HARD MARKETING: magic circle chasing smaller transactions as credit crunch bites


Magic circle firms have begun pitching for middle-market business as the pool of blockbusting merger and acquisition deals shrinks, according to competitors outside the circle.



At the same time, reports of 'hard marketing' campaigns by magic circle firms targeting banks have also emerged this week.



Other City firms have reported increased competition from the magic circle across a wide variety of commercial sectors, a practice described by William Arthur, principal of business advisory firm Fremont Consulting, as 'lowballing'.



He said increased competition would make the market more competitive and 'stop the trend of rising hourly rates and maybe even put it into reverse'.



Non-circle firms pointed to the continuing effects of the credit crunch as the prime reason for a drop in big deals - described by one managing partner as anything more than £500 million.



Howard Morris, chief executive and a partner at City firm Denton Wilde Sapte, said it was 'no surprise' that magic circle firms were 'casting their hungry gaze to areas they used to turn their nose up at'.



Morris also listed real estate and debt capital markets as sectors where the firm had experienced increased bidding competition. He was aware of two banking clients which had received 'hard marketing' calls from magic circle firms offering a variety of legal services.



Gareth Edwards, national head of corporate and corporate finance partner at national firm Pinsent Masons, said the increased competition is a sign that the magic circle is starting to 'struggle' as fewer multi-billion-pound M&A deals were being made.



Alan Paul, a partner at magic circle firm Allen & Overy, said his firm was not making any special effort to pitch for mid-market business. 'The magic circle, like everyone else, is working harder with pitches because there are fewer deals out there. I don't think it's a sign that magic circle firms are struggling.'



He added it was possible that a magic circle firm would be doing extra marketing to banks, but said it was natural for firms to be 'pushing on their contacts' in the current economic climate.



Perry Nobel, co-leader of Freshfields' global finance practice, said: 'It is not unusual for the larger law firms to advise key clients on mid-market deals. We don't specifically target the mid-market as such, but if one of our leading clients were to be involved in a mid-market transaction - which would not be surprising in the current deal climate - then we would want to be there for them. Mid-market does not equate to less complex or less challenging.'



The remaining magic circle firms - Clifford Chance, Linklaters and Slaughter and May - declined to comment.



James Dean