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’.

Legal Business

Deal watch: Healthy pickings for Travers and DLA on Unilever’s £150m graze buyout as firms navigate Interserve rescue saga

Deal watch: Healthy pickings for Travers and DLA on Unilever’s £150m graze buyout as firms navigate Interserve rescue saga

Travers Smith and DLA Piper have sated their appetites on The Carlyle Group’s £150m disposal of graze while a raft of advisers sat tight as a further twist in the Interserve saga unfolded.

Unilever last Tuesday (5 February) sealed the deal to acquire ubiquitous healthy snack brand graze, having fended of competition from rival bidders Pepsi and Kellogg in an auction launched in the latter part of last year by Harris Williams.

The buyer, which also owns Marmite, mustard maker Colman’s and Wall’s ice-cream, was reputed to have paid exactly half the £300m asking price for the snack company.

Private equity house Carlyle, which sold graze via its Carlyle European Technology Partners fund, turned to longstanding relationship firm Travers and a team led by partners Ian Shawyer (pictured) and George Weavil. While not an obvious asset to be owned by a tech fund, Shawyer notes that graze, having started life in 2008 as a direct to consumer snack box delivery service, has a tech-based flavour in that it is based on data strategy and uses tech to mine customer preferences of its products.

The company has evolved to stocking the shelves of more than 30,000 UK retailers as well as US shops including Target, Walgreens and 7-Eleven.

Carlyle last year started sounding out the market for a successor fund – Carlyle European Technology Partners IV – with a view to raising €1.3bn to invest in companies with significant growth potential.

While Latham & Watkins is the firm most associated with Carlyle Group for international work, Travers has carved a niche advising the group on European deals.

Bob Bishop, DLA’s global co-chair of corporate, led the team advising Unilever, while Phil Hails-Smith, corporate and commercial partner at Joelson, advised graze’s management.

Meanwhile, the rescue of beleaguered UK construction plc Interserve has encountered a snag. Coinciding last Wednesday (6 February) with Interserve’s agreement in principle of a deleveraging plan that could save it from a Carillion-style collapse, hedge fund investor Coltrane Master Fund sought to leverage its 17% stake to requisition a general meeting that could see most of its directors ousted.

The latest example of shareholder activists making their presence felt on this side of the Atlantic, Coltrane has called for Interserve’s entire board, apart from chief executive Debbie White, to stand down and that David Frauman and Stuart Ross be appointed as directors.

The rescue mission has kept firms including Ashurst, Slaughter and May, Allen & Overy and Akin Gump Strauss Hauer & Feld busy for several months. If approved by shareholders, it would involve £480m of new shares issued to lenders in a debt for equity deal aimed at reducing debt from £600m to £275m.

Advising Interserve are an Ashurst corporate team led by Tom Mercer and a Slaughters team led by restructuring partner Ian Johnson. A&O is advising the lenders with a team led by Trevor Borthwick, while Akin Gump, led by Barry Russell, is advising the noteholders.

Freshfields Bruckhaus Deringer restructuring partner Adam Gallagher is advising the pension trustees of Interserve.

While there are clear parallels with fellow UK construction company Carillion, which fell into liquidation in January 2018, advisers are quick to note that the underlying business of Interserve does not suffer from such severe liquidity shortfalls and has not been subject to the same mismanagement.

‘A similar rescue plan was being considered for Carillion but didn’t work because that business was in far worse shape. This is what it looks like if it is possible to save the company’, said one partner of the Interserve restructuring.

Howard Kennedy and Browne Jacobson also last week won mandates acting on HMV’s rescue buyout by Canadian record company Sunrise Records & Entertainment Limited.

The move follows the music retailer’s demise into administration at the end of last year when Addleshaw Goddard partners Fraser Ritson and Alison Goldthorp were drafted in to advise the administrator KPMG.

The transaction will see Sunrise Records acquire 100 HMV stores across the UK while 27 stores were not included in the deal and have now shut down.

Howard Kennedy is advising KPMG, with a team led by corporate partner Jonathan Polin while Browne Jacobson corporate finance partner Roger Birchall is advising Sunrise Records.

High street cake purveyor Patisserie Valerie last month called in KPMG after it was unable to shake off significant fraud plaguing the business, with Gateley advising the administrator.

