Cash Cowboys RP USL 2/4/03 4:33 pm Page 1

Private equity in

Cash cowboys

US private equity houses are capturing European targets withered by weak stocks. Legal Business assesses the law firms on whom the raiders rely

BY RICHARD LLOYD

‘TODAY, CASH IS KING SO WE’RE BACK traditional IPO exit route for in business,’ trumpeted , Kohlberg private equity buyers, and banks Kravis Roberts & Co’s legendary dealmaker, remain cautious, but the sector recently. ‘The M&A environment is absolutely has billions of dollars – some fantastic right now.’ Kravis is putting his think it’s close to $100bn – ready money where his hunger is: in Europe, Legrand to invest, and prices are low. and seven businesses of Siemens are recent ‘The private equity houses see buy-outs, and he was even eyeing up Safeway this stage of the economic cycle until he put his interest in the UK supermarket as an opportunity and they are chain on hold. the only ones with cash,’ ex- Kravis’s stance reflects the favourable plains Charlie Geffen at Ashurst climate that many private equity houses now Morris Crisp. And the biggest find themselves in. True, the freefall in the spenders are the Americans – world’s capital markets has blocked the certainly in terms of one-off >

Illustration JASON STAVROU March 2003 Legal Business 41 Cash Cowboys RP USL 2/4/03 4:33 pm Page 2

Private equity in Europe

Bruckhaus Deringer has picked Freshfields, , Kirkland & Ellis up work in the past, while and Shearman & Sterling. ‘All the US firms ’s steady flow of As US firms have extended their English deals from Duke Street Capital law capability, so private equity investors have decisions to make has been interspersed with have had a larger pool of advisers to turn to. transaction wins from the latter on what to do with their for Simmons & Simmons and Lateral thinking . Since the leading US firms started to pay On the Continent, the waters serious attention to building up their non-US teams.’ have been muddied further. Take English law capacity in the mid 1990s, KKR’s recent European buying their greatest success has been in develop- Edward Braham, Freshfields Bruckhaus Deringer spree. Simpson Thacher naturally ing credible finance practices. Shearman & picked up a large share of the Sterling and its highly regarded project work, but although Clifford finance team is one example, White & > deals. Last year saw Madison Dearborn Chance is KKR’s favoured Case on the acquisition and project finance Partners’ buy-out of Jefferson Smurfit, the European adviser, there have side another, and Latham & Watkins on Irish packaging company, for £2.37bn, and been key roles for ’ high-yield debt a third. KKR’s Legrand and Siemens acquisitions for office on Legrand and On the corporate side, however, few have £2.4bn and £1.1bn respectively. In 2001, it Simpson Thacher best friend shown a desire to develop a full-service was a similar story as Hicks, Muse, Tate & on KKR’s aborted offering and high-profile laterals have been Furst, together with the British buy-out interest in Safeway. fewer and further between than in the specialist Apax Partners, bought Yell, while As one in-house lawyer at a banking community. Where such hires have the Valentia consortium, a group of three US private equity house been made, most have come on the private US private equity houses, acquired the Irish highlights, this can have its equity side. Extending private equity relation- telecoms company Eircom. advantages. ‘Having a panel is ships in the US to Europe is the obvious aim. Market conditions in America are forcing fine if you’re BP, but for a private Private equity specialist Charles Fuller, one US private equity investors to look to Europe. equity house I think it’s odd,’ he of the highest profile laterals of 2002 when Money is available, uninvested in the US, but notes. ‘Every deal is so bespoke he moved from Simmons & Simmons to the American market is mature and a lot of that you need a range of firms to Latham & Watkins, has only been in the the plays have already been made. choose from and you also avoid latter’s Broadgate offices a matter of months, Not surprisingly, US law firms have been the threat of conflicts.’ but is already working on a deal for a West successful in winning a large proportion of Soros Private Equity, for Coast private equity house. ‘It’s just the sort the leading instructions. But, as our table of example, has shown a clear of deal that I moved to handle,’ he enthuses. the ten most active US private equity preference for working with a In 2001, Skadden, Arps, Slate, Meagher & investors in Europe from the past three large number of advisers. In the Flom chose to make one of its rare years shows, UK firms have more than held US, it has close links with lateral hires when it poached buy-out their own. It all makes for a complicated Simpson Thacher and Paul, specialist Allan Murray-Jones from Lovells. picture of conflicts and referrals. Weiss, Rifkind, Wharton & An earlier example was Mike Francies, Garrison, while in Europe it has who joined Weil, Gotshal & Manges from Deal rustling used Allen & Overy, Ashursts, CC in 1998 and has since cemented the Pick out the largest US LBO houses and firm’s relationship with Texan buy-out house more often than not you can name their Hicks, Muse, Tate & Furst. Kirkland & Ellis US legal adviser with the certainty of night has also impressed with its efforts in London. following day. Think KKR and Simpson Thacher & Bartlett; The Carlyle Group and When push comes to shove Latham & Watkins; Clayton, Dubilier & ‘The strongest push has been from Rice and Debevoise & Plimpton; or Madison Kirklands,’ says one partner at a leading Dearborn Partners and Kirkland & Ellis – City firm. ‘It’s got a number of very serious relationships that are among the deepest in players in London and has hired Nigel the private equity world. Dunmore from DLA.’ Dunmore joined in In the UK market, by contrast, the 2001 to head a UK law team, having worked greater threat of conflicts and the smaller with Kirklands on the English side of a number of law firms with the necessary number of deals while he was at DLA. corporate clout has meant that private Of course, it helps if you have one of the equity houses pick and choose from a pool strongest brands for private equity work in of advisers. True, Ashursts bags the rump the world, with Bain Capital and Madison of Cinven’s instructions, but Freshfields Braham: drive to win Dearborn as clients. But even by the firm’s

