Legal Business

Here we must run, just to stay in place – what it takes to be a law firm partner in 2016

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Comment Macfarlanes
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Macfarlanes’ Charles Martin reflects on the paradoxes facing the modern partner

I confess the analogy is not perfect, but reflecting on the bizarre and often contradictory pressures on partners in law firms today brings to mind the world of Alice in Wonderland. Today, many question the appropriateness of the partnership model itself. They certainly question the strange, often opaque feudal master/servant process by which the aspiring lawyer serves their apprenticeship. They then work (following the white rabbit down the hole past many locked doors) until they leave all caution behind and take the option of partnership – a bit like Alice eating the cake with ‘EAT ME’ written on it. Readers of the story will know that the result is Alice growing to such a tremendous size that her head hits the ceiling! The analogy is maybe not so imperfect after all.

Legal Business

News in brief – February 2016

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Legal affairs DAC BeachcroftMacfarlanes
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CASES AGAINST LAW FIRMS DOWN

Figures collated by RPC suggest the post-financial crisis wave of professional negligence claims against law firms has passed. High Court cases against firms were down 47% last year. While the number of cases spiked by 192% to 418 for the year 2013-14, the number of actions against solicitors for the 12 months to 30 June 2015 is lower at 221.

 

Legal Business

Macfarlanes sticks by management duo, reappointing Martin and Howard until 2020

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Leadership Macfarlanes
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In a conspicuously early move demonstrating confidence in its leadership, the partnership at Macfarlanes has re-appointed Charles Martin (pictured) and Julian Howard to the roles of senior partner and managing partner respectively for another three years.

As soundings were taken from all partners and the results came back to the policy committee, the firm was not required to carry out formal voting. Both Martin and Howard’s terms expire in May 2017, and the new terms will take effect for a further three years until May 2020.

Martin has overseen the firm’s rise to become of the most successful UK firms financially over the last five years. In summer 2015, Macfarlanes posted double-digit growth in both revenue and profits for the second year running. At £1.55m, Macfarlanes’ profit per equity partner (PEP) is now stronger than all of the big four Magic Circle firms.

These figures mark the firm’s fifth consecutive year of top line growth, up an eye-catching 73% since the 2009/10 financial year. The firm’s PEP over this period is even more impressive, growing 118% from £711,000 in the last five years.

It was a marked turnaround for the firm, which bounced back from falling revenues of 10% and 7% in 2008/09 and 2009/10 respectively following a major decline in corporate work post-Lehman.

Martin tells Legal Business the firm made the re-appointments early to make succession smooth.

He said: ‘If we wanted to make a change we want to make sure it’s bedded in and operates smoothly. We will make sure it happens that way in future too.’

‘There’s lots more to be done here. Life doesn’t get easier but the challenge of this job is still exciting and the momentum behind the firm is strong. It’s not a market to be standing still. We continue to make sure all our practice areas are where we want them to be and have internal initiatives on collaboration and focus on sectors. My job will be increasingly externally focused. I will do even more client work,’ he added.

In other recent management news this month Slaughter and May elected M&A heavyweight Steve Cooke as its next senior partner. He will succeed Chris Saul who is to retire after eight years at the helm.

sarah.downey@legalease.co.uk

Legal Business

Macfarlanes’ top-earning partner pay leaps by a third, annual LLP accounts show

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Salaries Macfarlanes
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The latest LLP filings at Companies House by Macfarlanes have shown the highest-paid member at the firm pocketed £2.04m in 2014/15, 33% more than in the previous financial year.

The firm confirmed that the highest-paid partner was not a retiree.

Dated for the year end 30 April 2015, the firm’s turnover increased by 17% to £156.5m from £134.4m for the financial year while profit before tax jumped 27% to £91.4m from £71.8m.

Staff costs increased to £43.8m from £37m while other operating expenses dropped to £22.5m from £29m. The average number of members during the year rose to 81 from 78 the previous year, while average figures for professional and support staff jumped to 518 from 465.

