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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For nearly 20 years FYA has been supporting disadvantaged children and young people to overcome the barriers they face in everyday life. Since FYA’s formation they have supported over 5,000 young people through youth volunteering, outreach work and employability programmes; helped young people gain over 900 AQA qualifications and organised over 100 community events including street parties, healthy living festivals, football tournaments, inter-generational programmes, film showcases and community events.
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1. CMS, Nabarro and Olswang merger begins to take shape
CMS, Nabarro and Olswang get closer to becoming the new global mega-firm as the latest news surrounding the merger this week reveals that Nabarro is dropping out of its European alliance.
Nabarro will be withdrawing from their European alliance Broadlaw Group as it commits fully to the three-way tie-up with CMS Cameron McKenna and Olswang. The Broadlaw Group features a number of well-established European firms, such as Germany’s GSK Stockman + Kollegen and France’s Lefevre Pelletier & Associes. Nabarro, however, will soon have access to CMS’s extensive European network, which would include CMS Hasche Sigle in Germany and CMS Francis Lefebvre in France.
Various details of the merger have been revealed so far, most significantly that the firms have all voted in favour of sitting under the CMS brand as it was announced the new firm will be called CMS Cameron McKenna Nabarro Olswang LLP.
This firm is expected to house over 1,000 partners and generate revenues of £450m in the UK, €1.2bn globally and will rank as the sixth largest law firm by headcount.
Whilst there has been a confirmation of the three-way merger, there still remains a lot for the law firms to work out. We have heard some speculation in the news around where the merged firm will be based, with The Lawyer commenting that CMS’s Canon Place office will be put up for sale following the merger, but will move in Nabarro and Olswang’s teams into the two vacant floors at their London HQ for the time being.
The firms will also need to consolidate their support services and review how they can best integrate all three business support functions. Legal Week posted this week that the result of this will most likely lead to job losses as it did when CMS merged with Scottish firm Dundas & Wilson. Combining those two firms led to a cull of 60 support roles whereas, this merger involves a much greater number of support staff. According to Legal Week: “CMS has 269 UK-based support staff out of total of more than 2,000 across the global CMS network. Nabarro has 118 support staff in London and 313 across the entire firm, while Olswang has 200 in London out of a global total of 263.”
Law firm mergers are undoubtedly a high-risk move, with many firms struggling with integration and breeding a consistent, coherent firm culture. However, if successful, the merger will unlock a wealth of opportunities for the new entity and those working within it.
For Olswang, the benefits of the merger will be in broadening their platform and offering partners a greater spectrum of deals to work on. Olswang have been struggling with partner exits over the last year and the merger is a much needed incentive for their partners to work bigger transactions and get on more client panels.
CMS are already seeing the benefits of the deal. The firm has previously suggested that they would be open to a transatlantic tie-up and the scope of this upcoming merger has already made them more noticeable to their US counterparts and will give the new firm more power when entering discussions with US peers. This week brought rumours that US outfit Hunton & Williams is in talks with CMS, Nabarro and Olswang about a further tie-up with the Virginia-based firm. The Lawyer reported the firms are in “late-stage merger talks”, which could see a four rather than three-way tie-up taking place by May 2017. If Hunton & Williams did manage to join the party, there could well be a comfortable fit given their heavy US presence and smaller international offering meaning the local integration in London, Brussels and Asia might be easier. However the global integration both physically and culturally of these three, or indeed four firms is a challenge that will only become more visible in time.
2. Incoming MiFID II rules to hit asset manager profits
A report has suggested that the research unbundling rules coming into force under MiFID II could cut asset manager profits by as much as 29 per cent.
Global research firm Crisil, a subsidiary of S&P Global, presented a report that examined the effect that new rules about research costs will have on asset managers. At present, investors are often charged research and execution costs together and haven’t previously been required to disclose a breakdown of these costings. Under upcoming MiFID II rules, asset managers will need to either absorb the research costs or set up a research payment account (RPA), which will involve additional disclosure, budgeting, reporting and auditing.
Woodford Investment Management is one of the first firms to unveil their plans for abiding by these new regulations. The firm is expected to absorb research costs and has committed to stop charging investors for research by April 2017.
Most firms are likely to take the same strategy as Woodford as the conditions of setting up an RPA are fairly long-winded. With this in mind, Crisil’s report suggests that, depending on what percentage of assets are exposed to equities, asset managers could anticipate operating profits to be hit from anywhere between 17 to 29 per cent.
These changes are predicted to lower costs for investors, and given the complexities of abiding by different regulations across jurisdictions, the US are likely to introduce similar research unbundling rules once MiFID II has been implemented in Europe.
MiFID II still carries uncertainties over key requirements under the regime. The 12 month delay that pushed the implementation date back to January 2018 has eased pressures slightly, but there continues to be questions surrounding the details of the regulation and indeed how the changes will affect asset managers and their business models. Research costs is only one requirement of the new regime that could result in lower profits and it remains to be seen to what extent MiFID II will impact on their bottom line.
Movers & Shakers of the week
Bird & Bird appoints new head of consulting arm
Edoardo Monopoli will take on the position of CEO at Baseline, Bird & Bird’s consulting business, replacing Dominic Cook who left the firm August
KWM appoints new European senior partner
Michael Cziesla has been appointed the first non-London EUME senior partner for King & Wood Mallesons after Stephen Kon’s unexpected resignation last month
W&C boosts European banking offering
White & Case has hired former Ashurst banking partner Gianluca Fanti in Milan
A&O add to London finance team with hire from HSF
Nick Bradbury will be leaving Herbert Smith Freehills to join Allen & Overy as a partner in their financial services regulatory team in London.
Ropes & Gray also gains partner from HSF in London
Debt finance expert Malcolm Hitching is set to join Ropes & Gray from Herbert Smith Freehills as a partner in their London banking practice
Addleshaws loses incentives head
Employment incentives head Michael Carter leaves Addleshaw Goddard to join Osborne Clarke’s incentives and wider tax practice
Bakers makes 10-lawyer team hire in Switzerland
Baker & McKenzie sees a team of five partners and five associates join their Swiss office from Floriep. The partners joining are Beat Barthold, Pascal Richard, Ansgar Schott, Boris Wenger and Alessandro Celli
Osborne Clarke loses COO after nine months in the role
First ever COO for Osborne Clarke Claire Binyon has left the firm after nine months
Office Openings & Closings
Latham to open in South Korea
Latham & Watkins have been granted a licence to open a foreign legal consultant office in Seoul
Mergers & Alliances