Legal Business

Slaughter and May steps in for Siemens on €1.7bn sale of stake in NSN

Slaughter and May steps in for Siemens on €1.7bn sale of stake in NSN

Shearman & Sterling has led for Nokia on its €1.7bn buyout of Siemens’ stake in Nokia Siemens Networks (NSN) in a deal that has seen Slaughter and May step in for the German engineering giant.

Announced on 1 July, Shearman fielded a multi-disciplinary team across London and New York led by City M&A partner Jeremy Kutner for longstanding client Nokia. Slaughter and May led by London corporate partner Tim Boxell advised the Siemens team led out of its German headquarters.

NSN was formed in 2006 in a €16bn joint venture between Nokia and Siemens aimed at offering innovative mobile broadband technology and services. Advising on its formation was former Shearman City-based partner Jonathan Coppin opposite Clifford Chance (CC).In April this year CC also advised NSN on the sale of its business support systems business to Redknee Solutions for €40m.

The JV was governed by English law and Kutner, who was promoted to partner in 2011, led alongside London finance partners Mei Lian and Clifford Atkins and New York M&A partners Peter Lyons, Scott Petepiece and Samuel Waxman.

The deal was turned round in a week, during which Lian and Atkins put a €1.2bn loan facility in place. Kutner said: ‘They did an amazing job of getting it done in a short space of time.

‘For us the real thing about this type of transaction is how well we work across our practice. A lot of people say that is the case but here it really was. I was closing another deal in Singapore and when I went to bed the people in New York picked it up.’

Shearman was assisted by De Brauw Blackstone Westbroek and Slaughters by Houthoff Buruma in relation to NSN in the Netherlands.

The deal is expected to close in the third quarter of 2013.

sarah.downey@legalease.co.uk

Legal Business

Slaughters leads on Punch Taverns £2.4bn debt restructuring

Longstanding Magic Circle client warns creditors that it could face administration

Slaughter and May is advising Punch Taverns on its £2.4bn securitised debt restructuring as the UK’s largest pub company warns creditors it could face administration.

On 10 June a powerful group of lenders rejected plans to reduce the pub group’s interest payments to £32m a year. Slaughters, led by corporate partner David Johnson is advising longstanding client Punch, which owns around 5,000 pubs across the UK.

Under the revised plans, Punch asked senior bondholders to approve a reduction in debt service payments of £600m over five years. However, a special committee set up by the Association of British Insurers to represent lenders rejected the plans last month, dismissing them as ‘vague’ and only a marginal improvement on proposals submitted in March.

Legal Business

Slaughters leads on Punch Taverns £2.4bn debt restructuring as pub group warns it could face administration

Slaughters leads on Punch Taverns £2.4bn debt restructuring as pub group warns it could face administration

Slaughter and May is advising Punch Taverns on its £2.4bn securitised debt restructuring as the UK’s largest pub company warns creditors it could face administration.

On Monday (10 June) a powerful group of lenders rejected plans to reduce the pub group’s interest payments to £32m a year. Slaughters led by corporate partner David Johnson is advising longstanding client Punch, which owns around 5000 pubs across the UK.

Under the revised plans, Punch asked senior bondholders to approve a reduction in debt service payments of £600m over five years. However, a special committee set up by the Association of British Insurers to represent lenders rejected the plans this week, dismissing them as ‘vague’ and only a marginal improvement on proposals submitted in March.

Without concessions being reached Punch faces the possibility that it will be unable to meet its debt covenants.

Slaughters has a long standing relationship with Punch, which built up high levels of debt during a series of acquisitions during the boom years, owning around 7000 pubs at its peak and earning itself a place in the FTSE 100.

The Magic Circle firm has led on Punch’s major acquisitions and disposals including a market changing £2.75bn acquisition of Allied Domecq in 1999, followed by the flotation of Punch on the London Stock Exchange in 2002, when the company was valued at between £620m and £744m.

Shortly after the turn of the century Punch gifted Slaughters with a significant corporate acquisition almost every year, including the £1.19bn acquisition of pub group Pubmaster in 2003, the purchase of Innspired Group from Alchemy in 2004 for £353m, the £233m buy-out of pub operator Avebury in 2005, and the takeover of another 869 pubs from market rival Admiral Taverns for £326m in 2006, in which TLT also had a role.

