Welcome back to the Fides Weekly Update. Read on for our analysis of the top legal and compliance new stories of the week. You can also scroll down to see our regular feature: Movers & Shakers of the week.
Please follow us on Twitter and LinkedIin for daily market updates.
This week:
1) Middle East exits continue: Weil Gotshal announces Dubai office closure
Weil Gotshal has become the third major law firm to announce office closures in the Middle East this week with the decision to close its Dubai office, the US firm’s only outpost in the region.
This move is somewhat unusual as other firms have typically scaled back in secondary regional markets, evidenced by the decision of Clifford Chance and Herbert Smith Freehills to close their Qatar offices last week.
This follows a raft of further consolidation, with HSF also closing its office in Abu Dhabi in 2015, and US giant Latham & Watkins also following suit, shutting its operations in Doha and Abu Dhabi in the same year. Other international firms to scale back include Baker Botts and Simmons & Simmons who both closed their Abu Dhabi bases in 2015 and 2016 respectively.
The retrenchment in its international network comes despite an expansive 2016 for Weil, which posted a 9% income hike to push its revenues to $1.27bn. During the 2016 financial year, profit per equity partner (PEP) also rose more than 22% to $3.1m, following a prolonged period in which Weil had struggled to sustain growth and a 1% revenue rise in 2015.
For law firms operating in the region, the UAE market remains intensely competitive, with significant pressure on fees. The market is heavily saturated, with 45 international law firms in Dubai and 20 in Doha competing with local firms for work.
The intense competition for work is not the only challenge, with falling oil and gas prices in recent years also impacting work levels in other practice areas such as project finance.
Despite this, the Dubai International Financial Centre – the UAE federal financial free zone in Dubai – continues to attract business, with most law firms believing an office base there is a prerequisite of successful practice.
2) RBS accused of fraud and forgery
The Royal Bank of Scotland has been accused of systematically faking and manipulating documents to cover misconduct, according to a number business customers and a former bank employee.
This comes as the latest in a long line of accusations of wrongdoing by the bank, which was bailed out by the tax payer in 2008, that includes the of miselling financial products, money laundering and forex manipulation.
Mark Wright, a former manager at the bank, accused two former colleagues in the Group Compliance Unit of fabricating bogus complaints from five of his customers, who later submitted statements contrary to this affect.
He maintained that the matter was not suitably investigated after the individuals in question left the bank, and that the complaint negatively affected his career progression within RBS as they failed to accord him the status of a whistleblower. He left the bank in 2013 with mental health issues, eight years after his grievance was first recognised.
This concurs with the experiences of Andy Keats and Clive May, who are amongst 300 others in seeking legal representation against RBS for fraud. Mr Keats contends that the bank falsified documents that led to the insolvency of his security business, whilst Mr May claims that RBS defrauded himself and the government by selling him an Enterprise Finance Guarantee (EFG) when he was ineligible for this.
The justification for the bank to be acting in this way is to cover up wrongdoing, in particular the alleged defrauding of thousands of small businesses for billions of pounds of assets.
Internal emails handed to BuzzFeed News and the BBC in October 2016 show that the bank implemented a plan to squeeze customers facing financial difficulty and gave bonuses to staff for identifying struggling firms.
RBS then bought assets at rock-bottom prices once companies hit difficulties, often selling them at a profit. It also hit them with large fees, driving many into the ground and boosting its own bottom line, according to the documents.
This is also in line with the findings of the Tomlinson Report (2013) which found that RBS made huge profits by engineering the failure of business customers.
The question remains as to how high the knowledge of this fraud and document manipulation went, and the extent to which the institutional culture within RBS facilitated this. Will this be the next big regulatory fine for misconduct, or left on the backburner by the FCA? Whatever the outcome, in the words of Steve Middleton, head of the RGL Management group helping individuals seek legal representation against the bank;
“In most cases the end result of what the bank did to their people was the total destruction of their businesses and people’s lives. These people were intentionally financially and emotionally destroyed. Their only mistake was to trust the bank that they thought was there to help them succeed.”
3) Movers & Shakers
Moves
Slaughter and May makes second ever lateral partner hire with addition of HSF pensions head
Daniel Schaffer becomes Slaughters first ever lateral hire in London
Cleary’s London capital markers partner exits for Simmons
Simon Ovenden joins Simmons & Simmons in a rare departure from the US firm in London
Freshfields pick up five-partner private equity team from Ashurst Paris
Partners Guy Benda, Nicolas Barberis, Stephanie Corbiere, Yann Gozal and Laurent Mabilat are set to join the magic circle firm in Paris subject to a partner vote.
Kirkland & Ellis loose seven-partner team to Sidley Austin in Munich
Sidley raids Kirkland for the second time in a year for a private equity team led by Volker Kullmann, whilst also hiring Linklaters’ Frankfurt banking and finance partner Kolja von Bismarck.
Morgan Lewis turns to Orrick for four further partner hires to strengthen Hong Kong base
Four Orrick of counsel – Rosita Chu, Eli Gao, Yan Zeng and Roger Zhou – will are set to join Morgan Lewis as partners, following the hire of nine Orrick partners in Hong Kong, Beijing and Shanghai last month.
K&L Gates expands City finance practice with hire of aviation finance head from Arnold Porter
Head of aviation finance and ex London managing partner Philip Perrotta joins K&L Gates
Office Openings and Closings
Weil Gotshal to close Dubai base as Middle East cutbacks continue
Mergers & Acquisitions
Eversheds Sutherland follows transatlantic tie up with Singapore merger deal
Financials
Cooley’s London base nears $50m mark two years after launch
White & Case posts 3.6% London revenue rise as global growth outstrips UK performance
David Polk sees double-digit revenue and PEP rises for 2016 as partner profits hit $3.75m
Cadwalader revenue shrinks 2.5% following office closures and partner exits
Welcome back to the Fides Weekly Update. Read on for our analysis of the top legal and compliance new stories of the week.
Please follow us on Twitter and LinkedIin for daily market updates.
This week:
1.All you need to know about the cities Law firms (PEP & Financials)
In a week where multiple global law firms have announced their financials we are looking into their performance and which partners have experienced a happy or bleaker start to the year.
Hogan Lovells global performance and turnover (excluding the US) was up to £638m, this has brought PEP up overall to £879,000 from £698,000 an increase of 25%. These results surely help ease the burden of adding an additional £50m in capital, which was announced earlier this month.