The firm also recorded a significant increase in lawyer pro bono hours to over 3,200 from 2,600 in 2014, while accounts further showed a pension deficit totalling £2.3m, an 85% leap on the previous year, and the largest the firm has had in the last five years.

As one of the most successful UK-based firms financially over the last five years, Macfarlanes unveiled strong financials again in 2014/15 with double-digit growth in both revenue and profits for the second year running. At £1.55m, Macfarlanes’ profit per equity partner (PEP) is now higher than each of the big four Magic Circle firms.

Deal highlights include representing Verizon Communications on its acquisition of Vodafone’s 45% interest in Verizon Wireless for $130bn, for which the firm picked up Corporate Team of the Year at the Legal Business Awards 2015; and acting for London Bridge Holdings on the £1.7bn sale of More London.

Linklaters’ LLP accounts, which were published last week, also showed that highest-paid member took home a third more pay than in 2013/14.

sarah.downey@legalease.co.uk

Legal Business

Macfarlanes combines with Wachtell for new client Visa on €21.2bn European transaction

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Corporate MacfarlanesWachtell, Lipton, Rosen & Katz
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Macfarlanes has scored a lead role advising US company Visa on its €21.2bn acquisition of Visa Europe alongside US firm Wachtell, Lipton, Rosen & Katz, while Linklaters also secured a leading role advising the other side.

In a transaction with up-front consideration of approximately €16.5bn and the potential for an additional earn-out of up to €4.7bn on the fourth anniversary of its closing, Visa and Visa Europe said the deal creates a ‘single global Visa business.’ Visa Europe, an association owned and operated by over 3,000 European financial institutions, has annual payment volumes of over $1.5trn and processes over 18 billion transactions each year.

The Macfarlanes team, working alongside Wachtell, Lipton, Rosen & Katz, was led by M&A partners Graham Gibb and Nicholas Barclay. The two firms previously combined to great effect to advise Verizon on its acquisition of Vodafone’s 45% interest in Verizon Wireless for $130bn.

Milbank, Tweed, Hadley & McCloy also assisted Visa on the deal with a team lead by the firm’s London co-managing partner Julian Stait. 

The Linklaters team advising Visa Europe comprised US corporate partner Scott Sonnenblick in New York, as well as partners Aedamar Comiskey and Stephen Griffin from the London corporate team.

Recent transactions for Macfarlanes include advising client Exor on its increased investment in The Economist Group for £469m in July, while Freshfields Bruckhaus Deringer advised seller Pearson.

Last year Linklaters advised Visa Europe on high profile litigation work, alongside Milbank, to secure a judgment in favour of the company after 12 major UK retailers led by the Arcadia Group sought damages in relation to Visa’s setting of interchange rates.

Commenting on the merger, Visa chief executive Charles Scharf said: ‘This transaction is beneficial for financial institutions, acquirers, merchants, cardholders, and other partners, as well as for our employees and shareholders.’

The deal is subject to regulatory approvals and is expected to close in the third quarter of 2016.

sarah.downey@legalease.co.uk

Legal Business

Macfarlanes taps Ashurst for another real estate hire

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Strategic recruitment Macfarlanes
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With Macfarlanes having a made a virtue of broadening its service lines post-recession to contribute to its impressive financial performance in the last five years,  it has expanded its real estate practice further with the hire of Ashurst real estate partner Gerald Kelly – its fourth real estate lateral from Ashurst in as many years.

Kelly has been a partner at Ashurst since 2001, and acts for fund managers, institutions, corporates and developers. Notable mandates include leading on advising Berkeley Group on a joint venture with National Grid in 2014 to develop and sell contaminated sites.

Macfarlanes has invested in its real estate and construction offering in recent years, notably with talent from Ashurst, which has included its former head of construction,  Anne Minogue in 2013, followed by partner Anthony Burnett-Scott. This was preceded by the departure Ashurst’s former head of real estate, Ian Nisse, in autumn 2011.

Nisse, who is now Macfarlanes head of commercial real estate said: ‘Gerald brings with him a wealth of experience which complements our practice very well. His addition to the team will further bolster our already compelling offering to commercial real estate clients.’

