Client turned shareholder

Through their deal advisory and fund formation functions, law firms are well used to working closely with private equity firms. In the UK, at least, relationships between the two parties may be about to become a lot closer still as a result of a new piece of legislation.

Details of the Legal Services Bill announced at the end of May revealed that, for the first time, firms from outside the legal profession will be allowed to own or acquire stakes in UK law firms. Rolling out the welcome mat to external shareholders will bring the legal profession into line with other comparable professions, such as accounting and architecture, where external ownership is now common and a number of such firms are quoted on the London Stock Exchange.

Observers say strong interest in the legal sector can be expected from GPs. ?The legal sector has generally performed well in recent years. This strong performance potentially makes law firms an attractive proposition,? says Alasdair Robinson, director and head of the transactions team at Edinburgh-based financial adviser Noble & Co. ?They are also arguably more recession-proof than many businesses,? he adds.

From law firms' perspective, there are also strong potential benefits of teaming with private equity backers. One is access to capital, enabling firms to grow domestically and overseas, perhaps through acquisitions or opening satellite offices. Robinson says demand is most likely to come from mid-tier firms, as the larger players ?are generally adequately financed to support their expansion plans.? Another possible motivation for deals is partners looking to realize some of their equity.

Perhaps the biggest obstacle to such deals is the need to face up to cultural change. At present, UK law firms are almost invariably structured as partnerships, with the board comprised exclusively of the firm's partners. There is understood to be keen scrutiny of the implications of having to accommodate external shareholders – including the possibility of switching from a partnership to a corporate structure. Robinson said private equity investors might be prepared to compromise by retaining a board of partners, albeit with a more typical management board sitting on top.

The Bill comes into force early next year, when Robinson expects the first private equity deals in the UK legal sector to emerge from the pipeline. At which point, some of the legal profession's most prized clients might also become its most demanding shareholders.

Goodwin Procter hires in New York, DC
Boston-headquartered Goodwin Procter has hired several private equity attorneys to the firm's New York and Washington DC offices. In New York, Goodwin Procter hired Thomas Meriam and Bruce Rader, both of whom come from law firm Chadbourne & Parke. Meriam was active in Chadbourne & Parke's private mezzanine, private equity and bank finance practice groups. Rader represented multinational corporations and investors in connection with secured financings, acquisitions and other transactions. In Washington DC, Goodwin Procter hired three private equity partners from law firm Hogan & Hartson. J. Hovey Kemp, Christopher Hagan and James Hutchinson all have a ?depth of experience in leveraged buyout transactions, recapitalizations, growth equity investments and portfolio company representation,? according to Regina Pisa, chairman and managing partner at Goodwin Procter. Kemp focused primarily on private equity and financing transactions at Hogan & Hartson. Hagan specialized in corporate, securities and venture capital law on behalf of private equity clients and portfolio companies. Hutchinson similarly focused on corporate, securities and private equity transactions. Goodwin Procter has roughly 650 attorneys and additional offices in Los Angeles and San Francisco.

Debevoise promotes Saronson in London
Global law firm Debevoise & Plimpton has named attorney Matthew Saronson a partner in the firm's London office. Saronson represents private equity funds on tax matters arising out of cross-border transactions. He advised on major deals including the $15.3 billion acquisition of TDC, the $15 billion acquisition of Hertz and the €3.7 billion acquisition of Rexel. Saronson joined Debevoise in 1998 in New York and is a member of the New York State Bar Association. He moved to London in 2003. Debevoise' tax practice in London is led by Richard Ward. In New York, the lead tax partner is Peter Schuur.

SJ Berwin hires Thompson from Taylor Wessing
London-based SJ Berwin has hired Rob Thompson, a real estate partner at Taylor Wessing, to join its real estate division as a partner. Thompson, who become a partner at Taylor Wessing in 2002, specializes in investment work, but also has development expertise, as well as acting for large corporates, which SJ Berwin described in a statement as being one of the ?key areas of growth? for the firm. Bryan Pickup, head of SJ Berwin's real estate division, said in the statement: ?Rob Thompson's appointment would consolidate our offer to our real estate clients. As well as work in the UK, Rob would provide an invaluable resource for our UK clients who are looking to invest in Germany, allied to European fund work.?