However, the company suffered at the hands of the financial crisis and in 2009 Slaughters advised the group on a rights issue worth £350m and handled the sale of 11 managed pubs to Greene King for £30.4m as the company endeavoured to reduce its debt.

francesca.fanshawe@legalease.co.uk

Legal Business

SFO to recruit 10 more barristers in defence of Tchenguiz brothers multi-million pound claim

SFO to recruit 10 more barristers in defence of Tchenguiz brothers multi-million pound claim

The Serious Fraud Office (SFO) is to recruit an additional 10 junior barristers to join the team involved in the defence of the multi-million damages claims brought by the Tchenguiz brothers.

Last year property tycoons Robert and Vincent Tchenguiz sued the SFO for more than £200m after the agency made serious mistakes in its investigation of their role in the collapse of Icelandic bank Kaupthing, of which they were executives.

Slaughter and May is managing the disclosure exercise and a witness statement filed by Slaughter’s dispute resolution partner Jonathan Cotton as part of the pre-trial hearings last week revealed that the SFO has so far spent £118,000 up to 30 April on the disclosure review.

It also revealed that the review was progressing slower than expected, resulting in plans to bring in up to 10 more barristers to join the team of 25 already working on the process.

Outsourcing to an external provider was not an option, Cotton said, considering the detailed legal knowledge required.

A spokesman at the SFO confirmed that the review team involved in managing the process and carrying out quality control exercise has already been increased from 10 barristers in March to 25 on 22 May.

Both Tchenguiz brothers, who before the financial crisis owned around 1% of all residential property in Britain, were arrested in dawn raids on their homes in March 2011. However, the investigations were dropped and in judicial review proceedings last July, the High Court overturned the search warrants used by the SFO to seize documents and files.

The SFO’s decision to hire Slaughter and May and apply this level of resource reflects the fact that, if the Tchenguiz brothers win, this will be the biggest single largest payout in the SFO’s 25-year history.

francesca.fanshawe@legalease.co.uk

Legal Business

Old normal update – Linklaters outpaces Slaughters to hike starting associate pay by £2,500

Old normal update – Linklaters outpaces Slaughters to hike starting associate pay by £2,500

A further reminder comes this week that despite much talk of the pressure on the legal market (see Comment: Things I would have said about the future of law if I hadn’t forgotten my notes), leading City players continue to be highly profitable with Linklaters announcing on Tuesday (7 May) that it is raising its salary bands for associates.

The move sees Linklaters increase newly-qualified pay from £61,500 to £64,000. Year one post-qualification experience (PQE) associates see a more modest £500 rise to £69,500. Years two and three PQE respectively earn £78,250 and £89,000, a rise of £2,250 and £1,000. Trainees see a £500 rise, increasing in seat one to £39,500.

The rises put Linklaters just ahead of magic circle rival Slaughter and May, which last week announced modest increases to its underlying pay bands.

The review is separate to the annual increases in pay associates gain as they move up the qualification ‘ladder’. Linklaters also operates a bonus scheme for ‘exceptional’ performance. The rises at Linklaters and Slaughters underline expectations that most City firms will agree modest increases in associate pay in 2013 after three years in which market rates for associates have largely been frozen.

Salaries for City associates have fallen around 15% in real terms since 2009, when many firms effectively dropped the salary for newly-qualified lawyers from around £66,000 to £60,000 in response to the banking crisis.

While some voices have argued that junior associates are over-paid given the prolonged slump in Western economies, pressure remains on leading City firms given the higher compensation on offer at the UK arms of many US rivals.

One solution to this tension firms have hit upon is bringing in a stronger element of discretionary promotion to associate progression and pay, a shift from the traditional ‘associate lockstep’ model in which lawyers are paid strictly on years of post-qualification experience.

While that trend is set to continue, and City firms continue to modestly downsize their UK intakes in response to the sullen domestic economy, pay for those lucky enough to gain a training contract is likely to be maintained or modestly increase in the years ahead.

alex.novarese@legalease.co.uk

Legal Business

Comment: Slaughters bumps up lawyer pay but associate lockstep’s days are numbered

Comment: Slaughters bumps up lawyer pay but associate lockstep’s days are numbered

Slaughter and May today (30 April) became the first major City law firm to announce a review of its associate pay bands – triggering minor rises in the underlying rates its lawyers earn from trainee level to three years post-qualification.

Newly-qualified see salaries rise from £61,500 to £63,000; one year PQE pay rises £500 to £69,500; two year PQE from £76,500 to £78,000; three year PQE earn an extra £1,500 at £87,500. Trainee salaries are up by £1,000, increasing to £39,000 in year one and £44,000 in year two. The rises kick in from 1 May.

This is, of course, in addition to the sizeable increases as associates pass through the ranks. Commenting on the move, Slaughters’ incoming executive partner Richard Clark said: ‘Our view remains that the economic climate is still uncertain but we are cautiously optimistic for the rest of 2013.’