Closer to home, Eversheds have consistently produced positive revenue results however have increased operating costs significantly, resulting in a drop in PEP from £410,000 to £386,000. The number of Partners at the firm grew from 296 to 323 while the number of legal advisers increased to 1,543 from 1,410 and administrative and support staff numbers rose to 1,097 from 941.
Dechert meanwhile also posted positive results with a 2.4% increase in revenue and 1.6% in PEP despite CEO Henry Nassau acknowledging the “challenges of 2016”. The real growth was the London office, despite the fluctuations in currency prices. Final PEP numbers came out at £2.03m despite other areas of the business suffering like non-equity partners and the US business remaining fairly flat.
Similarly to Hogan Lovells, Taylor Wessing Partners added a more modest £3.59m in capital this is in line with their move to become an all-equity Partnership. Turnover increased 5% to £126.65m whilst operating profit fell slightly from £49.99m to £49.85m whilst PEP increased slightly from £767,000 to £770,000.
Ashurst who experienced significant challenges within their partnership throughout 2016 whilst also investing heavily in their infrastructure, saw a significant drop in PEP to £567,000 representing a 24% decline. Despite this the firm grew from 2,651 to 2,722, although total fee earners fell from 1,399 to 1,368.
Weil Gotshal & Manges posted notable increases as revenue rose 9% while PEP jumped 22% to £2.5m. Lawyer headcount increased 1.8% to 1,083, while the number of equity partners at the firm dropped to from 164 to 161.
Despite the challenging environment for law firms globally these results provide some optimism for the year ahead as firms continue to develop their capabilities domestically and internationally, enabling their businesses to remain competitive and profitable in the current climate.
2. Trump considers Dodd-Frank repeal
Since his inauguration, Donald Trump has begun fulfilling many of his campaign promises. His administration is on a mission like no other before it, signing many executive orders, some controversial, as promised. Next on his agenda is one of the most significant pieces of regulation to be devised, the Dodd-Frank Wall Street Reform and Consumer Protection Act first implemented in 2010 in the aftermath of the 2008 financial crisis.
Trump is ordering a complete review, and has been contemplating since May 2016 that the act has been too severe on the banking sector, forcing banks to hold extraordinarily high cash reserves and stifling growth and innovation in an attempt to avoid another “too big to fail” scenario. As a successful businessman, who has relied heavily on many of these same banks to fund his vast and diverse portfolios of business, is it a surprise that he is considering repealing or even completely reforming the act?
The general consensus of the market is mixed, with most saying that Dodd-Frank has not fully achieved its original purpose, but on the other hand many would argue that it has been generally positive and certainly ‘done some good’. The opportunity for high risk strategies that could go wrong have been curbed and consumer protection has been tightened.
It’s also worth arguing that same lack of freedom for the banks has in some ways led to the exponential growth of the Fintech industry, which is now in itself a $7 billion sector. It has been able to capitalise on less regulatory supervision, low interest rates and the ability to utilise the latest technology to provide a level of service and efficiency traditional banks are unable to compete with.
Unsurprisingly, news of Trumps review caused shares to rally in London at a time when European banks are currently buckling under further regulatory pressures. Both administratively and economically MiFID II is causing headaches and is creating huge budget issues under strict timelines which are likely to be extended. Will the potential scaling back of regulation in the U.S force other regulators elsewhere to become more relaxed and stay competitive and if so would this lead us to be exposed in the future?
Where will this leave our compliance and regulatory industry? From our discussions, there is a mood that the size of these teams are bloated and of huge cost to the sector but have been necessary in protecting the banks from further failures. But these systemic risks have subsided as a positive compliance culture has been embraced.
The FCA’s approach since Martin Wheatley was forced to step down has been much more conservative but this is as much to do with the fact that the focus of the regulator has moved to the Asset Management sector and with MiFID II already delayed by a year the approach of Trump while radical could open up the opportunity for new ideas and regulatory strategy.
Welcome back to the Fides Weekly Update. Read on for our analysis of the top legal and compliance new stories of the week. You can also scroll down to see our regular feature: Movers & Shakers of the week.
Please follow us on Twitter and LinkedIin for daily market updates.
This week:
1. BofE Governor warns of fintech threats
There has been a lot of excitement in the financial services industry about the wave of new technology entering the market. However, along with all the innovation and new products comes a host of regulatory challenges that could pose a threat to the financial stability of our economy, Mark Carney has warned.
In a speech delivered by Governor of the Bank of England Mark Carney at a G20 conference on Thursday, we were made aware of the dangers that financial technology, including robo-advice, can have on financial markets.
Carney argues that the technology used by robo-adviser firms may result in a large number of clients all shifting towards certain assets at the same time. This process, which is defined as ‘herding’, creates market volatility in the short-term by artificially spiking the price of an asset through demand.
Such volatility could bring about systemic risk, as investors often make decisions based on the performance of the wider economy, which in turn would exaggerate the ups and downs. This cycle of fluctuations is termed ‘pro-cyclicality’.
Further to the systemic threat robo-advice presents, Carney also touched on the adaptation of cybersecurity frameworks for financial institutions. The success of fintech has led to a greater reliance and interconnectivity of IT systems, which naturally generates greater operational and cyber risks.
The Financial Stability Board, of which Mark Carney is Chair, has already begun to tackle this issue by carrying out a stock-take of existing cyber security regulation. The results of this investigation can be found here.
There is no doubt that the fundamental processes of financial institutions are changing. They are beginning to service clients better than ever and developing products that will permanently alter traditional banking activities. In his speech, Carney praised the Financial Conduct Authority for the efforts made so far in seeking more suitable methods of regulating fintech, with Project Innovate and the regulatory sandbox contributing to our objectives of attracting new businesses to UK and making London the fintech hub. But there remains numerous uncertainties when attempting to implement a risk framework that is fit for purpose and doesn’t leave an institution exposed to potential misconduct.
How easy it will be to regulate these new systems and to what extent they can be abused remains to be seen. Nevertheless, it’s encouraging that regulators and policymakers alike are attempting to stay ahead of the curve when it comes to technology, which is a positive sign that innovation is here to stay in the financial sector.
2. The aftermath of KWM: mass team hires the new normal
In the aftermath of KWM’s fall into administration last week, attention has shifted to the large team hires, where these teams went and what business this will provide to their new firms.
