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Another year, another bolt-on. As The Lawyer revealed last week, acquisition-hungry Norton Rose Fulbright (NRF) is in the midst of folding Chadbourne & Parke into its global operation.
This is not a transformative deal in the manner of NRF’s initial incursion into the US through its Fulbright merger. But it certainly deepens NRF’s reach in the energy and project finance market in the US. It is even being played by some as an answer to NRF’s search for deeper institutional finance roots. Many observers see the key in a bunch of institutional relationships that Chadbourne has in its New York banking, finance and insurance groups.
“Norton Rose Fulbright acts for a wide range of people in the finance community,” says one lawyer. “But this merger is possibly the US finance capability it’s looking for.”
“This merger would be an expansion for Norton Rose Fulbright in terms of the kind of markets it’s targeting,” says another. “Chadbourne’s got the finance aspect that will allow Norton Rose Fulbright to establish more of a US presence.”
However, that analysis is not entirely borne out by the data.
According to The Lawyer Market Intelligence, both Norton Rose Fulbright and Chadbourne share relationships with Société Générale and Bank of Tokyo Mitsubishi, and also act on deals for HSBC, BNP Paribas and Citigroup.
At the moment, the majority of Norton Rose Fulbright’s finance deals are run out of London and Asia, not the US. With the Chadbourne merger, that statistic could change, particularly after Norton Rose Fulbright’s own hire of 17 lawyers from Sidley Austin’s public finance team in New York, Washington DC and San Francisco last year. Chadbourne has a decent insolvency practice in New York, but across the firm much of its finance business is for borrowers – often in the energy sector.
The immediate gain is geographical. While the two firms have parity in terms of partner headcount in the US, with Chadbourne at 74 and NRF at 75, the deal will boost New York resources. According to The Lawyer Global 200, Norton Rose Fulbright has 43 partners in the city, while Chadbourne’s office consists of 62 partners. Intriguingly, and indeed conveniently, the firms are both located in the same building.
The deal shifts power away from Houston where Norton Rose Fulbright’s largest US office is located. A total of 214 lawyers are based in the office, while the third largest US office is in Dallas, where a total of 116 lawyers are based in the city.
“Norton Rose’s merger with Fulbright was driven by people with a focus on energy work,” says one source.
“But this latest merger is about the financial expertise Chadbourne has in New York. Fulbright doesn’t have that.”
The energy focus
The Chadbourne deal underpins Norton Rose Fulbright’s energy play. NRF has won substantial mandates from BP, National Grid and Shell in the past year.
According to The Lawyer Market Intelligence, the firm’s Houston office strengthened its BP relationship, with partner Daniel Mark working on sale of its Alabama petrochemical complex to Indorama Ventures as part of its restructuring programme. However, NRF has not displaced Kirkland on corporate, financing or litigation (Kirkland acted for BP on the oil spill litigation). Intriguingly, given the rivalry between oil majors, Norton Rose Fulbright also made it onto Shell’s drastically reduced global panel.
Commentators are dubious over how effective Norton Rose Fulbright’s US energy platform has been. “The firm’s [energy] platform is global and it’s especially deep in Africa,” remarks one lawyer. “But there is nothing much in the US. Chadbourne will give it that focus.”
Chadbourne’s clients include traditional energy clients but it also has an outstanding renewables practice. Clients include US-headquartered Top of the World Wind Energy, Green Frontier Windpower and NextEra Energy, as well as a South American giant YPF and French-headquartered Engie.
Will this merger play out?
In light of its difficulty in implanting itself in jurisdictions beyond the US, Chadbourne has been on the market for several years. In the last decade, it has spoken to both Watson Farley & Williams and Pillsbury Winthrop Shaw Pittman, with the latter talks said to have fallen apart due to a lack of support from the firm’s project finance stars Keith Martin and Rohit Chaudhry.
“Any strategic decision is only going to work if they agree,” says a source. “The group is a firm within a firm and it has so much power.”
Norton Rose Fulbright’s presence in the energy space, as well as its global coverage, will be the key to getting Chadbourne’s influential project finance team on board. And Chadbourne’s own expertise in the US will ultimately help Norton Rose Fulbright’s current US partners, who have reportedly had to lean on their London counterparts for project finance know-how.
A move to profitability
But will the added US finance capability lead to increased profitability and turnover for Norton Rose Fulbright? Immediately, it will add £163m to the bottom line, with the firm’s 2015/16 revenue of £1.16bn making it the seventh largest firm in the The Lawyer’s UK 200. However, its average profit per equity partner is disappointing at £600,000 – the 25th highest in the country.
“Its PEP is no where near where it should be,” argues a competitor. “Norton Rose Fulbright is on a soul-searching mission and it’s all about driving profitability It’s trying to be more economic.”
Much of this explains why the firm has embarked on several mammoth efficiency initiatives, such as the implementation of a multi-million pound management system and the relocation of 170 business roles to the Philippines. Enhancing its capabilities in the deepest legal market in the world is the next stage of that profitability.
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