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Private equity in Europe

standards, Kirklands’ London office is very with Wilde Sapte and Ashursts, decisions to make on what to do with their focused on the private equity market. back to London from New York. non-US teams,’ points out Edward Braham, ‘We have around 35 people in our In addition the firm has added a corporate partner at Freshfields Bruckhaus London office and about 75% of their an insolvency practice and is Deringer. The choices taken so far have varied activity is tied up with private equity,’ says understood to be on the between cherry-picking a couple of corporate Stuart Mills, the firm’s managing partner in lookout for tax specialists. specialists à la Skadden Arps, to offering London. From that team, the firm provides In contrast to Kirklands’ hires, greater depth in the mould of Weil Gotshal. specialist banking, IP, IT and insolvency English law capability remains Simpson Thacher is clearly looking at its advice. On the banking side, Kirklands has an area of contention for some English-law offering. Rumours persist that moved partner Bronwen Jones, formerly US firms. ‘All the US firms have it is on the lookout for an English-qualified >

BUY-OUT BONANZA: LEADING US PRIVATE EQUITY HOUSES IN EUROPE (BY NUMBER OF DEALS SINCE 1999)

PRIVATE EQUITY HOUSE LEGAL ADVISERS SELECTED SUCCESSES (BUY-OUTS COMPLETED) JP Morgan Partners (11) Allen & Overy Deals undisclosed Ashurst Morris CrispAcquisition of a 51% stake in FundsHub from Investia Clifford Chance €360m sale of minority stake in Getevision Telecinco and Publiespana () Freshfields Bruckhaus Deringer Limited auction for Klöckner Pentaplast and €925m syndication of equity by Cinven, €120m LBO by limited auction of SiTeco Beleuchtungstechnik €40m equity refinancing of City Reach International Linklaters LBO of Vision Networks SJ Berwin Deals undisclosed BancBoston Capital (9) Jones Day Gouldens MBO of Menzies Hotels and investments in Audio Holding and Mobil Rom Simmons & Simmons Investment in Categoric Software The Carlyle Group (9) Allen & Overy €700m acquisition of Casema (Netherlands) by Carlyle and others Ashurst Morris CrispPart of consortium, Publishing buy-out, formation, Carlyle Internet Partners Europe Clifford Chance Acquisition of QinetiQ Freshfields Bruckhaus Deringer () Advised on the take-private of Honsel (partner Dr Norbert Rieger) Jones Day Gouldens Deals undisclosed Wilmer, Cutler & Pickering Advising European Venture Funds – Accucard, Omiris, Skillvest, Apama, Surplex Soros Private Equity Partners (7) Allen & Overy €20m second round investment in Speed Ventures, £264m take-private of Delancy Estates Ashurst Morris CrispDeals undisclosed Freshfields Bruckhaus Deringer Part of consortium on Eircom Kirkland & Ellis OnCue Telecommunications, Sports.com Macfarlanes €3bn Eircom transaction Texas Pacific Group (7) Ashurst Morris CrispInvestor in Punch Taverns’ acquisition of Allied Domecq’s UK pubs business Cleary Gottlieb Steen & Hamilton Acquisition of Gate Gourmet, Swissair’s airline catering business Weil, Gotshal & Manges () Acquisition of Bankgesellschaft Berlin Goldman Sachs (6) Brobeck Hale and Dorr £11.5m investment in Mediasurface Freshfields Bruckhaus Deringer Buy-out of Cognis business of Henkel in Germany Shearman & Sterling Part of consortium on Eircom (6) Allen & Overy Acquisition of seven companies from Siemens, £627m bid for Wassall Plc (UK) Clifford Chance Acquisition of seven companies from Siemens Herbert Smith Proposed bid for Safeway Linklaters (Paris) Acquisition of Legrand Hicks, Muse, Tate & Furst (5) Weil, Gotshal & Manges Yell £2.14bn LBO Lehman Bros (5) Allen & Overy Acquisition of equity interest in Pubmaster Clifford Chance Strategic investment in financing of Knight Roundtable Europe Freshfields Bruckhaus Deringer Property MBO – Burford Holdings Morgan Stanley (5) Allen & Overy Participation in InterXion (Netherlands) by Morgan Stanley and others Freshfields Bruckhaus Deringer Takeover of Acorn Shearman & Sterling Acquisition of energy storage business of Invensys Warburg Pincus (5) Freshfields Bruckhaus Deringer Part of the Eircom consortium, several partners work on Warburg Pincus funds Private equity house deal volumes provided by Initiative Europe