Akin Gump grabs O'Melveny man
International law firm Akin Gump Strauss Hauer & Feld has hired David D'Urso away from law firm O'Melveny & Myers in New York, where he was a partner. D'Urso represents private equity sponsors, venture capital investors and their portfolio companies. In a statement, Akin Gump co-chair Adam Weinstein said D'Urso's ?intensity and character complement our entrepreneurial and collegial atmosphere.? Akin Gump has more than 900 lawyers in offices around the world.

Weil partner named director of Yale center
Ira Millstein, a partner at law firm Weil, Gotshal & Manges, has been named the director of the Yale Center for Corporate Governance and Performance. The Center's mission is to explore the role of corporations in becoming competitive in their markets as well as in contributing to society. Millstein is also the senior associate dean for corporate governance at the Yale School of Management.

Fried Frank in hiring spree
Fried, Frank, Harris, Shriver & Jacobson has announced the hiring of several partners around the world. In Paris, the firm hired Maurice Lantourne, who had previously worked with the firm through an exclusive correspondent agreement. Lantourne is a bankruptcy, commercial litigation, and white collar crime attorneys. Eric Cafritz, Paris managing partner, said, ?Maurice's litigation and bankruptcy expertise is the perfect complement to our own litigation and restructuring practice and enables us to play a primary role in major restructuring situations in France.? In New York, the firm hired David Mitchell as a partner in the corporate department. He joins Fried Frank from Cadwalader, Wickersham & Taft where he was a partner in the capital markets department. ?Our clients are increasingly involved in complex structured products and capital markets transactions, both in the United States and internationally. David's expertise is directly relevant to these areas,? said Justin Spendlove, the firm's managing partner, in a statement. The firm also hired Terrance O'Malley in the New York corporate department. He joins Fried Frank from Schulte, Roth & Zabel where he was a partner in the investment management group.

Kirkland launches in Hong Kong
International law firm Kirkland & Ellis is to launch an Asian operation based in Hong Kong focused on expanding its geographic coverage for private equity clients. A spokesperson for Kirkland & Ellis said that the Hong Kong office is expected to be operational in the fourth quarter of 2006 or the first quarter of 2007. David Patrick Eich, a private equity partner in the firm's London office, will relocate in order to head up the operations. He will be joined by Tai Hsia, an associate in the London office since 2002, and Chuang Li, an associate in the firm's Chicago office for the past five years. The move has come as a response to client demand, said a spokesperson: ?We're simply following the private equity market's move into Asia.? Eich advised CVC Asia Pacific's fundraising for CVC Capital Partners Asia Pacific II. Another Kirkland & Ellis client is Bain Capital, the Boston private equity firm that launched a Hong Kong office at the beginning of this year.

Winston & Strawn add PE partner
Winston & Strawn announced that Christopher Giordano has joined the law firm's New York headquarters as a partner in the corporate department. Giordano joins the firm from Wiggins and Dana. Prior to that he was a partner in private equity specialist law firm O'Sullivan Graev & Karabell, which merged with O'Melveny & Myers in 2002. Less than a year ago, Winston & Strawn hired private equity partner Steve Napolitano. The firm is 152 years old and has approximately 900 lawyers in nine offices, including in London, Paris, Geneva and Moscow.

Cravath advises Apollo underwriters
Law firm Cravath, Swaine & Moore advised the underwriters of the recent $1.5 billion 144A/Reg S initial public offering of AP Alternative Assets, a partnership formed by Apollo Management that will be listed on the EuronextAmsterdam stock exchange. Underwriters were led by Goldman Sachs, Citigroup, JPMorgan Chase and Credit Suisse Group. Recently, Cravath also advised the underwriters of KKR Private Equity Investors, a similar vehicle sponsored by Kohlberg Kravis Roberts. In 2005, Cravath advised on the reorganization of Ripplewood Holdings' Japan affiliate into RHJ International, which is now listed on the First Market of the Euronext Brussels exchange. The Cravath team that worked on the Apollo listing includes Thomas Brome, Ronald Cami, William Brannan, Rezart Spahia, James Munro, Christian Brause.