Legal Business

‘Not out of the woods yet’: Coronavirus puts the kibosh on Travers’ decade of revenue growth amid profit dive

‘Not out of the woods yet’: Coronavirus puts the kibosh on Travers’ decade of revenue growth amid profit dive

Travers Smith has suffered one of its biggest financial setbacks due to the coronavirus pandemic, recording an 11% slump in net profit and a 20% fall in profit per equity partner (PEP), its provisional results revealed. 

The provisional figures, announced on Thursday (30 July) show a 1% revenue drop to £160.9m from £162.5m last year, stymying a decade-long run of uninterrupted turnover growth. PEP fell to £1m, with the results being adversely affected by a reporting period that ran to the end of June, rather than April, giving the firm greater exposure to the pandemic downturn. 

The numbers are a far cry from last year, when Travers celebrated its tenth consecutive year of revenue growth with an 11% increase in turnover as PEP grew by 4% to £1.25m. In 2018/19, revenue had seen a 70% increase over five years.

Speaking to Legal Business this morning (Friday 31 July), managing partner David Patient (pictured) noted the drawback of the entire last quarter of the financial year taking place during the crisis, but was characteristically upbeat in the face of adversity 

You’ve got to put things in context. Wind back to the dark days of lockdown, it was surreal watching the pandemic sweep across the world, and it hit us very quickly. Back then, I had three questions: Will we be able to work? Will the clients need us? Will we get paid? And the answers, thankfully, were: Yes we can, yes they did, and yes we did, said Patient, adding that he was proud of how the firm’s people were able to make a success of lockdown. 

One should not simply assume that law firms will have uninterrupted growth. Every so often, something serious comes along, like the global financial crisis 0f 2008/9. We had been bracing for turbulence in this current year as we left Europe and expected growth to be flat or decline. We mustn’t forget Brexit, but this crisis has overshadowed everything.’ 

Upsides for the year included investment in technology that enabled staff to adapt to enforced working from home, as well as advising on a raft of matters. This included advising Hewlett Packard on fraud claims amounting to $5bn and criminal proceedings in the US arising from the $11bn acquisition of Autonomy in late 2011. 

Deal highlights included advising Rothesay Life on its £3.8bn buy-in of the Asda Group Pension Scheme, Willis Pension Scheme on a longevity swap transaction with Munich Re to manage risk on around £1bn of pension liabilities and EQT on the sale of its Credit business segment to Bridgepoint. 

Travers introduced what Patient called ‘prudent financial measures… to protect our business’. In April, the firm reduced monthly drawings for all partners and deferred partner profit distributions until the longer-term trading position becomes clear.  

The firm has not accessed the government’s Job Retention Scheme all and members of staff have been kept on full pay throughout the lockdown. Travers has deferred its annual salary review until later in the year, but it has awarded firm-wide bonuses, albeit at a reduced rate. 

It made up five new partners on 1 July across the corporate and equity capital markets, derivatives & structured products, dispute resolution, employment, and finance teams, and also posting a 90% retention rate for its autumn 2020 newly qualified lawyers.    

Patient refused to be downcast: ‘We are not out of the woods yet and I wonder how far we are even into them. The situation is challenging and will continue to be challenging, but I’m a glasshalffull man. There are significant clouds on the horizon, but the outlook is good.’ 

nathalie.tidman@legalease.co.uk 

 

Legal Business

Dealwatch: Slaughters and Ashurst make headlines on i newspaper sale as DLA and A&O dine out on Bookatable acquisition

Dealwatch: Slaughters and Ashurst make headlines on i newspaper sale as DLA and A&O dine out on Bookatable acquisition

In a busy week for UK buyouts, Slaughter and May advised Daily Mail and General Trust on the £49.6m acquisition from JPIMedia of i newspaper and its website by its consumer media business, DMG Media.

The Slaughters team was led by corporate partner Rebecca Cousin while an Ashurst  team led by corporate partner Braeden Donnelly advised JPIMedia Group.

Donnelly told Legal Business: ‘The sale of the i newspaper to Daily Mail was a significant first step for JPIMedia in realising value for bondholders. It is also part of a wider trend we are seeing in the UK print media market where consolidation is picking up pace as media owners respond to slowing print sales and increased competition from online alternatives.’

