For Norton Rose, the symbolism — or timing — could not have been less fortunate.Less than two weeks ago the firm announced it was parting company with a group of nine Cologne partners inherited from its year-old merger with Germany’s Gaedertz.
The implication was clear: Norton Rose was moving to upgrade its much-criticised German arm to fit with its stated ambitions and these partners were not playing on the same global stage.
On Monday (21 January), just nine days later, the tables were dramatically turned when four leading Norton Rose acquisition finance partners announced their resignations and departure for banking powerhouse Allen & Overy (A&O).
Bigger firm, bigger profits, bigger stage.
That the departures, the most high profile raid within the City’s top 10 for years, will be a loss is not in doubt.
The four — Tim Poleglase, Andrew Bamber, Robin Harvey and Clive Wells — collectively comprised one of the most highly-regarded acquisition finance teams in the Square Mile and one of the brightest jewels in Norton Rose’s banking crown.
Leading clients advised by the partners include Royal Bank of Scotland, JP Morgan and Deutsche Bank, while Poleglase and Bamber are two of Norton Rose’s highest billers.
“Poleglase is a coup on his own,” says one leading finance partner. “Add in the rest of the team and it is a serious acquisition for A&O.”
Norton Rose, unsurprisingly, is keen to play down suggestions that the team felt compelled to move to a bigger, more international firm or that the loss represents a body blow to its banking practice.
“These people were members of one finance team out of seven in the firm and were a self-sufficient team,” says Norton Rose banking head Stephen Parish. “It is, of course, an issue for our structured finance practice, but not one to trouble the firm as a whole. I certainly won’t be losing any sleep about it.”
“Let’s get this in proportion — it is four finance partners leaving the firm,” says managing partner Roger Birkby. “I remember when [Stephen] Mostyn-Williams led a team out of Ashurst Morris Crisp to Shearmans. It was painted as the end of the world for the firm, but within a year Ashursts’ finance practice was far superior to Shearmans’ [practice].
“The firm is more important than the individual and we will replace these guys and move on.”
Other partners concede that the loss of Poleglase in particular is a shock, although they were not surprised that the more junior partners, Harvey and Wells, have taken the opportunity to ‘jump on his coattails’.
Poleglase was considered to be close to Deutsche Bank and Chase Manhattan and was widely regarded as a ‘firm man’.
“I guess Tim’s issue boiled down to money and ambition,” said one Norton Rose partner. “A&O can match both of those issues and without the need for him to wait around in order to achieve it.”
Bamber, by contrast, is termed by sources within the firm as being something of a maverick, despite his acknowledged high billing and client contact abilities.
A senior source said he had clashed with members of staff, and had a highly individualistic approach to his work.
At the very least, insiders claim there was a personality clash between Bamber and the distinctly more diplomatic head of banking Parish.
Bamber’s main client, however, is Royal Bank of Scotland, which Norton Rose concedes is one of the major reasons the banking department increased its profitability last year by almost 40%.
Certainly, senior banking lawyers at rival firms are interpreting the noises being made by Norton Rose as damage limitation.
The team had a very strong reputation for turning out mid-market work to a high standard, often at some of the most competitive rates in the City.
Rival lawyers claim both a lack of international reach and assistant support will have been key reasons for their departure and that Poleglase had been considering a move for well over a year.
Indeed, A&O indicated this week that the appointments were in many ways a defensive move, prompted by a fear that a rival would seize the team.
Whatever the motive, A&O is now left basking in the glory of another high-profile partner swoop — further marking the magic circle firm as a potential leading player in the emerging, and potentially highly lucrative, European high-yield debt market.
Given that the firm was already acknowledged to be far ahead of the City pack in a sector dominated by US firms, the appointments appear to be very astute strategically.
And after six months of talks with the quartet, A&O is now hopeful of winning far larger roles as major acquisition finance advisers to JP Morgan and Royal Bank of Scotland.
A&O head of acquisition finance Tony Keal said the hires would bring “support to cross-border European leveraged finance work including the necessary expertise in securitisation, high yield debt and insolvency”.
But what next for Norton Rose? Ultimately, the losses this week appear to be the most dramatic illustration of the strategic issue that has dominated the firm’s development for the past five years: whether to compete head-on with top City and US firms or carve out some kind of niche.
Competition with larger, more profitable firms is a high-risk strategy. After three years when international expansion has dominated the agenda of the magic circle, the raid is a worrying sign for the likes of Norton Rose that the magic circle are shifting their attention back to their home patch.
A return to the predatory raids of the mid-1990s is firmly on the agenda. This could leave Norton Rose, which last year saw average partner profits of £522,000, badly exposed.
The firm’s partnership does not appear to have the cultural unity that has protected similarly placed rivals like Ashurst Morris Crisp, nor has it enjoyed the evident strategic success of Lovells and Herbert Smith. Whether other stars at the firm can be retained without a radical internal shake-up remains to be seen.
One pressing issue is whether the firm has the luxury of being able to retain its lock-step remuneration system — which has been modified only slightly — at a time when its better placed rivals will be looking to entice away its young stars.
And, as ever, the spotlight is firmly on its management team of managing partner Birkby and senior partner David Lewis.
However, one partner at the firm suggests that the problem lies with the whole partnership, rather than the firm’s leadership.
“If there is a management issue here it is that we are still behaving like an old fashioned partnership instead of being a decisive business like our competitors,” he said.
“Until this is sorted out we will continue to lose our more ambitious and charismatic partners.”