Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
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This week:
1. Continual shift of the law firm landscape: A week of mergers
This week has seen the momentum of law firm mergers rise with significant force and with it the continuation of change within the legal landscape in the UK and globally.
Following the three way tie up of CMS, Nabarro and Olswang, this week it has been announced that Addleshaw Goddard have approved a merger with HBJ Gateley and Holman Fenwick Willan’s acquisition of Texas firm Legge Farrow Kimmitt McGrath & Brown. The news has also broken of Dentons and Greenberg Traurig circling a merger with KWM’s European business, whilst other suiters for larger portions of the business also lie in wait. Add to this Eversheds’ proposed tie up with US firm Sutherland Asbill & Brennan and we can conclude that this week has been a busy one.
Trying to pick through all of this in one go would be unachievable and with the continual press picking apart poor KWM in recent weeks, we have decided to take a closer look at the Eversheds tie up in what could be significant news for the UK mid-market.
It is well known that Eversheds have been seeking out a US merger, with the firm previously reported to be in talks with Foley & Lardner, which failed to result in a tie-up last year. Tuesday’s news of merger talks between Eversheds and Atlanta-based Sutherland has shown much more potential, as equity partners at each of the respective firms have been presented with the proposal and are expected to vote on the 16th December.
The transatlantic tie-up, which would sit under the name Eversheds Sutherland, would house over 2,300 lawyers in 61 offices across 29 countries. Their combined revenue could total over $900 million, placing them amongst the top 40 largest law firms in the world (by revenue) and would represent a significant shift within the shape of the UK mid-market, much in the way the Silver Circle changed, or some might say dissolved, with the mergers of Norton Rose, Lovells and Herbert Smith.
The merger appears to be one of equals, as even though Eversheds is larger in terms of capability and breadth of offering, Sutherland is more profitable. Bloomberg has therefore posted that that the new entity would be overseen by a global board, with equal representation from each existing firm.
Eversheds’ core practice areas include real estate, company commercial law and consulting, which would complement Sutherland’s expertise in energy, financial services, intellectual property and litigation. It also allows Eversheds to gain a much desired US presence whilst Sutherland can benefit from the UK firm’s extensive international network.
Given a successful partner vote, the merger could go live as early as January as will HFW’s tie up with Legge Farrow Kimmitt McGrath & Brown (3rd January 2017).
Whilst the number of mergers or merger talks hitting the news in the last week has been significant, it is not unsurprising given the circumstances within the legal marketplace. In the case of Eversheds, it could be said that this is a traditional UK or regional UK firm who have developed their business both domestically and internationally in such a way that they are now able to become a truly global brand within the mid-market. This move takes them clearly away from their traditional, regional routes and onto the world stage as a top 40 firm, a credit to their leadership team. Others have not been as lucky however, as the situation at Olswang and KMW demonstrates that the question of ‘merge or die’ will only ring louder around UK firms’ corridors following this week’s news.
2. Report finds number of female leaders stagnates in asset management
The number of women running investment funds globally has not increased since the financial crisis, a new research report by data provider Morningstar found this week.
Only one in five funds has a female portfolio manager the study found, which examined more than 26,000 funds across 56 countries. However, the problem was particularly acute in the US, Germany, Brazil, India and Poland where one in 10 funds or fewer have female managers.
The data also showed that women are 74 per cent more likely to run a passive fund that tracks an index compared with one that tries to beat the market, suggesting gender balance could be improved if we were to see a structural shift towards passive management. Assets managed in passive mutual funds have grown four times faster than traditional active products since 2007 and now stand at $6 trillion globally.
This mirrors other recent research, with Citywire finding that just 10% of the world’s fund managers are women after an analysis of its global fund manager database in May.
Women’s share of the $13 trillion (£8.9 trillion) retail asset management industry rose slightly in terms of the number of investment funds managed by teams that included women (14%), however only 7% of funds were run by a female manager on her own.
Following this, City Hive – an industry network for women – was launched this week with the support of 15 asset management and investment firms.
This sits alongside other initiatives such as The Diversity Project, which aims to ensure diverse recruitment across the asset management industry in terms of gender, ethnicity, socio-economic background, age, sexual orientation and disability.
In August, BlackRock also shared its diversity data for the first time, marking a breakthrough for gender equality. This was followed by a commitment from six other fund houses – Franklin Templeton, Fidelity International, Amundi, Baillie Gifford, Union Investment and Capital Group – to also publish their diversity statistics and make their businesses publically accountable to change.
These statistics show that, although the pipeline of women moving into fund management is improving, the proportion of women seeking the chartered financial analyst (CFA) qualification rose to 37% last year, up from 29% in 2008 – firms are still struggling to retain top level female talent.
This is of critical importance as research has overwhelmingly found that more diverse organisations – in terms of gender or otherwise – are more successful financially. Greater diversity and inclusion is a business imperative for firms wishing to stay competitive in the global marketplace.
This holds true for asset management and financial services in particular, as regulatory change has issued in a more risk-averse era with a greater focus on customer outcomes. Furthermore, several studies have shown that female fund managers did better than men on a ‘risk adjusted’ basis, with men putting in some of the best and the worst performances.
As such, despite asset management being a great career option for women, currently there is not enough of them as firms struggle to retain and progress their female talent. Hopefully these findings from Morningstar will help create greater impetus for change as asset management firms continue to address the need for greater gender equality in their sector.
Movers & Shakers of the week
Moves
Standard Chartered hires divisional GC
Barclays star regulatory lawyer Chris Allen will move to Standard Chartered as its general counsel for clients and products
Magic circle PE rainmaker joins US firm
Allen & Overy private equity partner Michael Bernhardt moves to Milbank, Tweed, Hadley & McCloy’s corporate department in Frankfurt
DAC Beachcroft gains four-strong personal injury team
Four partners from Clyde & Co’s personal injury team have joined DAC Beachcroft. Partners Danielle Singer, John Goodman and Nigel Adams are based in London, whilst partner David Knapp is based in Guildford.
Freshfields makes corporate hire in the US
Corporate partner Aly El Hamamsy has left Cadwalader Wickersham & Taft to join Freshfields Bruckhaus Deringer in New York
Mischon sees rare partner exit
Partner Helen Croft exits the employment team at Mischon de Reya to become COO and GC at communications agency Mission Media
Sidley Austin expands City restructuring team
Linklaters restructuring partner Yen Sum departs the magic circle firm to join Sidley Austin in London
Mergers & Alliances
Holman Fenwick Willan to merge with US boutique Legge Farrow Kimmitt McGrath & Brown
Eversheds in talks for a US tie-up with Sutherland Asbill & Brennan
Shoosmiths merges with local firm McManus Kearney in Northern Ireland
DWF also gains Belfast offering, merging with C&H Jefferson
Addleshaw Goddard set to merge with Scottish firm HBJ Gateley
Partner Promotions
Herbert Smith Freehills promote five to partnership in Australia