Legal Business

Travers’ former tax head Kathleen Russ elected as senior partner successor to Chris Hale

Travers’ former tax head Kathleen Russ elected as senior partner successor to Chris Hale

Travers Smith has nominated former tax department head Kathleen Russ (pictured) as its new senior partner, to succeed long-serving Chris Hale whose term comes to an end 1 July 2019.

Russ is a relative veteran in her own right, acting as a partner in the firm’s tax practice since 2001, and heading the team between July 2007 and January 2017.  

Described as ‘business-savvy’ by The Legal 500, Russ has acted on a number of mandates for property company Zoopla and notably advised TA Associates on the acquisition of the Single Strategy asset management business from Old Mutual Wealth.

Russ told Legal Business she plans to retain a significant amount of her client work upon becoming senior partner, but noted there has been a ‘gradual shift’ in her role after stepping down as head of the tax department last year.

She was coy on specific campaigning initiatives and instead ‘wanted to focus on the future.’ Russ said: ‘Our firm is going from success to success. We’ve got a strong M&A practice and disputes is absolutely flying. I want to showcase everything that is special about the firm.’

On Hale, she commented: ‘Chris has been a phenomenal senior partner and throughout my career someone I have respected and admired. He will have big shoes for me to fill.’

Russ’s elevation brings Hale’s senior partner stewardship to an end, having held the position since 2013. Hale was originally elected in 2013, before being re-elected at the beginning of last year. He stood unopposed after championing a professionalization of the firm’s support services.

Hale said: ‘I have worked with Kathleen Russ for many years both on transaction work and as a member of the Travers Smith partnership board. I have seen how dedicated she is to the firm and that she has all the qualities to make an outstanding senior partner.’

On current trajectory, Russ will be taking over a firm with consistent and healthy revenue growth. The City independent posted its ninth consecutive year of financial growth in the summer, with revenues climbing 18% to £146.9m.

Travers continues to be a well-respected player in the private equity sphere, with long-standing client Bridgepoint proving a fruitful source of business in recent months. In June, Travers advised Bridgepoint on the £1.5bn sale of food chain Pret a Manger to JAB Holding Company.

But the firm’s dispute team has also been making waves. Earlier this year, newly-installed disputes head Rob Fell claimed the team had its ‘best year ever as a disputes practice’.

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

Deal watch: Slaughters and Kirkland drill into giant $12bn offshore plc merger as Travers and Eversheds maximise L&G’s pensions buy-out

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.

Legal Business

Deal round-up: Travers advises Shazam on Apple buyout as Freshfields and Norton Rose strike gold on $18bn mining merger

Deal round-up: Travers advises Shazam on Apple buyout as Freshfields and Norton Rose strike gold on $18bn mining merger

In the latest flurry of deals, Travers Smith has represented popular mobile app Shazam on its buyout by tech giant Apple, while a raft of international firms have benefitted from recent transactional activity.

Shazam, which was founded in 2002, is a song recognition app which can identify what music is playing via a phone’s inbuilt microphone. The deal for Shazam, reportedly worth $400m, will see Apple offer the app on an ad-free basis for all users.

The buyout was initially delayed by a European Commission (EC) probe, amid fears it could give Apple Music a competitive advantage over rival streaming apps such as Spotify and Deezer, but the EC gave the takeover the green light earlier this month.

Shazam was advised by Travers Smith, with a team spearheaded by corporate finance partner Andrew Gillen. Gillen was supported by partners Jessica Kemp and Madeleine Gowlett, who offered specialist tax advice, while commercial advice was given by partner Louisa Chambers.

Apple was represented by Cooley, while Hogan Lovells also featured on the deal, advising Shazam on US aspects of the transaction.

Elsewhere, Freshfields Bruckhaus Deringer and Norton Rose Fulbright landed key roles as goldmining giants Randgold and Barrick of Canada announced an $18bn combination.

The merger is expected to create the largest gold company in the world in terms of tier one gold assets, and is predicted to have a market capitalisation of $18.3bn.

Freshfields is one of the firms advising Barrick on the merger. Leading for the Magic Circle firm are corporate partners Piers Prichard Jones and Stephen Hewes. US outfits Davies Ward Phillips & Vineberg and Cravath, Swaine & Moore also advised Barrick, alongside offshore firm Carey Olsen.