The discussion of this topic is contentious, with an interim report released this week to creditors by KWM’s administrators Quantuma citing that ‘Administration was the only resort’ following the amount of partner and staff exits in 2016, with all but 33 partners exiting the firm’s European business.
The motivation of the firms who made the largest team hires – Reed Smith and Greenberg Traurig – appears to be access to the KWM network.
According to Ashfords partner Sam Palmer, who as solicitor manager to Quantuma has been dealing with the transfer of client files since the practice went into administration, only around 5% of clients decide not to follow partners to their new firms and decide to take their work in progress elsewhere.
The administrator’s interim report seems to confirm this, noting that as of the 10th January the sales the administrators completed after their appointment included the work in progress (WIP) and accounts of six partners to Greenberg Traurig, seven to Goodwin Procter, eight to DLA Piper, 11 to KWM China and 12 to Reed Smith.
However, with the former partnership and KWM now so dispersed, it will be interesting to see which partners manage to retain their key client relationships.
Greenberg Traurig yesterday announced that it had gained 10 new clients from its hire of a six partner, 25-lawyer team from KWM in London.
The team – which includes real estate funds partners Steven Cowins and Marc Snell – has brought in the following private equity funds clients: Cain Hoy, CBRE Global Investment Partners, Europa Capital, M3 Capital Partners, Paloma Capital, Revcap, Brockton Capital and Rockspring, as well as retail giant Westfield and British Airways Pension Fund.
Despite being known for its real estate offering in the US, this builds Greenberg’s practice in London, which has done little private equity and real estate work to date and no work with funds. This also follows failed merger talks last year with Berwin Leighton Paisner over differences in culture.
Much has also been made of the 50 lawyer team hire to Reed Smith – the largest team move from KWM – to strengthen its financial services regulatory, corporate and private equity practices in the UK, France and Germany.
At the core of this hire was the acquisition of a four partner financial services regulatory team under Tamasin Little, and the addition of four corporate partners to specialise on Private Equity and Funds.
Building out the corporate practice especially is understood to be a strategic goal of the firm, although it is questionable of the 17 partners that Reed Smith hired, how many of them were working with their own clients as opposed to serviced KWM clients.
As always, only time will tell if these large acquisitions are successful and integration into the acquiring firms client base and culture will be the determining factor. With the collapse of large elements of the KMW network, we are pleased to see that many lawyers have managed to secure their immediate future with moves and we hope the integration into their new firms is as seamless as possible.
Movers & Shakers of the Week
Appointments
Addleshaws re-elects managing partner
Managing partner John Joyce has been re-elected for a second term at Addleshaw Goddard
Moves
GC assigned to open banking group
The Open Banking Implementation Entity, funded by the UK’s nine biggest banks, hires former Lloyds and Halifax legal head as its first general counsel
Freshfields NY office loses top litigator
Securities and commercial litigation partner Marshall Fishman departs Freshfields Bruckhaus Deringer in New York to join Goodwin Procter as its head of New York commercial and financial litigation practice
A&O makes Asia IP hire
Allen & Overy has hired former China general counsel for pharmaceuticals giant AstraZeneca David Shen, who will join its global IP practice in Shanghai
Hogan Lovells boost FS practice with top lawyer from the regulator
Claire Lipworth is set to join Hogan Lovells in London as a financial services partner. Claire was previously chief criminal counsel at the Financial Conduct Authority for three years
Paul Hastings expand Paris offering with KWM real estate head
Former EUME real estate co-head Jean-Louis Martin is to join US firm Paul Hastings in its Paris office from King & Wood Mallesons, taking with him three fellow associates.
TPG hire new legal chief
Private equity firm TPG has hired Bradford Berenson in San Francisco as the new general counsel. He joins from GE where he served as its head of litigation and government investigations
KWM practice head to join Covington
Covington & Burling will hire European head of fraud and investigations Ian Hargreaves from King & Wood Mallesons, where he will be reunited with five other former KWM partners
EY bolsters Frankfurt office
EY Legal’s Frankfurt office gains KWM’s co-managing partner for Germany Stefan Krueger, who will sit in its TMT practice group
Office Openings & Closings
Morgan Lewis set to open Hong Kong office with nine partner-strong Orrick hire
Mergers & Alliances
DWF acquires claims management firm Triton, rescuing them from administration
Weightmans in merger talks with Newcastle law firm Ward Hadaway
Hello and welcome back to the Fides Weekly Update.
We’re back with the week’s trends, moves and developments in legal compliance. Scroll down to see our regular feature of Movers & Shakers of the week.
You can always follow us on LinkedIn and Twitter for regular market updates
This week:
1. SFO agrees settlement with Rolls-Royce on largest DPA since UK inception
Rolls-Royce will receive penalties of £671m in the largest Deferred Prosecution Agreement (DPA) to be approved by English courts, following a five year-long investigation into allegations of bribery by the luxury British car manufacturer.
Claims of malpractice began in 2012, after which regulators across the globe teamed up to carry out investigations exploring whether Rolls-Royce paid bribes to win export contracts in several countries, including Brazil, India and China. In 2016, the Guardian published the results of an independent investigation which found that ‘commercial agents’ had been hired in 12 different countries to help Rolls-Royce secure export contracts. The settlement reached involves a pay out to both Brazilian and US regulators, as well as to the Serious Fraud Office (SFO).
The courts approved the DPA on Tuesday (17 January) and it marks the third and largest ever DPA in English law. A DPA is an arrangement between the prosecution and an organisation used in connection with fraud, bribery or other economic crime to suspend investigations in return for a fine. If the organisation committed further wrongdoing during the defined period, which in Rolls-Royce’s case is five years, it could trigger reactivation of prosecution. The previous two companies to have arranged DPAs with the SFO are ICBC Standard Bank and an anonymous UK SME.
For this probe, Rolls-Royce initially instructed Debevoise & Plimpton back in 2012 to conduct an internal investigation after the SFO requested company information, and later brought in Slaughter & May as advisers in late 2013. Slaughter & May has a long running history of defending global corporations on corruption scandals, having advised GlaxoSmithKline in 2007 during an investigation into bribery allegations in Iraq during Saddam Hussein’s regime.
The rise in DPAs in the English legal system highlights a real step up in the SFO’s action against bribery and corruption, with Robert Amaee, a former head of anti-corruption at the SFO and partner at Quinn Emanuel Urquhart & Sullivan claiming that “The SFO is now playing in the big leagues.” Alongside the DPA, the SFO continues to investigate into individuals involved in the bribery scandal, which further demonstrates its stronger stance on such misconduct.
