminal offences across a broad spectrum of regulation affecting our corporate clients – such as bribery, the Criminal Finances Act and environmental matters – makes this area of work a really important one.’
Martin added the move for Blundell reflects a desire to provide complete specialist services on white-collar crime and develop the practice further. ‘If we could find someone outstanding in the market, it meant we could provide these needed services ourselves’.
For Eversheds Sutherland, the move means the departure of a department head who had been with the firm since 2008 and worked on high-profile investigations and proceedings brought by the Financial Services Authority and the Serious Fraud Office. He has been involved in some of most significant investigations around Libor, FX, misleading the market and foreign bribery. Zia Ullah, an experienced corporate crime lawyer, will now take over the leadership of the corporate crime and investigations group at Eversheds Sutherland.
The move extends a rare spell of transfer activity for Macfarlanes, which recently saw Bronwen Jones leave the firm after 14 years to Reed Smith.
thomas.alan@legalease.co.uk
For most law firms, nailing down your c-suite successor two years in advance may look excessive, but when your leader is a veteran who could give Nigel Knowles a run for his money in industry prominence, it may be a wise move.
Such appears to be the logic at mid-tier thoroughbred Macfarlanes, which has confirmed today (8 January), that its print-friendly senior partner Charles Martin (pictured) will be succeeded in April 2020 when his latest term ends by private client partner Sebastian Prichard Jones.
The announcement signals the end of Martin’s fourth term in Macfarlanes’ leadership, by which time he will have had 12 years at the helm of the City institution.
In an unusual process reflecting the firm’s distaste for heavy-handed politics, Prichard Jones’s name ‘emerged as a result of an extensive consultation of partners of a period of months’ rather than a formal election, Martin told Legal Business.
Martin said an early announcement concerning the firm’s leadership was ‘the right thing to do, both internally and for clients, so that people can see clearly the direction of travel’.
The corporate lawyer first took over as senior partner in 2008 and oversaw the City stalwart’s turnaround from the post-Lehman crisis to become one of the most successful UK firms financially. Macfarlanes bounced back from falling revenues of 10% and 7% in 2008/09 and 2009/10 respectively following a major decline in corporate work. The firm has recorded seven consecutive years of revenue growth since then to bill £167.6m last year – a 64% rise in the last five years.
Macfarlanes is also one of the most profitable law firms in the UK. At £1.376m, its profit per equity partner is higher than that of Clifford Chance and only second to the other four Magic Circle firms and Stewarts Law.
‘The firm is happy, successful and confident today,’ said Martin. ‘We kept the firm pretty simple. We are essentially on one site with very little politics and we are very outward-facing. Clients can see the difference. We resisted the temptation to expand internationally. Our culture is collaborative on the one hand and on the other hand demanding. Not a clubbable kind of place yet very cohesive.’
Prichard Jones joined the firm as a trainee in 1996 and works with high net clients, advising on structuring, investment and tax issues, underlining Macfarlanes’ relatively unusual stance as a large City firm that still maintains a substantive private client team.
‘It’s a great honour to be chosen and I am very confident in the future,’ said Prichard Jones. ‘Charles’s major achievement has been to steer the firm in a much stronger place. For that we continue to be grateful.’
Martin will be working with Prichard Jones over the next two years and increasingly involve him in the decisions concerning the firm.
Martin also noted that an announcement concerning the managing partner is expected in the coming months. Julian Howard’s term also expires at the end of April 2020 and the appointment for the new term will follow the same process as the senior partner.
While Prichard Jones takes on a strong legacy, there will be challenges ahead. The outgoing Martin has long been regarded as one of the most thoughtful and effective leaders in the profession, proving adept as repositioning Macfarlanes after a troubled period post-banking crisis.
Given that the 410-lawyer firm has required strong and robust characters in the past like the super-connected Vanni Treves, the no-nonsense Robert ‘Captain Bob’ Sutton and Martin to marshal the troops when a little changed was required, Prichard Jones will have to work hard to establish himself.
marco.cillario@legalbusiness.co.uk
Click here to see Charles Martin’s Life During Law Interview (£)
In a challenging but ‘good year’ for the firm, Macfarlanes has continued growing with revenues up 4% to £167.6m.
With profits per equity partner rising 7.6% to £1.38m, senior partner Charles Martin said the results were impressive, despite the market turbulence which followed the June 2016 EU referendum vote and some partner losses over the year.
‘It had its challenges, but some of the more gloomy predictions made following the Brexit vote didn’t turn out to be true,’ Martin said. ‘Business held pretty firm: the results speak for themselves.’
Profits also rose 4% to £85.85m. Given the firm’s billings are mainly in sterling with negligible foreign currency effect, Martin said this reflected ‘client loyalty’ and the firm’s ‘willingness to adapt’ to market conditions. He also attributed the results to ‘hard work’ by its team and its ‘strategic focus’.
He added that Macfarlanes did not benefit from billing in euro and dollars, ‘unlike many of our competitors – that makes these results doubly pleasing’, Martin added.
For a firm with revenue growth figures of 64% over the previous five years, the figures remain fairly stable, despite a number of challenges. Macfarlanes lost three partners in three months between September and November 2016. Financial services head David Berman left for Quinn Emanuel Urquhart & Sullivan, Scott Brodsky quit the Johannesburg practice to join a client, spelling the closure of the South African office, and competition and EU head Marc Israel left for White & Case after 15 years with MacFarlanes.
The firm, however, hired King & Wood Mallesons’ (KWM) competition team in December, bringing in partners Cristophe Humpe, Tom Usher and Cameron Firth, who started operating from the firm’s new Brussels office in January 2017.