The deal was completed on 29 November. Ashurst previously advised Johnston Press on its acquisition of the i newspaper business from Independent Print Limited in 2016.

Meanwhile, DLA Piper advised Michelin on the sale of London-headquartered restaurant reservation business Bookatable to TripAdvisor company TheFork.

The acquisition allows competitor TheFork to consolidate in the United Kingdom, Germany, Austria, Finland and Norway meaning that 14,000 restaurants on Bookatable will join the 67,000 restaurants available on TheFork.

The DLA team was led by London partner Tim Wright and Paris partner Simon Charbit while an Allen & Overy team led by Richard Browne advised TripAdvisor.

The acquisition follows Michelin’s content and licensing partnership with TripAdvisor and its subsidiary TheFork. The partnership means that Michelin guide inspectors will be grading restaurants according to the ‘stars, bib gourmand and Michelin plate’ on the TripAdvisor and TheFork websites. 4,000 restaurants in Europe will also be available on TheFork and the Michelin Guide’s digital platform.

French firm Gide advised Michelin on the partnership with a team led by partner Guillaume Rougier-Brierre.

Elsewhere, Travers Smith has advised New York Stock Exchange-listed company Noble Corporation on the acquisition of its 50%interest in the Bully I and Bully II drillship joint ventures by a subsidiary of Royal Dutch Shell for a value of $166m.

Shell will pay a final cash settlement of roughly $59m of to Noble for its two drillships. Nobel, which owns and operates fleets in the offshore drilling industry, issued a note payable to Shell which satisfied a portion of the buyout price.

The Travers team was led by corporate partner Richard Spedding and Shell was advised in-house.

Finally. Addleshaw Goddard advised the promotional products company Pebble Group on its flotation on the AIM market with a fundraising value of £135m. It is the eighth IPO on AIM this year and the largest in terms of funds raised. The firm also advised on the £28m essensys listing in May and the £57m Brickability Group IPO in September.

The Addleshaw team was led by corporate partner Richard Lee. Lee told Legal Business: ‘What it means for the group is that they are no longer a private equity owned business and they no longer have the debt structure that goes with the private equity ownership. It gives them an improved balance sheet because the funds they raised in the IPO have been used to pay off the debt which they were previously carrying.

‘There were preferred share structures in there, plus loan notes, plus bank debts and the purpose of the fundraising for the company was to clear out that debt,’ added Lee.

The equity fundraise was managed by Berenberg with Grant Thornton acting as adviser. A London Bird & Bird equity capital markets team led by Adam Carling advised Berenberg as broker and Grant Thornton as nominated adviser.

muna.abdi@legalease.co.uk

Legal Business

Former Travers managing partner Lilley joins Deloitte Legal as employment head

Former Travers managing partner Lilley joins Deloitte Legal as employment head

Big Four accountancy firm Deloitte has bulked up its UK legal bench by hiring Andrew Lilley, the former managing partner of Travers Smith, to spearhead its employment practice.

Lilley will now focus on building the firm’s employment presence in the UK, as Deloitte joins its Big Four counterparts in further expanding its domestic legal capability. Lilley joins alongside Squire Patton Boggs employment partner Liz Pierson.

Commenting on the hire, Deloitte Legal’s UK managing partner Michael Castle said: ‘Andrew and Liz both have fantastic track records in their respective fields. As we continue to build Deloitte Legal’s presence in the UK, we are determined to hire the very best talent in order to provide our clients with best-in-class service.’

Lilley joined Travers in 1995 and served as the firm’s head of employment before being appointed managing partner for a four-year term in 2010. Lilley resigned in 2015 to explore a career in teaching. Pierson, meanwhile, had been a partner at Squire Patton Boggs since 2017, having previously been a senior counsel at Clifford Chance for four years.

The hires come off the back of another significant play from Deloitte in May, when it announced a non-exclusive alliance with US law firm Epstein Becker Green to provide employment law to clients.

Deloitte will hope to make up ground with the double hire, having been the last of the Big Four to make a push into UK legal. In January 2018 Deloitte secured its alternative business licence, while a year later the firm announced the hire of Allen & Overy banking veteran Castle to head its UK legal business after a four-month hunt. Currently Deloitte Legal counts over 60 practicing lawyers in the UK with more than 125 other fee-earners engaged in legal activities.