We expect to more outcomes such as this in the coming year, both from the SFO and US regulators. The FCPA released its Corporate Investigations List this month, which details all companies that remain subjected to ongoing and unresolved FCPA-related investigations. You can find the list here.
Movers & Shakers of the week:
Appointments:
Kennedys senior partner re-elected
Senior partner Nick Thomas has been re-elected to serve a fifth term at Kennedys, which will run for a further four years
Moves:
Simmons hires A&O capital markets partner
Jonathan Mellor joins Simmons & Simmons as a capital markets partners, leaving Allen & Overy after 30 years at the firm
Squire Patton Boggs former managing partner returns to fee-earning role
Former Europe and Middle East managing partner at Squire Patton Boggs Peter Crossley has decided to take back his previous position as a litigation partner in the firm’s international disputes practice in London
Leicester City FC appoints a GC
Caroline McGrory has joined Leicester City Football Club as its first general counsel, having previously worked in Mercedes-Benz’s Grand Prix team as director of legal and commercial affairs
Paris managing partner departs from Olswang
Ahead of the three-way merger, Paris managing partner Guillaume Kessler has moved to the French corporate practice of Orrick, Herrington & Sutcliffe
K&L Gates expands City disputes practice
Disputes partner Clarissa Coleman joins K&L Gates in London, and denotes the fifth London disputes partner to exit Addleshaw Goddard over 2016/17
Gibson Dunn gains four lawyer technology team from magic circle firm
Gibson Dunn & Crutcher has hired Allen & Overy’s group head of TMT Ahmed Baladi, who brings with him Counsel Vera Lukic and associates Emmanuelle Bartoli and Adelaide Cassanet to join the US firm’s Paris office
Philip Crump leaves Gibson Dunn & Crutcher’s finance practice, having joined from Kirkland & Ellis in August 2015. His next steps are unknown
John Berriman, who previously sat as a board member at PwC, has joined the board at Norton Rose Fulbright and will serve as their global chief operating officer
Office Openings & Closings:
Pillsbury Winthrop Shaw Pittman set to open an office in Dubai
Mergers & Alliances:
Hello and welcome back to the Fides Weekly Update.
We’re back with the week’s trends, moves and developments in legal compliance. Scroll down to see our regular feature of Movers & Shakers of the week.
You can always follow us on LinkedIn and Twitter for regular market updates
This week:
1. The curtains are closing on KWM
The story of the European arm of King Wood Mallesons, having dominated the headlines for the past 10 months, today is expected to come to an end as the firm enters into administration.
It has been a rough week for the firm and those who work for it, as on Tuesday Barclays refused to release salary payments for the firm, and proposed administrators AlixPartners withdrew over concerns about funding. This means that staff have effectively worked for free so far this month, and will now have to apply to the firm’s new administrators to attempt to claim back their pay for this period.
Yesterday KWM China managed to strike a deal to retain a small presence of 30-40 lawyers in Europe, although it was announced that all London training contracts would be cancelled effective from today ahead of the administration.
News of partner exits continued throughout the week, with Reed Smith taking a further three KWM partners – including equity capital markets head Delphine Currie – whilst Simmons & Simmons have hired a further two partners, private equity funds partner Cindy Valentine and banking and finance partner Jen Yee Chan to strengthen its financial markets practice.
The firm also dropped a lawsuit against Goodwin Procter which granted the move of a 26 lawyer (5 partner) team to its London office, as it was announced that French international funds co- head Arnaud David is set to join the US firm as part of a five-lawyer team in Paris. It was also announced that former SJ Berwin senior partner Jonathan Blake was joining the global investments funds group at O’Melveny & Myers.
Other firms that have announced the hire of KWM partners this week include Baker Botts and Cambridge real estate boutique Bicham Dyson Bell.
At such a difficult time for those still associated with the firm, we hope that lessons are learned within the industry from this event which has led to the demise of once a well-regarded UK law firm.
Whilst the market and legal press remain awash with the continued news of partner exits and lateral hires from KWM, our thoughts go out to those not represented – the associates, trainee’s and business support staff – whose critical work behind the scenes has made this firm function to the best of its ability in this difficult time.
We hope there is a swift resolution to this situation so those affected find employment and stability as soon as possible.
2. Former VW compliance executive arrested in the aftermath of diesel emissions scandal
The Department of Justice cracked down on Volkswagen (VW) this week, bringing to a close last year’s high profile diesel emissions scandal, with VW agreeing to pay a settlement of $4.3bn to US authorities, and six current and former executives of the corporation charged in relation to the investigation.
Monday brought news of the arrest of Oliver Schmidt who, during the period in which emission tests were rigged, acted as VW’s head of the US compliance team. He has been charged with fraud and conspiracy, after US officials claim he was fully aware that the allegations made when the scandal broke were correct, but continued to conceal the truth about their vehicles. The five other executives charged are based in Germany, but it has been deemed unlikely that they will be extradited.
As the week went on, it resulted in further fallout from the scandal, as the automotive company announced it plans to pay penalties totalling $4.3bn (£3.5bn) and plead guilty to three felonies. These include “participating in a conspiracy to defraud the United States and VW’s U.S. customers”, being “charged with obstruction of justice for destroying documents related to the scheme” and “importing these cars into the U.S. by means of false statements about the vehicles’ compliance with emissions limits”.
Unfortunately for VW the blows don’t stop there. In the UK, 10,000 VW owners filed a class action lawsuit on Monday against the German carmaker, requesting £30m in compensation. Harcus Sinclair, the law firm acting on the suit, has claimed that owners should be compensated because they paid extra for what they thought were clean diesel cars.
The continuous aftermath VW have been faced with after getting caught rigging diesel emissions tests 14 months ago is a clear example set by both US and international regulatory authorities and officials of the severity of the consequences businesses can encounter. Not only have they dealt with harsh financial ramifications and a tarnished brand reputation, but the authorities are also making it known that the rules on individual accountability for wrongdoing will be enforced, which once again reinforces the importance for all corporate institutions in maintaining robust regulatory and compliance systems.
The US authorities are persisting with the approach they have taken with certain financial institutions who have attempted to manipulate markets by handing out much more severe penalties and higher fines on European institutions, in comparison to smaller fines issued by less aggressive EU regulators. However, with the US inauguration of its 45th president Donald Trump taking place next week, his strong views and opinions on global institutions and overregulation of the markets could be a sign of incoming leniency to these rules.
