Just like claims that India’s legal market is about to liberalise, predictions that Allen & Overy’s (A&O’s) corporate practice was about to take its place among Europe’s M&A elite have been one of commercial law’s most reliable false dawns.
But perhaps it is time to prepare to practise in Mumbai, because it has been a good year — some are even whispering about a breakthrough year — for A&O’s M&A team.
Let’s for a moment leave aside the deal tables, which are notoriously volatile indicators of M&A strength, though A&O will this year be up with its peer group on the key rankings.
The lead mandates read like a roll-call of the year’s top deals. Advising ABN Amro on its agonisingly prolonged takeover, instructed by Thomson on its tie-up with Reuters, advising Imperial Tobacco on its €16.2bn (£11.6bn) bid for Altadis and advising Tyco on its global restructuring.
Other highlights include advising National Bank of
At the very least you would have to say the firm matched Clifford Chance and outpaced Herbert Smith and Ashurst on public M&A. Still, given the legacy of hyper-ventilated claims regarding the firm’s M&A arrival, there are some who are yet to be convinced, putting the firm’s current standing down to luck of the draw in terms of active clients and the activities of its sizeable marketing team.
The background to A&O’s corporate practice makes such scepticism understandable. It was under then-corporate head Guy Beringer that the practice began to expand rapidly in the 1990s, belying its reputation as a bank-driven adviser. The combination of Beringer’s quiet conviction, which famously helped him secure the senior partner role against high-profile incumbent Bill Tudor John, buoyant deal markets and an expansive client base sent the team’s confidence surging - leading to the first claims that A&O had arrived as a corporate heavyweight.
But by 2002 and 2003, as the deal markets slumped, it became apparent that the firm had a way to go before the bedrock of its M&A practice could yet compare to a Linklaters. It was during this point that the firm began to feel the pressure and the first talk of red and yellow cards began. This period also led to claims of pronounced tensions with the firm’s market-leading finance team.
In retrospect, it is conceded this was less about 'banking versus corporate' than a new mood affecting the firm as a whole in a leaner commercial environment. Even though there has been some territoriality between the firm’s two main constituencies, it was more a product of this general pressure to deliver, which sometimes led to inter-team finger-pointing.
True, there were some in banking who felt that corporate had avoided the tough medicine, especially after banking saw a number of equity points docked from the projects team, but current and former partners agree that such tensions never really rose above the level of common-or-garden office politics.
The reality is that the entire firm was being pressed and corporate, along with department head Richard Cranfield, were facing considerable calls to ensure the team delivered. From this period there began a small but steady stream of exits — though these were typically handled with a sensitivity and light touch often missing from the firm’s peer group.
During this tricky period it was also not apparent that the leadership team of Cranfield, Mark Wippell and Stuart Harray was winning wide support within the team. This line-up had in 2004 replaced the leadership pairing of Cranfield and the robust but well-regarded Susan Howard. By contrast, though Howard is reported to have trodden on a few toes, the three-strong line-up was viewed by some as unwieldy.
More positively, it is argued this was the period in which A&O was moving to mature its practice — which had been over-reliant on growth markets like telecoms — to encompass more FTSE 100 clients. Yet the firm was still losing pace in 2005, a period in which profits were beginning to lag, no corporate partners were promoted in
So much for history. It has been apparent since the second half of 2006 that the firm’s corporate team has been getting more traction, while there is consensus that relations with banking are on a much firmer footing.
Leaving aside the obvious boost of a busier market, there has been mounting evidence that corporate is making real progress in market share, which, it is claimed internally, represents the fruits of a push into bluechips that stepped up five years ago. It also seems apparent that more actively-managed performance has hit the right note, particularly in comparison to the turbulence that has been visited on the restructuring Freshfields Bruckhaus Deringer.
Perhaps surprisingly, given the firm’s ambivalence to management, the reshuffling of M&A leadership since 2006, when Alan Paul (pictured top) took on the business development role and Andrew Ballheimer took the operations managing partner brief, is cited by some as a plus. As A&O’s unquestioned M&A heavyweight, Paul is obviously playing to his strengths, while Ballheimer is viewed as a proper deal lawyer who has given the firm valuable in-roads with hedge fund clients but can also lead.
Will it be enough? Critics says that 2007 is a year in which it got lucky and it is true that a high number of existing clients happened to do large deals. After all, you are unlikely to hear the familiar gripe about being over-represented in the Netherlands when your top-tier Dutch arm bags you the biggest European deal of the year (via established client ABN). Likewise, the Thomson relationship is decades old and the firm has been working regularly for Imperial Tobacco since the 2000 recruitment of Jeremy Parr from Ashurst.
But the bigger underlying criticism is that the firm simply has not got the bench-strength at the younger and mid-end at a time when established names like Paul and David Wooton will be expected to pass on the reins in the not-too-distant future.
Leaving aside respected operators like Howard and Wippell, of the mid-level partners, Ballheimer and Parr are particularly well-regarded. At the junior end, Richard Hough and Richard Browne are cited as names to watch, while equity capital markets specialist Mark Dighero is widely agreed to be coming into his prime.
Likewise, last year’s recruit of Derek Baird from Lovells is judged to have given the firm a lift in private equity, even if the firm would surely be well advised to use the downturn in the sector to further beef up its practice while there are bargains to be had.
Still, many neutral observers would see the team as light on business-winning partners and a touch heavy on transaction managers. Cranfield responds to the point with admirable conviction: “I would back my younger partners against any other team in the City — we are awash with talent.”
Upbeat partners also argue that the firm will keep investing in corporate, which in 2006-07 generated around a third of the firm’s £887m turnover. Quite possibly that could be at partner level in London, but also in foreign markets like France and Germany, where the firm is still under-weight, and in key emerging markets, where it wants to tighten its grip.
But whatever work A&O has still to do, 2007 does mark the year in which the team has won back its old confidence, as evidenced when Cranfield is asked if the practice is yet the match of Linklaters and Freshfields — answer: “Oh, yes.”
There are still many who would disagree with Cranfield on that point but, with a good 12 months under its belt and a new spring in its step, A&O certainly has a better shot of convincing the sceptics come 2008.