‘Andrew and Liz’s knowledge of employment law and reward will add to a wealth of expertise across Deloitte, providing clients with technology-enabled, practical solutions to tackle the complexities they face,’ Castle added.

thomas.alan@legalease.co.uk

Legal Business

Some challenges: Travers ups NQ pay range following 11% revenue growth and subdued PEP

Some challenges: Travers ups NQ pay range following 11% revenue growth and subdued PEP

Travers Smith has marked a tenth consecutive year of revenue growth with an 11% increase in turnover, although profit per equity partner (PEP) grew at a more subdued 4%.

Revenue at the firm grew to £162.5m for the 2018/19 financial year – good for growth of more than 70% over the last five years – while PEP hit £1.25m. The firm subsequently joined the raft of firms increasing pay for newly-qualified solicitors (NQs), lifting their base rate salary to £85,000. NQs have the potential to receive between £93,500 and £110,500 with bonuses and other discretionary payments.

Managing partner David Patient (pictured) told Legal Business: ‘Every year we’ve managed to beat our budgets and surpass our expectations. This financial year will present some challenges. There is a lot of political and economic uncertainty which could come into play in terms of what our clients will want to do over the next 12 months.’

He said activity levels were high across the firm with standout areas being dispute resolutions, investment funds, infrastructure M&A, and the pension sector. Highlight mandates include representing Hewlett Packard in its $5bn fraud claim involving Autonomy, Premier Rugby in its major investment from private equity firm CVC Capital Partners, and Nortel Networks UK Pensions Trust on a £2.4bn buy-out for the Nortel Networks UK Pension Plan with Legal & General.

In addition, the firm worked with The Carlyle Group and shareholders on the sale of Graze to Unilever and with Horizon Capital and shareholders on the sale of EAT group to Pret A Manger.

Travers made up four new partners this year and has promoted 16 new partners over the past three years. Earlier this month, the firm appointed Paul Dolman co-head of the corporate department in addition to his role as head of private equity and financial sponsors.

Meanwhile, the firm has increased the base salary for NQs by 8% to £85,000. It follows Macfarlanes and the Magic Circle announcing similar lucrative pay increases.

Patient commented: ‘It’s a very competitive market, we want to be able to attract and retain the best possible people. We want to ensure therefore that, in terms of being able to offer a fair compensation to our lawyers, it is comparable with what other people in the market are paying.’

For more on Travers’ improbable rise, read: Defying gravity (£) 

muna.abdi@legalease.co.uk

Legal Business

Travers’ private equity star Dolman joins Summerfield at the corporate helm

Travers’ private equity star Dolman joins Summerfield at the corporate helm

Travers Smith has appointed Paul Dolman as co-head of corporate in addition to his existing role of head of private equity and financial sponsors.

The well-respected Dolman joins the influential Spencer Summerfield, who has been sole head of corporate since 2013, on a joint ticket to lead Travers’ M&A, private equity and equity capital markets practices.

Dolman told Legal Business: ‘I am honoured to be given the chance to run the corporate team. That isn’t to say that my focus is going to move away from leading the private equity and financial sponsors group and being heavily involved in fee earning. I certainly think there is an opportunity for me to use the skill set that I have developed doing that, for the benefit of the wider corporate group as a whole.’

‘The M&A market has been slightly subdued for the last 24 months. But I think people are now getting to the stage where the break is coming off, and activity levels are ramping up.’

Former tax head Kathleen Russ also on Monday (1 July) took over from Chris Hale as senior partner, a move first announced last November. Hale had held the role since 2013 having been re-elected in March 2017.

Russ commented: ‘Clients are at the heart of our business. As the firm’s new senior partner, I am keen to build on our strong client relationships and ensure we continue to deliver a first-rate service to clients across all areas of expertise.’

The firm’s managing partner David Patient said: ‘Kath and I share a strong commitment to our firm’s values and culture, and I very much look forward to working alongside her more closely going forward, in what promises to be an exciting new chapter for the firm.’

Meanwhile, Ian Jeffery will be stepping down in September as chief executive officer of Lewis Silkin after 15 years. Jeffery will continue as partner and will focus on the development of new legal service ventures.