Movers & Shakers of the week
Appointments
113 take silk in latest round of QC appointments
Partners from numerous City law firms, including Freshfields Bruckhaus Deringer, Herbert Smith Freehills, King & Spalding and Skadden, Arps, Slate, Meagher & Flom have been included in this year’s QC appointments.
Eric Nitcher has taken the top legal role at BP, rising from America general counsel to global legal chief as he replaces current head Rupert Bondy, who departs for Reckitt Benckiser
Freshfields has chosen new global heads for their M&A practice
London-based Bruce Embley and NY-based Matthew Herman are both appointed global co-head of M&A for Freshfields Bruckhaus Deringer
Lucozade look to appoint new GC
Current general counsel for Lucozade Ribena Suntory Mollie Stoker has decided to take on a new position internally, leaving the soft drinks brand to search for a new legal head
Moves
Legal shake-up in the media industry
Marcel Apfel, former general counsel for Ministry of Sound, has decided to join brand management company Iconix as the vice president for international legal
Sole Singapore partner exits O’Melveny
Nathan Bush departs from O’Melveny & Myers’ Singapore office to join DLA Piper as their Asia head of investigations in Singapore, leaving O’Melveny’s office with two associates.
KWM’s funds specialist joins US firm
O’Melveny & Myers’ gains King & Wood Mallesons’ European head of funds Jonathan Blake in London
KWM’s five-strong Paris team to join Goodwin Procter
Five lawyers from King & Wood Mallesons’ Paris office will be joining Goodwin Procter, which will include the firm’s co-head of international funds Arnaud David
Dechert boost competition offering in Brussels
Cadwalader Wickersham & Taft’s managing partner for Brussels Alec Burnside is set to join Dechert, taking with him special counsel Anne MacGregor, who joins as a partner, and associates Marjolein De Backer and Adam Kidane
Office openings & closings
Ince & Co opens third French office
Ince & Co launches an office in Marseilles with the hire of lawyers Fabien d’Haussy and Laurianne Ribes, who specialise in shipping and transport
Macfarlanes launches Brussels office
Macfarlanes has opened an office in Brussels after having hired a three partner competition team from King & Wood Mallesons in Cristophe Humpe, Tom Usher and Cameron Firth
Dentons expands in Mexico and Barbados
Dentons launches its second Mexico office in Monterrey, whilst bolstering its Barbados offering with the hire of partners Charles Gagnon, Rosalind Bynoe and Ruan Martinez
Bircham Dyson Bell acquires new Cambridge office
Bircham Dyson Bell have gained a nine lawyer real estate team from King & Wood Mallesons along with the firm’s Cambridge office, led by partner Simon Burson
Herbert Smith Freehills plans an office opening in Malaysia later this year, expected to consist of two partners and four lawyers
Partner promotions
Reed Smith promotes 25 to partner globally, with five in its City office
Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
Tweet us @Fides_Search to let us know your thoughts.
This week:
1. Trio of global banks faces €485 million in Euribor fines
Following a five-year long investigation, EU regulators have fined JP Morgan, HSBC and Credit Agricole a total of €485 million for colluding to manipulate the Euribor benchmark rate.
Competition authorities in Brussels have undertaken a lengthy probe investigating rate-rigging of the Euro Interbank Offered Rate (Euribor), Libor’s European counterpart, which began with Barclays alerting the European Commission of misconduct and subsequently reaching a multi-state settlement over Libor and Euribor rate-rigging charges. In 2013, a proposed settlement of €820 million was also imposed on and accepted by Deutsche Bank, Société Générale and Royal Bank of Scotland.
All seven banks have now been fined for entering into a cartel and colluding to manipulate the Euribor rate, which breaches EU antitrust rules and can generate massive gains for the banks, given the volumes they are trading. Credit Agricole, JPMorgan and HSBC refused to join the multi-bank settlement served in 2013 and EU regulators have finally managed to issue fines for the three remaining institutions.
JP Morgan was fined €337m, HSBC €33m and Crédit Agricole €114m. These were all calculated based on their time involved in the cartel and the value of products involved.
However, all three banks continue to deny wrongdoing, with each respective institution issuing a statement declaring as such. JPMorgan states it “did not engage in any wrongdoing with respect to the Euribor benchmark,” whilst Credit Agricole argues it “firmly believes that it did not infringe competition law” and HSBC said it “did not participate in an anti-competitive cartel.”
American magazine Forbes have also argued that the banks shouldn’t necessarily be fined for cartel activity, maintaining that it wasn’t organised manipulation between the banks that took place, but rather collusion and market manipulation amongst individuals working within these institutions.
Regulators around the globe have spent the last decade focusing their efforts heavily on currency market manipulation. Since the beginnings of suspected misconduct in 2003, fines have been levied against a dozen banks for benchmark manipulation with the total value reaching around $9 billion. Over 20 traders have also been individually charged for wrongdoing.
Nonetheless, penalties for the alleged manipulation of the $5.3 trillion forex market remain to be distributed, with Margrethe Vestager, the EU’s competition commissioner, said to be in the process of developing a cartel case against multiple banks for FX rigging.
With the mounting evidence obtained by investigators, it is expected incoming forex fines will exceed anything previously given for rate rigging. Such fines have now become common place within banking and these market tremors are set to reverberate for years to come. While significant regulatory change and compliance frameworks have been implemented over the years, we are yet to see how effectively institutions have implemented the measures to prevent or at least mitigate the risk of wrongdoing. Collusion between traders or a lone wolf is always a threat, but now with a highly sophisticated surveillance techniques and the severe personal penalties for stepping over the line, hopefully these incidents will be few and far between and institutions can continue to rebuild their reputations for the future.
2. Innovation, Innovation, Innovation
Innovation was the talk of the town this week, with Barclays and Linklaters introducing new schemes to assess how they can work in more innovative ways and bring greater value to their customers and clients.
Barclays announced the launch of a new innovation panel with six of the bank’s core legal advisers, including Ashurst and Simmons & Simmons.
Selected based on their use of legal project managers, collaboration with other law firms or services providers, sophistication around pricing arrangements and thought leadership, the aim of the panel is not to pitch firms against each other but provide an environment in which legal innovation can flourish.
The innovation panel was the brainchild of the commercial management team, led by Stephanie Hamon and Chris Grant, which also oversaw the bank’s panel process earlier in the year which saw its legal line up slashed by 60% to 140 firms.