‘We have a much larger competition law practice group now than we had last year, and we are encouraged by the start that the former KWM team has had.’ While Brussels is now Macfarlanes’ only non-UK office, it operates closely alongside London.
Advisory roles in multi-billion deals helped maintain growth. Macfarlanes acted for Argus Media’s chairman in its £1bn takeover by General Atlantic and advised US internet giant Verizon during the $2.4bn purchase of vehicle communications company Fleematics group.
‘In corporate, private equity and the large strategic M&A are the main areas of focus for us, and they held up pretty strongly,’ added Martin.
Last year, revenue was £161m with profits of £74.5m, following several strong years of significant growth.
Allen & Overy (A&O) and Skadden, Arps, Slate, Meagher & Flom led as Moody’s agreed a €3bn (£2.6bn) deal to buy Dutch data group Bureau van Dijk from Swedish private equity company EQT. Skadden advised Moody’s, alongside Dutch adviser Stibbe, while A&O acted for EQT. Latham & Watkins advised the banks, while Baker McKenzie acted for van Dijk’s managers. Simmons & Simmons is also playing a role, providing employment and pensions advice to Moody’s.
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Macfarlanes has advised UK based virtual simulation start-up Improbable on its $502m financing raised from Japanese telecoms group SoftBank.
Improbable is now valued at more than $1bn following the largest ever venture finance round by a private British company. The investment will be used to further develop technology and hire additional staff for the five-year old company’s London and San Francisco offices.
Improbable turned to Macfarlanes, which has been advising the firm since 2012 on its previous funding rounds. The firm’s team included corporate and M&A partners Alex Edmondson and Richard Burrows. Cooley advised SoftBank on the funding round with a team led by business partners Ryan Naftulin based in London and Matthew Bartus in Palo Alto.
Edmondson said: ‘This is a transformational investment for Improbable, which we were delighted to advise and work closely with [chief legal officer] Rob Miller on, and is a continuation of the relationship we have built with Improbable and its founder Herman since first incorporating the company five years ago. It also represents a landmark transaction for the UK start-up scene, being the largest fundraising seen to date, and validates the UK technology sector as a significant global force.’
In March it emerged social gaming giant King Digital Entertainment’s chief legal officer and company secretary Miller (pictured) was to leave for Improbable. Miller joined the mobile games developer, best known for its Candy Crush Saga game, in 2012, when the company grew from three European offices to 10 and expanded from 150 employees to more than 2,000. Miller joined Improbable as its first in-house lawyer.
Last year Slaughter and May, Freshfields Bruckhaus Deringer, Davis Polk & Wardwell and Morrison & Foerster scored roles on SoftBank’s £24.3bn deal to acquire UK tech flagbearer ARM Holdings.
A long-time adviser to ARM, Slaughters led as the chip designer agreed a deal that became the largest ever acquisition of a European tech business. ARM turned to M&A heavyweight Steve Cooke, London-based corporate lawyer Chris McGaffin, who was promoted to partner at Slaughter and May in 2015, and Brussels-based competition partner Jordan Ellison also advised on the deal.
Davis Polk & Wardwell were also listed as legal counsel to ARM. Davis Polk’s team on the deal included managing partner Thomas Reid and Reuven Young.
Morrison & Foerster, a longstanding adviser to SoftBank, again acted for the Japanese firm along with Freshfields which was drafted in to provide London M&A muscle. Ben Spiers, Freshfields’ then global co-head of M&A, and corporate partner Stephen Hewes acted for SoftBank.
madeleine.farman@legalease.co.uk
My father, who sadly died last year, did his articles. Absolutely hated it. Left as soon as he could. He did briefly work in London and then went to Edinburgh, and carried out his career as a fund manager. He was always much more interested in stock markets than the law. He was a very kind, calm and perceptive man.
I joined SJ Berwin in 1991, qualified in 1993, became a partner in 1999, left in 2004. Came back in 2006. Until the bitter end.
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After making its first ever lateral hire in London last month, Slaughter and May has strengthened its London bench with five new partners, including three women. Macfarlanes also made up three partners in the City earlier this week.
In its partnership round announced by the Magic Circle firm today (30 March), Slaughters added seven across London, Brussels and Hong Kong. The firm made up three fewer than last year, but more than the four it promoted in 2015.
The new Slaughters partners join across five practice areas. The cohort includes Duncan Blaikie as a new IP partner, Christian Boney and Filippo de Falco in corporate, Susan Hughes in financing, Phil Linnard in pensions and employment. Outside of London Kerry O’Connell and Natalie Yeung were made up in competition, in Brussels and Hong Kong respectively.
Slaughters senior partner Steve Cooke (pictured) said: ‘The fact that we have promoted lawyers from a broad spread of practice areas reflects the underlying strength of our firm.’
Meanwhile, Macfarlanes announced Richard Burrows (mergers & acquisitions), Jeremy Moncrieff (tax) and Sarah Ward (banking & finance) are to become partners on 1 May. This year Macfarlanes promoted half of last year’s promotions round, when it made up six as new partners.
Charles Martin, Macfarlanes senior partner said: ‘In a market that is tough and likely to get tougher the commitment of highly talented young partners to driving forward their respective practice areas is of critical importance. We are confident that these three lawyers will each play an important part in the future success of the firm.’
georgiana.tudor@legalease.co.uk
Slaughter and May promotions in full:
Duncan Blaikie, IP/IT
Christian Boney, corporate
Filippo de Falco, corporate
Susan Hughes, financing
Phil Linnard, pensions and employment
Kerry O’Connell, competition, Brussels
Natalie Yeung, competition, Hong Kong
Macfarlanes promotions in full:
Richard Burrows, M&A
Jeremy Moncrieff, tax,
Sarah Ward, banking & finance
