Bids create pounds 300m fee bonanza for lawyers

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The Independent Online
City law firms reaped rich rewards from last year's boom in takeover activity by scooping a record pounds 300m in fees, a 50 per cent increase from 1995.

This upturn in business has led to an explosion in vacancies at law firms, driving salaries higher and boosting the earnings of partners at the firms.

"I would have expected partners to have had one of their best years for quite a number of years," said David Woolfson, recruitment consultant at Chambers, a leading firm of recruitment experts for lawyers.

The legal data compiled by Acquisitions Monthly follow calculations by Philip Healey, editor of the magazine, that total fees paid out for mergers and acquisitions in the UK reached a record pounds 1.1bn in 1996. This figure includes fees paid to investment bankers, lawyers, accountants and public relations advisers,

Last year created a good environment for mergers because the stock market soared and interest rates were low. This makes deals less earnings-dilutive for the buyer.

Deals were also driven by expectations that a Labour government would be elected this year and alter taxation and competition policy.

In 1997, City lawyers expect business to remain brisk, although Nigel Boardman, partner at Slaughter & May, which was ranked second in Acquisitions Monthly's tables, thinks the election may lead to a slowdown in activity during 1997.

The rankings are based on the value of mergers between UK firms on which the law firms advised, rather than the number of deals.

Slaughter & May advised on 25 deals, the largest number, but was second in the table because their value amounted to pounds 16.26bn.

Linklaters & Paines took first place by advising on 19 deals worth pounds 19.02bn. It advised on a number of pounds 1bn-plus deals such as Royal Insurance's pounds 2.4bn merger with Sun Alliance, and ousted Freshfields, the City firm run by Anthony Salz, a mergers and acquisitions specialist, from the top slot.

Freshfields fell to third with 17 deals worth pounds 9.46bn. Barry O'Brien, head of corporate finance at Freshfields, said: "We are not surprised by our position in these tables since we started the year by being conflicted out of both sides of the pounds 3.6bn Granada-Forte bid."

"Perhaps more importantly, we have also advised on over pounds 16bn of US-UK mergers, such as Premier-Farnell and BT-MCI, which did not even qualify for the tables [because they took place outside the UK]."

While the the mergers during 1996 were not as large as in previous years, they were more complex, which helped generate higher fees for the law firms involved.

"The increasing complexity of deals meant that last year was even better than 1995 in terms of boosting the coffers of leading law firms," said Mr Healey.

Mr Boardman of Slaughter & May said: "There were fewer mega-deals in 1996 but a larger level of overall activity. It's been an active year. It's been a good year."

He now expects continued activity in sectors where further consolidation is needed, such as engineering and financial services, but said changes to competition policy after the election could slow down such consolidation.

A number of bids between engineering companies are already under way, such as Triplex Lloyd's offer for William Cook, FKI's bid for Newman Tonks and Fairey's move for Burnfield.

In other sectors, Gulf Canada is bidding for Clyde Petroleum and Ashquay is chasing UK Estates.

Anthony Cann, head of the corporate department at Linklaters & Paines, expects the healthy start to the year to continue even though the general election later this year may lead to a pause in domestic business. Outside the UK, he predicts that merger business will soar.

Law firms do not publish profit figures but recent research by Legal Business, a specialist magazine, confirms that 1996 was one of the best for firms in recent years.

Top legal advisers for UK public takeovers

Legal adviser No of deals Value pounds m

1 Linklaters & Paines (3) 19 19,016

2 Slaughter and May (2) 25 16,260

3 Freshfields (1) 17 9,457

4 Ashurst Morris Crisp (13) 15 8,986

5 Allen & Overy (8) 15 8,768

6 Herbert Smith (4) 17 6,258

7 Macfarlanes (14) 7 5,976

8 Lovell White Durrant (6) 5 5,667

9 Clifford Chance (5) 15 4,595

10 Denton Hall (11) 2 3,688

Numbers in brackets refer to league position last year.

Source: `Acquisitions Monthly'