Competitive pressures have forced law firms to take a closer look at how best to add value to their service, but in the cutthroat world of asset finance (see market report, page 50) this exercise has reached an altogether higher plane.

Allen & Overy (A&O) acquired three Wilde Sapte partners last year, launching the firm into the lucrative world of advising UK-based tax leasors.

Norton Rose and Wilde Sapte are the dominant players in this area of the market, and A&O's advances are most unwelcome to them.
A&O's team is championing the firm's broad practice and international presence compared to the limited resources of its immediate rivals. The implicit suggestion is that clients will want to defect from smaller firms, such as Wilde Sapte, in droves. As you would expect, Wilde Sapte is fighting back. It commissioned an independent survey asking 200 clients what they thought about the firm. The response, we are told, was a resounding thumbs up. But one criticism did register – the problem of international coverage. One wonders how quickly senior management can find an international merger partner to answer that criticism before A&O's claims prove true.

The American way
Last year was a record year for mergers and acquisitions, with 2,278 deals struck, the highest number in 10 years. The value of these exceeded £90bn, far more than the previous record of £67.7bn achieved in 1995. By all accounts, mergers and acquisitions departments in the top UK firms are enjoying a busy time.
Nobody is expecting this year to be as good as last year, but there is one other potential cloud on the horizon. For the first time a US-owned investment bank, Morgan Stanley Dean Witte, has pipped the UK banks to the top of the table of financial advisers' deal value, although Schroders did act on more deals. Lawyers should take note. The easy relationship the City's investment community used to have with its legal advisers is changing in favour of the US approach of picking and choosing the best outside counsel for the job. While US banking clients in London may look and sound anything but American, the corporate culture of these institutions is strongly US-influenced. The door is still open to the City law firm way, but watch out for the US law firms coming up on the inside.

Corporate challengers
Talking of mergers, Herbert Smith's corporate lawyers are apparently too "worn out" by last week's £15bn BAT/Rothmans deal to comment on the experience. It remains, however, another victory for the firm's 'low-profile' corporate team.
One of Herbert Smith's partners did manage to summon the energy to provide some explanation for the corporate arm's astonishing rise. Richard Bond, head of corporate, believes that the sluggish economic climate of the 1980s was to blame. The '90s, it seems, are proving much more promising. The corporate team has grown in the number of fee earners by just under 100% in the last three years and it earns more than 50% of the London office's total fee income, Bond reports.
With clients including BAT, British Sky Broadcasting Group, Invesco, Enterprise Oil and Sears, Herbert Smith could soon be challenging Linklaters, Clifford Chance and Slaughter and May to the top spot.