While these are substantial sums, they remain well below the peak offered in 2008, when magic circle firms were paying around £66,000 for newly-qualified solicitors. That figure has been substantially eroded by inflation and Freshfields Bruckhaus Deringer’s controversial (but justified) decision in 2009 to halt its associate lockstep progression, which was widely followed.

The latter move effectively reset UK associate compensation downwards by around 10%, going a long way towards making boom-era cost-bases adjust to the post-Lehman environment.

It remains likely that other peers will follow Slaughters with comparable modest rises this year but the underlying picture hasn’t changed. City firms are using inflation and the straightjacket of associate lockstep to control salaries while demand remains subdued. Indeed, many observers believe associate pay is still too high given the gloomy market.

However, such assertions probably understate the substantial shift since 2009 in that associate pay has rapidly moved from the entirely dominant lockstep to a more flexible, merit-driven version. Though the jargon differs between firms, the basic idea is the same: seniority-driven pay to three year PQE, soon after which kicks in some form of discretionary promotion or assessment that defines salaries and career tracks. While the mid-tier pioneered it, Freshfields’ recent introduction of a four-stage ‘milestone’ framework was hugely significant. Even the famously conservative Slaughters is currently bringing in some grading beyond the four year PQE point.

This is a considerable and rapid shift by the standards of City law. Despite the oft-repeated claim that most partnerships have ditched lockstep, the majority of top 50 UK firms deploy only moderate variations on the seniority-based equity ladder. And that is after a 20-year evolution of dishing out the profits. In comparison, associate pay is being redrawn far more quickly.

Largely, that’s a good thing. Associate lockstep is slow-moving, inflexible, prone to transmitting excessive wage inflation and tends to deliver pay rises at the wrong point in the economic cycle.

This decisive break with the old model is very different to the US. Major US advisers have kept compensation heavily structured post-qualification despite the downturn, so far with problematic results. As yet there is no sign of that consensus breaking down in the world’s largest legal market, despite increasingly bad-tempered – and rather ill-directed – grumbling from clients about ‘paying for training’.

You don’t have to be a legal futurologist to believe that this relative flexibility will stand UK firms in good stead in the years ahead as they strive to reinvent and renew their businesses for a more disruptive and demanding age. Still, with US rivals making ground in the City, and continuing to offer a lot more for junior talent, phasing out lockstep remains a tricky balance to strike. Just not tricky enough to stop it happening. That means comp’ for junior lawyers will be pushed down and a select band of mid-level associates in hot practices areas will be earning more in the years to come.

alex.novarese@legalease.co.uk

Legal Business

Banks could face backlash on legal panel reviews

With the latest round of bank panel reviews in full swing, early indications show signs of a backlash from law firms as banks place increasing demands on panel candidates at the same time as driving down costs.

In October, The Royal Bank of Scotland (RBS) announced the results of its long-running panel review. By reducing its number of sub-panels from 13 to five, it has significantly lowered the number of law firms on the panel from around 100 previously to between 55 and 60 now. Meanwhile, former panel firms Slaughter and May, Olswang and Mayer Brown didn’t pitch to join the panel this time around.

Legal Business

Australia tempts yet another major international player

Linklaters has joined the ranks of its Magic Circle peers by moving into the Australian market via an alliance with Allens Arthur Robinson (AAR).

The alliance, which went through on 1 May, was planned over a year ago, according to a source close to the firm. AAR, which had operated an exclusive relationship with Slaughter and May, is viewed by many as one of the best in the region.

Legal Business

Magic Circle reigns but cracks are there

Magic Circle reigns but cracks are there

In the same way the sports media has speculated long and hard these past couple of years on the ‘demise’ of Tiger Woods, much has also been said about the Magic Circle also losing its aura of invincibility since the global financial crisis.

The Magic Circle’s relentless pursuit of domination has inspired awe over the last two decades but at the same time has drawn brickbats when things have gone awry. It is all too easy to build something up only to knock it down.

Legal Business

Kop Kings – Liverpool FC

Kop Kings – Liverpool FC

From the fields of Anfield Road to the offices on Bunhill Row, the takeover of Liverpool Football Club was played out in the full glare of the courts and the press. Legal Business talks to the key legal players

When John William Henry II descended the curving flight of stairs into the cool, inconspicuous client reception at Slaughter and May’s offices on Bunhill Row on the afternoon of 15 October 2010, he was met by an unusual sight. As the threshold of a law firm that has long prided itself on its understated manner, it’s usually exceptionally quiet. But that afternoon there was little evidence of calm: pandemonium had taken hold.