Jeffery said: ‘With Lewis Silkin in great shape and full of potential for the future, I believe that after fifteen years of firm-wide leadership responsibility, a planned transition this year is in the interests of both the firm and myself, allowing a refreshed leadership team to refine and deliver the business plan for the next three years and giving me the opportunity to focus on venture opportunities in an exciting period for the legal industry and our markets.’

Lewis Silkin will be under a new leadership structure, with the joint management of partners Giles Crown and Richard Miskella. They are currently divisional managing partners for the firm’s Creators, Makers and Innovators (CMI) division and Employment, Immigration and Reward (EIR) division respectively.

For more on Travers’ improbable rise, read Defying Gravity

muna.abdi@legalease.co.uk

Legal Business

Deal watch: Seats at the table for Travers, Skadden and Gateley as Pret acquires EAT and Oliver’s chain collapses

Deal watch: Seats at the table for Travers, Skadden and Gateley as Pret acquires EAT and Oliver’s chain collapses

Two opposite developments in the UK high street have seen City and US firms advise as food chain Pret A Manger acquired rival Eat and high-profile British chef Jamie Oliver’s restaurant business went into administration.

Also keeping City insolvency practitioners busy was the news today (22 May) that British Steel has been put into compulsory liquidation.

Skadden, Arps, Slate, Meagher & Flom advised Pret as it agreed to acquire all of Eat’s 94 shops for an undisclosed sum, with plans to turn most into ‘Veggie Prets’.

The US firm’s team was led by London corporate partners Richard Youle, Katja Butler and Linda Davies. Freshfields Bruckhaus Deringer partner Alex Potter is advising Pret on antitrust.

On the other side of the table, Travers Smith’s head of private equity and financial sponsors Paul Dolman led the team advising Ardian, Horizon Capital and the other selling shareholders of Eat.

‘I acted for Horizon when they acquired Eat [in 2011] and we have acted for them ever since, so we were the logical people to advise on the sale,’ Dolman told Legal Business. ‘Travers has in-depth expertise in this sector.’

The deal sees Travers’ and Pret’s paths cross again after the City firm advised previous owner Bridgepoint on the £1.5bn sale of the food chain to JAB Holding Company one year ago, with a team including Dolman and private equity partner Ian Shawyer.

Under Bridgepoint’s ownership the company, founded in London in 1986, expanded its presence in the UK and US, and launched in France, China, Dubai and Singapore, quadrupling its revenues to £879m. It now counts over 500 shops in nine countries.

Eat was founded in 1996 and bought by Horizon in 2011 with plans to build hundreds of shops. But it has struggled in recent years and reported pre-tax losses of £17.2m in the year to end of June 2018.

Meanwhile, Daniel French, an insolvency partner at listed firm Gateley, is leading the team acting alongside administrator KPMG after Oliver’s business became the latest victim amid difficult times for the UK high street.

Jamie Oliver Restaurant Group will see 22 of the 25 eateries it operates close, resulting in 1,000 job losses.

This is the second prominent high-street insolvency Gateley has acted on this year. The firm also advised KPMG on the administration of Patisserie Valerie in January.

Elsewhere, Clifford Chance (CC)’s insolvency team is advising as British Steele entered compulsory liquidation, putting its 5,000 employees at risk of redundancy.

The government’s official receiver has taken control of the company and together with Big Four accountancy firm EY is looking for a buyer, while it continues to trade normally.

CC’s restructuring head Philip Hertz and partner Iain White are leading the team advising on the process.

The Magic Circle firm was previously among the advisers in one of the largest UK insolvencies to hit the construction industry in recent years, when construction giant Carillion collapsed in January last year.

marco.cillario@legalease.co.uk

Legal Business

Sponsored briefing: Excessive litigation – how can it be discouraged and stopped?

Sponsored briefing: Excessive litigation – how can it be discouraged and stopped?

Huw Jenkin assesses the options for curbing excessive or aggressive litigation

In the Solicitors Regulation Authority (SRA)’s November 2018 report ‘Balancing duties in litigation’, the SRA criticises ‘excessive or aggressive litigation’ involving ‘disproportionate valuations of the claim, wide-ranging allegations of impropriety and inappropriate volumes and tone of correspondence’. The SRA indicates that these cases ‘create disproportionate costs’ and ‘occupy court time to the detriment of other cases’, and that the courts have made clear their disapproval of such cases (citing, by way of example, Excalibur Ventures v Texas Keystone & ors [2013] EWHC 4278 (Comm)).