Norton Rose was on hand to support the US-based Randgold with a transatlantic team. Corporate partners Jon Perry and Nick Adams led for the firm out of London, while New York-based securities partner Steven Suzzan provided advice on the US side. Canadian firm Stikeman Elliot and offshore outfit Ogier also represented Randgold.

Finally, White & Case has advised the creditors of pharmaceuticals company Concordia on its $3.7bn recapitalisation.

The restructuring came after Concordia faced a number of issues, including regulatory scrutiny of its past business practices and a large amount of debt accrued from its previous acquisitions. As a result of the restructuring, Concordia’s debt has reduced from around $3.7bn to $1.4bn. A Carey Olsen team, led by partner Kate Andrews, advised the ad-hoc group of secured creditors on Jersey law aspects of the deal.

Christian Pilkington, one of White & Case’s lead restructuring partners on the mandate, commented: ‘This deal illustrates our ability to combine our global restructuring, finance and regulatory capabilities with our deep knowledge of the pharmaceutical industry.’

Legal Business

Travers makes pension play with Sackers hire as KFC GC Nelson-Smith decamps to WeWork

Travers makes pension play with Sackers hire as KFC GC Nelson-Smith decamps to WeWork

Travers Smith has made a rare lateral play with the hire of Sebastian Reger to its pensions sector group as KFC loses highly-regarded general counsel (GC) Sarah Nelson-Smith to WeWork.

Travers announced today (20 September) that Reger will be joining the firm from pensions boutique Sackers & Partners, where he had been a partner since 2015 in the finance and investment team. Reger started his career at Magic Circle firm Freshfields Bruckhaus Deringer.

Travers intends to add Reger’s pensions experience into the firm’s structured finance practice, with Reger having acted for a number of trustees, custodians and collateral managers. Reger will now work alongside the firm’s dedicated pensions partners while practicing in Travers’ derivatives and structured products group.

Daniel Gerring, head of the pensions sector group at Travers, told Legal Business: ‘We have been wanting to expand this practice at the partner level for a while, and there is a natural synergy between the structured finance practice and pensions. Sebastian has excellent experience spending the majority of his career at Freshfields before honing his pensions practice at Sackers.’

Meanwhile in the in-house community, Nelson-Smith is moving to collaborative workspace company WeWork from fast-food chain KFC, where she had been European chief legal officer. The move adds a string to the bow for WeWork in its European offering, with Nelson-Smith having a private practice background with Freshfields and US law firm Baker Botts, as well as holding in-house roles at Taco Bell and Pizza Hut owner Yum! Brands.

It was during Nelson-Smith’s tenure at KFC that the fast food company was put under the spotlight in the BBC One documentary The Billion Dollar Chicken Shop, while at the beginning of the year she oversaw KFC’s first European panel review.

Legal Business

LB100 case study: Travers Smith

LB100 case study: Travers Smith

You can always rely on Travers Smith for revenue growth; the City independent has posted its ninth consecutive year of financial expansion. Although, in many ways, the 18% uptick in turnover to £146.9m was a triumphant bounce back from 2016/17’s results, when revenue inched up just 4% against a backdrop of Brexit uncertainty.

The revenue increase is more impressive when considering that only £900,000 of the £146.9m figure was generated overseas – in Travers’ small Paris branch – emphasising the firm’s strength in its domestic market.

Legal Business

City’s mid-weight elite set blistering pace as Travers and Macfarlanes surge in 2017/18

City’s mid-weight elite set blistering pace as Travers and Macfarlanes surge in 2017/18

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.

Legal Business

Another big-dollar mandate for Travers as Micro Focus sells software business to EQT

Another big-dollar mandate for Travers as Micro Focus sells software business to EQT

Extending beyond its reputation for outstanding mid-market deal work, Travers Smith has once again put its name to a multibillion-dollar deal as IT company Micro Focus sells its open-source software business SUSE for $2.5bn.

Swedish private equity group EQT Partners is on the other side of the table and turned to US giants Latham & Watkins and Milbank, Tweed, Hadley & McCloy to advise on the acquisition.