Wednesday, June 5, 2013

Information Barriers in the UK -- A Brief History and Recent Trends

A reader sent a link in to an interesting article just published in The Lawyer: Information barriers - approach with caution, which reviews the history and complexities in this market and asks: "The ‘Chinese walls’ technique is still widely used at top firms, especially on private equity deals. Did the great M&S conflict debacle of 2004 really change anything?" --
  • "Yet the incident appears to have done little to ward off firms from using Chinese walls as a prevention for conflicts or confidentiality breaches. Indeed, these seem even to have grown in popularity as firms eye revenues from bidding processes in which a number of companies are tendering. This is perhaps most common for firms majoring in the prime domain of competitive bidding: private equity. Indeed, the concept of the Chinese wall harks back to the late 1980s when banks lent to multiple M&A clients, including private equity houses, bidding against each other to take companies over."
  • "According to Weil Gotshal & Manges London private equity partner Marco Compagnoni, the nature of deals in his sector is such that the practice area’s leading firms would be foolish to minimise their role when one of a number of bidders could end up buying the company or asset. 'Where there is a competitive auction lots of companies will start out needing lawyers,” Compagnoni explains. “As the field narrows, [if you put up an information barrier] you’re not shut out and the clients aren’t shut out either. It happens all the time. We only do it if the client in the engagement letter has accepted you can do it.'"
  • "For Herbert Smith Freehills (HSF) partner Mark Bardell, a system aligned across the network is crucial, with the firm going beyond the letter of the law to ensure client confidentiality. 'For us, because it’s such a sensitive issue you apply best practice - you don’t just do what the rules say - and you apply that best practice wherever you are,' says Bardell, who recently experienced informational separation on Ithaca Energy’s £203m acquisition of Valiant Petroleum, announced earlier this year."
  • "The corporate partner acted for Valiant but worked on the other side of a Chinese wall from finance partner Jason Fox and senior associate Olivia Caddy, who advised Ithaca’s lenders, Banc of America Securities, BNP Paribas and Bank of Nova Scotia. The situation was made more unusual by the fact that Fox resigned to join Bracewell & Giuliani halfway through the deal."

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