Hello and Welcome to the Fides Weekly Update. Take a look at which legal and compliance stories our Researchers have been talking about this week. Scroll down to check out the Movers & Shakers of the week.
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1) Addleshaws considers restrictions on partner exits
Management attempts to limit partner exits through changes to the partnership deed has been met with staunch opposition at Addleshaw Goddard, as reported in Legal Week today.
Partners are divided over the proposed changes to the partnership deed, which would restrict the number of partners able to resign in each financial year to just seven. The proposed changes cover both fixed share and equity partners, and would introduce a ‘bad leavers’ policy that would allow the firm to slash a departing partner’s equity share by up to 30% if they were deemed to be in breach of the agreement.
The firm has been reviewing its partnership articles since November with the arrival of new General Counsel Simon Callander from Olswang. Although the goal was to have the new deed in place by 1 May, management are now said to be “scrambling desperately” to put in more consultations and to persuade the partnership to vote in favour of the proposals.
Whilst the firms’ partnership deed already has a lock-in that is triggered when seven equity partners have handed in their notice in any one year, the new proposals would extend this provision to also include fixed shared partners, further limiting the amount of exits from the firm.
This is somewhat surprising as it comes on the back of strong financial performance by the firm who made up 15 new partners at the start of the month. Last summer, Addleshaw’s saw its top of equity soar 67% to £936,000 after a 12 per cent revenue increase and an 11.6 per cent increase in net profit for the 2014/15 financial year. Changes to the firm’s bonus system also saw the distribution of a firm-wide bonus at the end of 2015, as previously the firm had not often reached the profit level needed to reward its partners.
However, in spite of recent financial success the firm has seen a string of exits over the last few years, including a number of senior figures. Most notably, in December 2015 former Managing Partner Paul Devitt and M&A Partner Richard Thomas joined EY in Manchester, led by ex-Addleshaws corporate Managing Partner Philip Goodstone. More recently, the firm has seen departures from its Real Estate team with practice head Jane Hollinshead moving to IJD Consulting Limited and Asia real estate specialist Helen Worth relocating back to Hong Kong in February. In Dubai, Addleshaw’s also lost M&A partner Ben Gillespie who joined DLA as Head of Corporate for the Middle East.
With internal consultations to the partnership deed still ongoing, how Addleshaw’s management envisage the ‘bad leavers’ policy being realistically implemented across the firm’s 170 fixed shard and equity partners is a question that needs answering. Furthermore, with internal divisions over the proposed change rife, it will be interesting to see how partners react if the decision does not go their way.
2) FCA shine a light on IPO process
FCA published an interim report on the investment banking and corporate market this week. More interestingly, they released a discussion paper alongside this looking into the IPO process and how information is released to investors.
The main conclusion from the interim report is that competition needs to be further encouraged in equity and debt capital markets. It claimed that cross-selling restricts competition for smaller institutions who cannot offer the same lending facilities as their larger competitors. The regulator suggests one way to increase competition in this field is by prohibiting the use of contractual clauses that limits a client’s choice of providers on future transactions, a tool widely used in the market.
Meanwhile, the FCA has released a discussion paper in an attempt to start up a debate on revised practices for IPOs.
Access to information on company flotations and the allocation of shares amongst investors are high on the agenda for the FCA, as there seems to be a lack of transparency around new offerings, especially at earlier stages.
During the IPO process there is a blackout period, typically 14 days, between research on the issuer being published by banks supporting the IPO and the circulation of the issuer’s prospectus. The FCA argue that that investors are receiving such vital information too late into the process, at the point where managers will likely have already made their investment decisions.
The regulator has suggested a new proposal, similar to that of the US, whereby the initial research is delayed until after the issuer prospectus has been released, allowing investors to make a fully informed decision.
It seems this change has been welcomed in the market and many believe it will provide more flexibility when launching a transaction. Morgan Stanley’s co-head of global capital markets Henrik Gobel said: “we have for a long time been a big proponent of having a prospectus filing system similar to the US.”