Senior partner Charles Martin added: ‘An appointment at this level is a further sign of our continued commitment to building on the strength and depth of our very successful real estate team, which is a core part of our practice.’

sarah.downey@legalease.co.uk

Legal Business

Deal machines – the resilience of Macfarlanes, Travers Smith and the mid-tier deal team

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Corporate MacfarlanesTravers Smith
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The forced obsolescence of Macfarlanes and Travers Smith as City-focused M&A teams has been as long predicted as it has failed to materialise. Since 2010, after both firms quickly recovered from a brutal post-Lehman shock, the pair have proved not just resilient but able to thrive.

The pair performed robustly again in 2014/15, with Macfarlanes having been one of the most successful top-100 firms over the last five years with organic revenue growth of 73%. Around 20% of revenue is generated by its corporate department, reflecting the size of its private client practice and a concerted push to broaden its disputes, regulatory and finance teams.

Legal Business

Bryan Cave’s London head talks not being ‘all singing and all dancing’ as firm hires Macfarlanes structured finance chief in City push

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Strategic recruitment Bryan CaveMacfarlanes
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After having carried out a strategic review which will see the Global 100 firm look to create three ‘best-in-class’ international practices, Bryan Cave has hired Macfarlanes‘ structured finance and capital markets chief Rachel Kelly as part of a drive to build its financial services offering in the City.

Kelly joins from Macfarlanes after having served as head of the City firm’s structured finance and capital markets practice for four years. Before that, she was a partner in Clifford Chance’s structured debt group for 14 years, leaving to help set up Macfarlanes structured finance offering.

The hire is part of a broader plan with Bryan Cave’s London managing partner Carol Osborne telling Legal Business: ‘We are eager to grow the London financial services practice, and we have being doing just that all this year. Helena Nathanson joined in corporate trust from Reed Smith in January, and she added an associate and counsel-level hires in the second quarter.’

‘We also expect to hire support for Rachel in the near term and we are adding at the associate and counsel level in our leveraged finance practice. These hires are all part of a plan to really bolster the London office’s contribution to what is a strong US financial services practice.’

The expansion in London is part of a strategic change for the firm that in 2014 had an average of just 38 lawyers in London – and only a 12% change in headcount over five years. Osborne said: ‘We’ve just finished a strategic planning process as a firm and one outcome of that was to establish some best-in-class practices globally. We have always been strong in financial services but we want to really solidify that team as one of these feature practices for the firm.’

‘On a global basis Bryan Cave is looking to expand its footprint in the financial services, real estate private equity and investment trusts, and agribusiness and food sectors. These have been core strengths of the firm for some time with enduring client relationships and we are looking to build on those foundations. This doesn’t mean we aren’t interested in opportunities in other areas but the priority at the moment, especially in London, is on financial services.’

There will be some broadening as the St Louis-bred firm builds out in corporate trusts and leveraged finance as well. But Osborne is adamant Bryan Cave won’t over-extend: ‘As the group gets bigger, we will want to add regulatory expertise but we aren’t trying to build a full-service financial services play as it is too difficult and too slow to do that well in this market. We have looked at what our clients want and need in London and that means we are going to add along three lines: corporate trust, structured finance and leveraged finance. We are not going to try to be all singing and all dancing… that just gets too distracting for everyone.’

‘It is really important to us to have the right alignment with the US – we want to build London along parallel lines with our colleagues in America. You can’t stray too much from your core strengths, clients like to see more depth as opposed to a mile-wide, inch-deep approach. We have a uniquely collaborative culture in which around one third of our work is performed in a different office than the one where the relationship with the client originates.’

michael.west@legalease.co.uk

For more on US firms’ strategies in London see: The Third Wave – high stakes City deals for Akin and Cooley highlight changing tactics

Legal Business

Second edition: Freshfields, Linklaters and Macfarlanes advise on Pearson’s £469m sale of The Economist

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Corporate Freshfields Bruckhaus DeringerMacfarlanes
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Freshfields Bruckhaus Deringer has reprised its role for Pearson as, just weeks after selling the Financial Times, the publishing group agreed to sell its stake in The Economist group for £469m to Macfarlanes‘ client Exor and back to the group itself.