The bank is already working on various projects as a result of the panel, such as apps relating to regulatory changes associated with Brexit, as well as the hiring and training of legal project managers to sit within law firms.
Meanwhile, Linklaters have set up a partner-led global innovation team to oversee the firm’s use of technology.
Led by a trio of partners including Paul Lewis in London, Sophie Mathur in Singapore and Christian Storck in Frankfurt, the team coordinate developments with different practices across the firm, working with ideas from partners, associates and trainees.
Some of the current firm-wide initiatives include working on AI projects, as well as a pilot program teaching lawyers the basics of coding and blockchain.
‘It’s absolutely something general counsel are looking for,’ said Paul Lewis, upon commenting that clients were looking for more from law firms to drive innovation and efficiency.
These are promising signs made by client and law firm alike to harness greater innovation in the sector.
With in-house counsel being universally challenged to do more with less, this presents both a challenge and opportunity for panel law firms in the constant drive to increase their efficiency.
Through fostering innovative thinking, law firms have the ability to offer solutions beyond that of traditionally delivered legal advice that will lead the way legal services are perceived and accessed by clients.
These solutions hinge on the development and use of technology to make legal processes more efficient, and save time and money for clients.
The best route forward, as witnessed here with Barclays, is for law firms to collaborate with clients to take their ideas for better productivity and innovation forward, and in so doing prompt further change and innovation in the sector.
To read more on this topic, check out our blog Collaboration: The Vital Ingredient to Law Firm Success by Directors Philip Burdon and Tom Spence
Movers & Shakers of the week
Moves
RBS loses divisional legal chief to property fund Valad Europe
Robin Macpherson joins Valad Europe as Head of Risk
Noerr hires 11-strong team in Warsaw led by ex-White & Case head
Noerr has added an 11-strong team of fee-earners in Warsaw, including former White & Case Warsaw Poland managing partner Witold Danilowicz.
Quinn Emanuel takes fraud heavyweight Hastings from Addleshaw Goddard
Fraud specialist Mark Hastings joins Quinn
Simpson Thacher antitrust head joins Weil Gotshal
Kevin Arquit, antitrust head and former CC rainmaker joins Weil Gotshal & Manges
Shearman private equity partner duo resurface at Goodwin Procter
Former Shearman & Sterling private equity partner duo Mark Soundy and Sarah Priestley are set to join Goodwin Procter
Simmons hires former UBS GC for financial institutions team
Former UBS EMEA group general counsel Andrew Williams joins Simmons as a senior consultant
Squire Patton Boggs hires WilmerHale team in Frankfurt
Former Frankfurt managing partner Reinhart Lange, Christofer Eggers and Eva Schalast are joining Squire Patton Boggs along with a five-strong brand management team
Office Openings & Closings
PwC launches Singapore foreign law practice
Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
Tweet us @Fides_Search to let us know your thoughts.
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
Hello and welcome back to the Fides Weekly Update. This week we’re discussing KWM’s troubles and what we learned from the FCA’s Asset Management Review. Don’t forget to scroll down and take a look at our Movers & Shakers of the week.
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This week:
1. Integration gone wrong: European partners fail to back KWM recapitalisation plan
Global giant King & Wood Mallesons has dominated the legal press this week as news emerged that European partners failed to commit to the firm’s recapitalisation plan, rejecting to secure additional funding from the Asia-Pacific business.
Only 21 of KWM European partners agreed to commit to the plan, which was far below the 70 partners (60%) required to raise £14m in extra funding to secure the bailout from China, which also tied partners to a 12 month lock-in.
This was despite European partners being warned at the start of the week that they might have to pay back two years’ worth of profit contributions should the bailout deal not go ahead.
Initially paused in October due to a raft of senior partner exits, the recapitalisation plan would have guaranteed that equity partners received at least £11,000 per equity point in remuneration, despite the financial difficulties in Europe. This would have equated to an additional £220,000 to £660,000 dependant on a partners position in the firms’ 20-60 point lockstep.
Had the recapitalisation gone ahead, the combined funds would have been used to pay down some of the partnership’s debt, to provide working capital and to guarantee European partner earnings at a minimum level.
With partners within the European arm initially agreeing to a £14m recapitalisation in the summer, commentators suggest that it was the provision that partners could not leave the firm for 12 months that ultimately led the majority of European partners to reject the plan.
As a result, this has put the future of the firms’ European arm into question, with KWM’s management team scrambling to find alternative solutions, including mergers.
Despite this, many in the market believe that finding a suitable merger partner will be difficult to achieve, given the level of debt (understood to be around £35m) and stark lack of buy in from partners.
The failed recapitalisation plan raises serious questions about the global KWM project, and what to do next following the reputational damage to the firm.
European partners have sent a strong message to Asian management in rejecting plans to recapitalise the firm, forcing them to find other solutions. On the other hand, it is questionable to how well the firm’s Asian-based corporate and finance practices could operate without a solid base in London.
Where this leaves KWM in Europe is clear, and how the firm chooses to redevelop and build is yet to seen. However, without a merger partner for the European business, rival firms will continue pick at their failing partnership until KWM Europe is either no longer or certainly no longer in the news
Pre-merger SJ Berwin, we’re once a hugely well regarded firm in the City, who unfortunately by chasing growth through merger have been left exposed and subsequently depleted.
The potential lesson for other UK firms is to look at all options regarding growth rather than focussing on mergers alone as KWM are not the only firm who have hit difficulties following rapid expansion through merger.
2. 4 key points from the FCA’s Asset Management Review
It’s been a stressful week for fund managers as they begin to prepare themselves for the aftermath of the FCA’s Asset Management Review.
In a critical review of the industry, the regulator expressed their dissatisfaction with how investors are treated, hinting that there may be an overhaul of fee structures being introduced that will make it fairer and simpler for customers to invest.
Here are some of the key points outlined in the review:
Active funds under scrutiny
Actively managed funds have been hit the hardest by the interim report, as it declares that active funds often don’t outperform their benchmark, but continue to charge high fees and secure large profits. The FT has listed those who specialise in active funds and could be most affected by upcoming changes include Jupiter, Henderson, Schroders, Aberdeen and Ashmore.
Changes to charging structures
Achieving transparency of costings for customers is the key objective, says the FCA. They aim to make costs easier to compare between fund houses, allowing more investors to individually seek better value for money. The regulator plans to address this, as “investors are not given information on transaction costs in advance, meaning that they cannot take the full cost of investing into account when they make their initial investment decision.”