The findings, which came from the FCA’s assessment of 10,000 deals over a period of five years, also showed that banks tend to make more favourable allocations of shares to investors that submitted price-sensitive bids as well as those who attend meetings with the issuer before the IPO. This conflict of interest will also be investigated in a bid to remove any “potentially anti-competitive practices” in the system. The FCA believe that external researchers and analysts conducting independent research must also be allowed to attend meetings with the issuer’s management. This will improve the quality and depth of independent research and ensure that investors don’t solely make decisions based on material prepared by the syndicate banks’ analysts, who are focused on selling the IPO.
The IPO market itself has suffered a long dry spell over the last year. After several strong years of IPO activity, stock market volatility has weakened investor appetite for high-profile offerings. The value of IPOs fell by 36 per cent between 2014 and 2015, whilst Q1 in 2016 showed that IPOs got off to an even slower start. EY reported a total of 167 deals, raising just $12.1bn last quarter, which represents a 70% decline in total capital raised compared to this time last year. IPO activity has been the weakest since 2009 and with the fear of further global economic slowdown and turbulent market conditions, it is predicted that the M&A market will continue to fare better than the IPO market, as it is less sensitive to potential slowdowns in economic growth and continued uncertainty around the economic environment and the looming Brexit referendum.
Movers and Shakers of the week
Clifford Chance announces new Asia Pac head
Geraint Hughes is to replace Peter Charlton in the role of Asia Pacific regional managing partner, beginning in September 2016.
Skadden name NY white collar partner as London enforcement head
Skadden, Arps, Slate, Meagher & Flom have relocated white collar partner Keith Krakaur from New York to London, where he will serve as head of the firm’s European government enforcement and white collar crime practice
Pinsents banking head seconded to Barclays
Michael Isaacs, head of banking & finance at Pinsent Masons, has been seconded to Barclays’ litigation and investigations team
OneSavings Bank hire interim GC
Martin Purvis has joined OneSavings Bank as interim general counsel to replace Zoe Bucknell, who resigned last month. He previously held the role of interim head of secretariat at Balfour Beatty.
Airbnb hire GC from Ebay
eBay’s vice president and deputy general counsel Rob Chesnut has joined Airbnb as their new general counsel
Ashurst expand global fintech team
Ashurst have appointed David Futter as a partner in their global fintech practice, based in their London office. He joins from Addleshaw Goddard.
KWM lose three partners from London office
IP partner David Rose leaves King & Wood Mallesons for Mischon de Reya, whilst IP partner Campbell Forsyth and commercial partner Gretchen Scott join Dentons and Goodwin Procter respectively.
Mayer Brown expand London finance capability
Dentons finance duo Tom Eldridge and Liz Soutter have joined Mayer Brown’s London office
PwC Legal hire employment partner
Employment partner Tom Kerr Williams departs DLA Piper to join PwC Legal
A&O re-hires TMT and IP partner
Tom Butcher has returned to Allen & Overy to head its Middle East TMT and IP practice. He joins from Simmons & Simmons
Stephenson Harwood boost corporate offering in London
Corporate partner Anthony Clare exits Ashurst to join the London office of Stephenson Harwood
Simmons lose aviation finance duo to US firm
Winston & Strawn have hired aviation finance partners Mark Moody and Christopher Boresjo from Simmons & Simmons in London
Hengeler Mueller lose 3-strong corporate team
Kirkland & Ellis have have taken on M&A partner Achim Herfs, counsel Anna Schwander and senior associate Benjamin Leyendecker-Langer, who will all join the firm as partners. All three depart from Hengeler Mueller’s Munich office.
Linklaters make senior partner hire
Former Allen & Overy real estate head Mark O’Neill has joined Linklaters in their real estate finance team
Orrick take four from Freshfield’s Paris office
Four partners from Freshfields Bruckhaus Deringer will join the Paris office of Orrick Herrington & Sutcliffe. this includes Paris employment head Emmanuel Bernard, finance partners Hervé Touraine and Emmanuel Ringeval and corporate partner Patrick Tardivy
Herbert Smith make disputes team hire in Frankfurt
Herbert Smith Freehills have taken on name partner Helmut Görling and partner Dirk Seiler, along with seven lawyers, from boutique firm Acker Görling & Schmalz (AGS Legal).
BLP re-hires competition litigation partner
Edward Coulson departs from Hausfeld to re-join Berwin Leighton Paisner in their Litigation and Corporate Risk practice.
Macfarlanes promotes six to its partnership