Freshfields corporate partners Oliver Lazenby and Simon Marchant led the team advising Pearson on the sale of its 50% interest in the group, which comprises the weekly magazine plus other titles and the Economist Intelligence Unit, to existing shareholder Exor which is taking 27.8% with 22.2% repurchased by the group.

The same team most recently acted for Pearson on its disposal of the Financial Times group to Japan’s Nikkei for £844m, announced in July, while Skadden, Arps, Slate, Meagher & Flom advised Nikkei and Herbert Smith Freehills acted for Pearson on UK real estate matters.

The Magic Circle firm has built a strong relationship with the FTSE-100 company, with duo Marchant and Lazenby having also advised the publisher on the combination between Penguin and Random House, as well as its disposal of Mergermarket Group. 

Macfarlanes partner John Dodsworth advised the Italian-based investment firm on the Economist buy alongside Italian law firm Pedersoli e Associati’s partner Carlo Re. Pedersoli also advised Exor on all regulatory aspects of the transaction with partner Davide Cacchioli and junior partner Lisa Noja advising.

Meanwhile, Linklaters acted for the The Economist Newspaper itself on the deal as the overarching group repurchased £182m worth of shares in an effort to safeguard editorial independence. The Silk street team was led by corporate partners Richard Godden and James Inglis.

The transaction, which is subject to regulatory and shareholder approvals, is expected to complete by the end of the year.

sarah.downey@legalease.co.uk

Legal Business

‘Old-fashioned’ values pay off for Macfarlanes as double-digit growth sees PEP pass big four

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Financial results 2014/15 Macfarlanes
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Pound for pound one of the most successful UK firms in financial terms over the last five years, Macfarlanes has once again posted an impressive set of figures with double-digit growth in both revenue and profits for the second year running. At £1.55m, Macfarlanes’ profit per equity partner (PEP) is now stronger than all of the big four Magic Circle firms.

Revenue grew an impressive 14% to £159.6m for the 2014/15 financial year, up from £139.7m having grown 22% from 2013/14. Profits climbed 26% to £81.7m with PEP jumping 30% from £1.2m to £1.55m following a 21% increase the previous year. In PEP terms, based on last year’s Legal Business 100 stats and the results already in from the Magic Circle for 2014/15, Macfarlanes would be bettered only by Slaughter and May from the top 100.

These figures mark the firm’s fifth consecutive year of top line growth, up an eye-catching 73% since the 2009/10 financial year. The firm’s PEP over this period is even more impressive, growing a 118% from £711,000 in the last five years.

Unlike some Global 100 firms and the Magic Circle’s big four, Macfarlanes has bounced back incredibly considering its revenues were down 10% and 7% in 2008/09 and 2009/10 respectively after a stark decline in corporate work post-Lehman hit the firm hard.

‘We are in a very different business,’ said senior partner Charles Martin (pictured). ‘We compete with the Magic Circle in some ways but we don’t see them in every market. We don’t have the complexities and layers of cost that they have because of their scale. Our success comes down to a simple business model – some would say that’s old-fashioned but not having grown to some extent makes our partnership more adaptable. We bounced back after the downturn because changes were easy to drive.

‘We have seen some important client gains and some interesting trends but as usual, it is our loyal longstanding clients that came back strongly last year.’

Martin also pointed out that 2014/15 was also a year in which the firm’s almost entirely sterling billings were a distinct advantage. A depressed euro has been a key factor affecting the billings of the big four, while a weaker Australian dollar has also played its role for Anglo-Australian firms.

Some highlight mandates in the past year for Macfarlanes include representing Verizon Communications on its acquisition of Vodafone’s 45% interest in Verizon Wireless for $130bn, for which the firm picked up Corporate Team of the Year at the Legal Business Awards this year; and acting for London Bridge Holdings on the sale of the More London valued at £1.7bn.

Jaishree.kalia@legalease.co.uk