Legal Business

Travers female partner promotions suffer amid scaled back round

Travers female partner promotions suffer amid scaled back round

A firm more progressive than many in the City on gender diversity, Travers Smith has made up just one female partner in a four-strong promotion round that is significantly scaled back from last year.

The City stalwart made up half the number of new partners as in 2018, when eight new partners were promoted, of which three were women.

Although a significant reduction on partner promotions compared with last year, the four-strong round is equal to the number promoted in 2017, which was notable for being the year the firm announced its first all-female partner promotions round.

This years’ cohort relates to the dispute resolution, pensions, financial services and markets and corporate finance practice areas, with the promotions taking effect on 1 July 2019.

Managing partner David Patient (pictured) said: ‘The appointment of new partners is always one of the highlights of the year, and it’s great that we are, once again this year, able to promote such exceptional talent from our deep bench.’

Alexa Day has been promoted in the firm’s dispute resolution practice. She was recently part of team which worked on the successful defence of claims brought by the Tchenguiz brothers against Kaupthing, Jóhannes Jóhannsson and others. The claims were dropped by the claimants three days into what was set to be a 12-week trial.

Pensions partner Andy Lewis has also been promoted. He has experience advising clients with complex pensions projects and regulatory work including scheme reorganisations, liability management, benefit changes, difficult funding and debt settlements.

Lewis recently advised – alongside head of pensions Daniel Gerring – the Akzo Nobel (CPS) Pension Scheme in a sponsor negotiation, and advised another global corporate based in the USA on a restructuring and flexible apportionment arrangement in a key pension scheme. Other highlights include acting for Micro Focus International PLC on the global pensions aspects of the $2.5bn sale of its SUSE Linux business and advising Ancala Partners on pensions in its acquisition of Portsmouth Water.

Michael Raymond has been promoted in the financial services and markets team having gained experience advising asset managers on regulatory issues including market conduct in the credit markets, securitisation risk retention rules and regulatory capital requirements for investment firms and alternative investment fund managers.

Finally, the firm promoted corporate lawyer Jonathan Walters, who advises clients on public and private M&A, joint ventures and equity capital markets with a particular focus on the infrastructure sector. He recently acted for Arjun Infrastructure Partners on the acquisition of two combined heat and power plants in the UK and Ancala Partners on several transactions including on the acquisitions of Portsmouth Water and an interest in the Scottish Area Gas Evacuation System (SAGE).

nathalie.tidman@legalease.co.uk

Legal Business

Defying gravity – Inside the improbable rise of Travers and Macfarlanes

Defying gravity – Inside the improbable rise of Travers and Macfarlanes

‘If you look at Wall Street, this model is replicated again and again. There is no reason it shouldn’t work in the UK.’ David Patient, now seven months into his second term as Travers Smith’s managing partner, responds philosophically to this Legal Business comment on the performance of his firm and Macfarlanes: ‘If two firms with once-derided models can so comprehensively outpace the wider industry, then even more of the profession’s battered received wisdom should be sceptically revisited.’

Criticism of Travers and Macfarlanes has largely focused on them being old-school, City-centric law firms, barring one tiny European outpost apiece. Yet the pair continue to defy expectations post-Lehman. For Travers, 2017/18 was its ninth consecutive year of growth, yielding an 18% uptick in turnover to £146.9m and a 24% surge in profit per equity partner (PEP) to £1.2m. Meanwhile, Macfarlanes’ reputation for striking profitability has yet to desert it in eight years of sustained revenue and PEP growth (marred only by a shaky 2015/16), with the firm upping revenue by 20% to £201.6m in the last financial year and posting an enviable 27% increase in PEP to £1.74m.

Legal Business

Legal 500 data: behind the story

Legal 500 data: behind the story

The Legal 500 United Kingdom 2019 rankings

Our cover feature this month looks at London-centric peer firms Macfarlanes and Travers Smith. Here we look at the two firms’ UK rankings in The Legal 500. For further information see ‘Defying gravity’.