Under new conditions, asset managers could be required to consider formulating alternative fee-structures, and reevaluating current fees incurred by investors, which not only includes transaction costs, but also ‘box profits’.
The “all-in fee”
The review also references to the potential introduction of an “all-in fee”. It offers multiple ways that this new structure could be implemented, one of which is to package up both the transaction costs and fixed fees that fund houses charge. It would benefit customers by giving them a clear upfront image of the cost of investing, whilst also ensuring that fund managers absorb any extra costs incurred.
Shift away from “dinosaur investment products”
Increasing competition will be another focus for the FCA. The review claims there is “weak price competition in a number of areas of the asset management industry” and not enough incentive for investors to switch between funds and asset managers to get better value for money.
Hargreaves Lansdown senior analyst Laith Khalaf argues that there are billions of pounds invested in “dinosaur investment products” and individuals should be encouraged to review their investments. These products have been criticised over the last year for failing to produce sufficient returns and for being ill-suited to the modern investment marketplace. The regulator is hoping to provide tools to allow investors to more easily search for alternatives investment opportunities.
Many are speculating that the outcome of this interim report will be damaging to asset manager profits. Those most disadvantaged will be managers in the active funds space, who will be anticipating an overhaul of their fee structures and should ready themselves for the “all-in fee” which, depending on how it’s implemented, could significantly impact their revenue. However, Daniel Godfrey, former chair of the Investment Association, believes the incoming changes may prove beneficial to some: “This won’t be good for everyone — the weak asset management companies will die. But if margins come down and the overall pool of assets gets bigger, profits can be higher.” Whether or not this is case, it’s fairly likely that the FCA could shake-up the industry, bringing about a more transparent and competitive investment environment.
Movers & Shakers of the week
Appointments
New York Times gain new GC
The New York Time Company will promote their deputy general counsel Diane Brayton to the role of GC in January next year
Freshfields PE head promoted to lead sector group
Adrain Maguire will leave his role as head of private equity as Freshfields Bruckhaus Deringer to become the new head of their global financial investors (GFI) sector group
Moves
Dechert expands Middle East capability
King & Wood Mallesons corporate and M&A partner Hamish Walton has exited their Dubai office to join Dechert, leaving KWM with only five partners in their local office
Freshfields M&A heavyweight moves to US firm
M&A partner Ben Spiers leaves Freshfields Bruckhaus Deringer for Simpson Thacher & Bartlett in London
Office Openings & Closings
Norton Rose Fulbright launches Papua New Guinea office
Partner promotions
Weil, Gotshal & Manges promotes 13, two in London
Simpson Thacher & Bartlett makes up 11 with two in the City
Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
Tweet us @Fides_Search to let us know your thoughts.
This week:
1. Asset managers to help recover costs of MiFID II
The FCA released a paper on Wednesday announcing that wealth and fund firms will assist in settling the costs incurred in introducing MiFID II.
In a consultation paper labelled CP16/33 Regulatory fees and levies: policy proposals for 2017/18, the FCA has proposed a plan to increase fees to recover the costs of bringing in the EU’s Markets in Financial Instruments Directive (MiFID II). The paper has declared that the firms most affected by MiFID II will be the ones paying for it.
Financial services companies are allocated into different fee blocks depending on what services they offer. The FCA are yet to decide the proportions of how much each fee block will contribute, but it is expected that portfolio managers, fund managers and pension scheme operators will all be incurring these fees.
The FCA have stated: “When we complete cost recovery in 2018/19, we expect to have sufficient information to moderate the allocations for fee-blocks with lower proportions of firms benefiting directly from MiFID II. We will set out the final position in spring 2018.”
Along with the cost recovery of MiFID II, the paper also touched on changes to the fixed fee rates that asset managers are normally charged.
Firms currently pay a minimum fixed-rate of £1,067 for service companies with incomes up to £100,000. The paper proposes a plan to retain the minimum fixed-fee rate of £1,067, and add a variable rate fee of £1.80 per every extra £1,000 of income.
With MiFID II not coming into play till January 2018, asset managers are already seeing the effects of the new regulation. These fee increases are only the latest notice of MiFID II costings, with news breaking last month that the incoming regulation’s new research rules will also be hitting asset managers’ bottom lines.
It is still unknown exactly what impact MiFID II will have on wealth and fund firms, but one expectation is that the regulation could result in a reduction in the range of investment choices available to customers. Perhaps this, along with the aforementioned costings, could hit the asset management industry harder than initially expected.
In addition to MiFID II additional costs and the announcement today of the initial suggestions of the FCA’s Market Study into asset management, it looks as though the asset management industry will have to bring in new innovative ways to draw investors and remain competitive in terms of pricing.
2. Three-way merger takes a toll on Olswang
As the infamous three-way merger between CMS Cameron McKenna, Nabarro and Olswang continues to push forward, Olswang is struggling to retain talent with news breaking of a further departure for the firm.
Two partner departures were reported at Olswang this week, with their co-head of patent prosecution Justin Hill exiting for Dentons to lead their European patent prosecution and opposition practice.
The Lawyer then revealed later in the week that the former Asia managing partner Rob Bratby has also opted against joining the mega-merger, departing for City firm Arnold & Porter.
Hill is the second IP partner to be leaving Olswang since the merger was announced after their co-head of life sciences Stephen Reese joined Clifford Chance in October.
These departures could be signs of further exits anticipated during the next few months, not only in IP but across the firm. The firm gave partners until 10th October to sign a lock-in agreement committing to the merger, and those not signing have until May 2017 to move on.
It’s widely reported that Olswang has been struggling to retain partners in recent times, with the firm losing over 30 partners in the last 20 months, as reported by Legal Business. It’s unknown whether these mass departures are as a result of the impending merger or if it could in fact be a lifeline for the firm, allowing partners an opportunity to work on larger deals and broaden their platform.
The three-way merger is just one of a numerous mergers taking place in the legal sector as we witness another wave of market consolidation. Interestingly a recent study by Harvard Business Review has looked into the ways in which abnormally high levels of merger activity can affect industries. It has found that mergers don’t in fact have a discernible effect on productivity and efficiency. Despite this article being a reflection on many industries, the new wave of mergers within the global law firm landscape will mean firms constantly striving for the benefits of economies of scale and strategic synergies through successful integration. As has been seen with CMS Nabarro and Olswang there is always an inevitable fall out at the outset and during the integration phase and time will tell as to the final make up, strength and market reputation of the combined entity.