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Private equity in Europe

> M&A specialist to go with the recent hire of capability, so the It’s who you know A&O banking partner Euan Gorrie. His UK firms have Firms need the resources and the move was largely driven by a desire to structured their US infrastructure, but also the service KKR with English finance expertise. law practices for contacts. ‘The market remains A partner at a top-ten City firm offers his private equity influenced by individual contact interpretation of Gorrie’s hire: ‘US lawyers means. Freshfields, and comfort with advisers,’ are notoriously possessive about their for example, has confirms Marco Compagnoni, clients. They see their clients paying more hired tax partner Lovells head of private equity. attention to Europe and they want to be a Claude Stansbury One in-house lawyer at a private part of that.’ Being a part of that, however, from Washington, equity house adds: ‘On a deal, if I requires local advice. DC tax boutique know there is good chemistry Ivins, Phillips & between someone here and a Getting local Barker. Edward partner at a , then I’ll go Weil Gotshal, for example, thanks to a Braham admits with that firm.’ credible English law practice, has been that his input in At what was Gouldens, successful in converting Hicks, Muse, Tate structuring Greaves: hitting it off corporate partner Adam Greaves has forged close links with Banc- Boston Capital, one of the most active American private equity ‘US private equity houses have become investors in Europe since 1999. ‘I hit it off with one of the guys at very sophisticated in familiarising themselves BancBoston Capital and over the past eight years they’ve been one of my most active clients,’ he Gerry Cater, Wilmer, Cutler & Pickering with local markets.’ reveals. He first came across BancBoston in 1994 through its London office when he was & Furst from an American client into a European deals involving US working on a deal in which it was looking to transatlantic one. ‘They gave us a chance investors has been vital. ‘We invest. ‘Anything routed to Europe tends to and we took it,’ says London managing talk to him a lot about tax come through me,’ he adds. Gouldens’ partner Mike Francies. Since then, Weil advice involving US funds and merger partner Jones Day has also picked up Gotshal has won prime roles advising on investments they make in work from BancBoston in London through Hicks Muse’s £2.14bn acquisition of Yell European targets,’ he says. private equity specialist Daljit Singh. and its purchase of the ambient food Stansbury’s hire is part of As the gateway into Europe, City-based businesses of Nestlé. Freshfields’ drive in recent years UK firms have proved adept at picking up a Local input has also proved invaluable at to win more US private equity series of deals from the leading US houses. Wilmer, Cutler & Pickering’s London office. deals. Braham comments: ‘We But as a partner at a top ten practice Through partner Gerry Cater, who moved take the US private equity houses concedes, ‘no one has cornered the market’. to the UK in 1999, the firm has close links very seriously and over the past The same goes for the US firms in with The Carlyle Group. Cater admits that couple of years we have done a London. A lack of English law capability when the US private lot of work to adapt or an international network of real depth equity houses our practice to fit has held many back from translating US started looking to with their require- relationships into transatlantic ones. Europe, it was ments.’ It’s paying ‘Is there more competition from US unfamiliar territory. off – as the table firms?’ asks James Baird, a private equity ‘You need to reveals, the firm has specialist at Clifford Chance. ‘I don’t navigate a bit more,’ picked up work from think so – you need a network to handle he says, before the Valentia consor- European cross-border deals,’ he concludes. adding: ‘But now tium including Soros Perhaps, but it’s no secret that US firms are the US houses have Private Equity, scouring the City for high-calibre deal- become very sophis- Goldman Sachs and makers. And as the likes of KKR, Madison ticated in familiaris- Warburg Pincus on Dearborn and Hicks Muse continue to ing themselves with the buy-out of search Europe for buy-out targets, so local markets.’ Eircom, and from corporate practices will scramble to bag As US firms have Morgan Stanley and more of the work. It’s high noon for the addressed the need The Carlyle Group in City’s private equity teams. LB for English law Mills: tied up with private equity Germany. [email protected]

44 Legal Business March 2003