A friend in need

Cosying up to companies in trouble is key to winning work on administrations

HMV

There is something slightly morbid about being an insolvency lawyer. You develop contacts with the right people, wait for a company to fold, and then capitalise by winning the instruction from the company or the accountants handling the case.

Winning the work tends to come from longstanding relationships with either the company in trouble or one of the big four accountancy firms – PricewaterhouseCoopers (PwC), KPMG, Deloitte and Ernst & Young – whose partners tend to act as administrators of the biggest companies.

In general, individual lawyers will try to wine and dine individual accountancy partners as it is they who decide who to instruct when they are appointed administrators – a decision taken alongside the banks that funded the casualty.

There have been plenty of cases like this for law firms to get their teeth into in recent months, with Comet, Jessops, HMV and Blockbuster UK all filing for administration.

But administration is not necessarily the end: a company can be bought out of it by a restructuring specialist or a rival looking to pounce on cheap assets.

Take HMV. Linklaters was instructed by the administrators at Deloitte to advise on the legal aspects of the matter on account of the magic circle firm’s longstanding relationship with HMV’s lenders, which include RBS. Indeed, Linklaters took a double advisory role for both the Deloitte partners and the banks.

HMV’s debt has been bought by Hilco, a specialist in turning companies around. Hilco was advised by Salans, which is merging this year with SNR Denton and Canada’s Fraser Milner Casgrain to form Dentons.

The Comet administration is also being handled by a Deloitte team, but this time five law firms were chosen to advise them: main advisers Bingham McCutchen and Mayer Brown, with Eversheds, Macfarlanes and SNR Denton for specific matters. Multiple firms are usually instructed when there is a conflict of interest related to matters one of the firms advised on in the past or ties it might have to one of the creditors.

CMS Cameron McKenna is advising Blockbuster UK. The UK subsidiary of the US-headquartered DVD rental group filed for administration in January. It has worked with CMS for years.

Jessops’ administrators PwC hired SNR Denton, while the company itself is being advised by Ashurst, which had acted for it for many years. SNR Denton had previously advised Jessops’ lenders.

The moral of the story: get cosy to troubled companies or their banks, and big insolvency instructions will follow.