Movers & Shakers of the week
Moves
Olswang loses patent co-head ahead of merger
Justin Hill, Olswang’s co-chair of the patent prosecution group, is set to join Dentons as the head of their European patent prosecution and opposition practices
Simmons bolsters European IP offering
Simmons & Simmons have hired IP partner Michael Knospe, along with counsel Caroline von Nussbaum and supervising associate Massimo Bellitto-Grillo, all joining the firm’s Munich office from King & Wood Mallesons.
Senior Olswang partner to depart
Former head of commercial telecoms and Asia managing partner Rob Bratby has decided to leave Olswang to join Arnold & Porter
DLA’s Australia managing partner to step down
Australia managing partner at DLA Piper John Weber will be retiring from the firm by the end of April
Mergers and Alliances
King & Wood Mallesons and Morgan, Lewis & Bockius call off merger talks
Dentons ties-up with Costa Rican firm
Fieldfisher merges with Beijing’s JS Partners
Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
Tweet us @Fides_Search to let us know your thoughts.
1. A marriage of convenience: Arnold & Porter and Kaye Scholer combine stateside
In the latest example of consolidation in the legal market, Thursday saw the announcement that east coast firms Arnold & Porter LLP and Kaye Scholer LLP are set to combine in 2017. The merger will propel the new 1,000 lawyer firm – with a combined revenue of $1bn – into the top 40 largest firms in the world, with a significant presence in Washington DC, New York and London.
To many commentators the tie up did not come as a surprise, with each firm brining complementary expertise and footprint. With the 700 lawyer Arnold & Porter is known for its litigation and regulatory expertise, headquartered in Washington D.C., whilst at half the size, Kaye Scholer is best known for its financial services and life sciences work and will give Arnold & Porter a long-desired critical mass in New York.
The firms combining might well position the merged firm to improve their financial performance. Last year, Arnold & Porter’s revenue fell 6.4 percent, to $650 million, whilst profit per equity partner (PEP) fell 12.6 percent, to $1.21 million. Kaye Scholer’s revenue also dipped last year, by 1.3 percent, to $370 million, and its profit per partner fell 2.1 percent, to $1.38 million, according to figures from the American Lawyer.
The deal is rumoured to be the largest law firm combination so far this year in the US. While the numbers and scale of the deal has been widely reported, Richard Alexander the current Chairman of Arnold & Porter who is also set to lead the new firm was quoted as saying “We don’t think this is a transaction about size, but instead about partnering with clients” and identifying the synergies of the respective platforms as being vital to the combined firms future.
The combination is the latest in a string of tie-ups involving Global 100 firms in a market that is ripe for consolidation with increasing commoditisation. Earlier this month, Legal Business revealed Morgan Lewis & Bockius is in talks with King & Wood Mallesons, while Addleshaw Goddard and Hunton & Williams have held talks in recent months as well as the well-publicised CMS Nabarro Olswang tie up in the UK. It seems that on both sides of the Atlantic that merger activity, particularly in the mid-market is a constant theme with firms looking to compete on an international footing with the big established players.
2. 22 HNW individuals under investigation from Panama Paper task force
A government taskforce created to analyse the Panama Papers data leak has identified a number of leads that are relevant to a major insider-trading operation, led by the Financial Conduct Authority (FCA) and supported by the National Crime Agency.
The task force has opened civil and criminal investigations into 22 individuals for suspected tax evasion and is investigating the links of 43 “high net worth individuals” with Panama.
It has also identified 26 “potentially suspicious” offshore companies whose beneficial ownership of UK property was previously concealed, established links to eight active Serious Fraud Office investigations and identified nine potential professional “enablers” of economic crime, “all of whom had links with known criminals”.
In the first update to the House of Commons on the progress of the task force on Tuesday, Chancellor Phillip Hammond said that the cross-agency task force set up to analyse the information in the data leak had “added greatly” to the understanding of the ever more complex and contrived structures used to mask offshore tax evasion and economic crime.
The UK’s task force, set up in April with funding of up to £10m, is jointly led by HM Revenue & Customs and the NCA and draws on investigators, compliance specialists and analysts from those two bodies plus the SFO and FCA.
The cross-agency task force was established to analyse all the information available from the Panama Papers, leaked data from leading Panamrian law firm Mossack Fonseca published by the International Consortium of Investigative Journalists.
Over the past few years, the government has increased penalties and introduced new measures to tackle offshore and onshore tax evasion. In the summer 2015 Budget, the Government gave HM Revenue & Customs an additional £800 million to invest in compliance and tax evasion work. This is expected to recover £7.2 billion in tax by the end of 2020/21.
However, despite this, the UK government continues to campaign against the EU to prevent Guernsey, Jersey and British overseas territories from going on an EU blacklist of tax havens, set up by the European Commission to add greater tax transparency in wake of the papers release.
Some financial experts remain sceptical about the number of prosecutions likely to result from the Panama Papers with the investigations still in their infancy. With the average length between opening similar enquiries and passing them onto the Crown Prosecution Service being 44 months, “This is a marathon not a sprint,” a government source told the City A.M.
3. Movers & Shakers
APPOINTMENTS
Finance partner Paul Stacey elected as Slaughter’s next executive partner
Jane Haxby succeeds Peter Crossley as EMEA managing partner at Squire Patton Bogs
MOVES
HSBC Global Asset Management general counsel leaves for top legal role at World Bank
The World Bank Group has recruited HSBC Global Asset Management general counsel Sandie Okoro as its new general counsel (GC)
LOD co-founder Brenner joins Keystone Law to realize future growth strategy
Jonathan Brenner, the co-founder of Berwin Leighton Paisner’s contract lawyer spin-off LOD, is set to join virtual law firm Keystone Law at the end of the month.
Kirkland finance partner John Markland and White & Case private equity partner Ross have joined Dechert’s City base this week
MERGERS AND ALLIANCES
Arnold & Porter and Kaye Scholer confirm $1bn merger deal
US firms set to combine as Arnold & Porter Kaye Scholer on 1 January 2017
Fieldfisher merges with Reed Smith spin-off for Birmingham launch
Fieldfisher has merged with Hill Hofstetter, a 19-partner UK firm with revenue of around £6m that spun off from Reed Smith in 2008.
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