The real threat to Freshfields is not losing Maguire, it is losing CVC
What impact will Kirkland's latest Freshfields raid have on the premier City private equity practice?
January 09, 2019 at 11:12 AM
4 minute read
Another day, another top private equity partner joins a US firm in London. Only there is nothing routine about Adrian Maguire's move from Freshfields Bruckhaus Deringer to Kirkland & Ellis.
After all, Maguire was the UK's "most sought-after private equity partner at the moment", according to one partner at a top-tier US rival. The partner added that his firm would have jumped at the chance to hire Maguire – who is known for having a loyal client base that includes Cinven, Advent International and Warburg Pincus – had the opportunity arisen.
And yet the biggest issue for Freshfields is not actually Maguire's departure. His list of clients is strong, but none of them rank highly on the list of buyout firms that have the most money to spend at the moment. Some would say Advent is mainly a Weil Gotshal & Manges client, while Cinven was more associated with Maguire's former colleague David Higgins, who he has now been reunited with at Kirkland. And Freshfields' main buyout client relationship, with CVC Capital Partners, has been managed by other partners.
The significance of Maguire's departure is actually in what it means for the future of what remains of the magic circle firm's private equity practice.
The steady stream of partner losses to US firms pushed Freshfields to change its remuneration structure in order to compete more aggressively and retain its best people. Did it not do so well enough? Maguire's departure, so soon after the changes were introduced, suggests no one is off the table. And if US firms can still pay more (and they can), other departures could well be on the way, which could fairly quickly pose a threat to the firm's status as the City's premier private equity firm.
Such a prediction might sound harsh, but don't forget that the best UK legal advisers for large buyouts used to be Clifford Chance (CC) and Ashurst.
CC still has a credible practice, though it is notable that its best-known private equity partner, managing partner Matthew Layton, is not doing so much fee-earning these days, and many big names of years gone by, such Adam Signy, David Walker and Kem Ihenacho have moved to US firms. It is nothing like the force it once was.
Ashurst, meanwhile, has fallen way down the pecking order. Its top partners in the sector – Charlie Geffen, Stephen Lloyd and Gavin Gordon – all moved to US firms years ago and it is rare to see them on the biggest buyouts now.
Freshfields should view these as cautionary tales. The truth is that its position as the leading private equity adviser in Europe is now less assured than it has been for several years. Rivals also point out that buyout firms are increasingly interested in their legal advisers having a US capability – it is hard for firms such as BC Partners, Permira, Cinven and CVC to spend their huge funds entirely in Europe. And rivals also say Freshfields' capability on financing advice will be subject to close scrutiny.
The firm's relationship with Cinven, long a client of both Maguire and his new Kirkland colleague Higgins, is at the most serious risk. And there is already plenty of competition for Permira – arguably Freshfields' second most important buyout client – from the likes of Kirkland and CC.
But it is CVC that would prove a real game-changer, should it move away from Freshfields. It is Europe's biggest and most active buyout firm and has remained close with Freshfields over the years, no doubt thanks to the fact that Christopher Bown, the former Freshfields partner, has been a senior adviser at the fund manager since 2014. Still, at some point there could be hardly anyone left from Bown's peer group still at the firm.
Meanwhile, a host of other firms will be knocking on that client's door. CVC itself lists its European legal advisers as CC, White & Case, Freshfields, Latham & Watkins and Weil Gotshal & Manges. It is worth noting that Latham handled the largest public-to-private deal last year, acting for CVC and Blackstone Group on the £2.96bn acquisition of Paysafe Group.
Charles Hayes is now the CVC contact at Freshfields. A lot of pressure rests on his relatively junior shoulders in the coming years. That's if he sticks around.
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