Private Equity and Regulation
April 9, 2007 | Filed Under Private Equity, Regulation
All big gifts come with some strings attached.
Late last week, TXU Energy was forced to disavow a regulatory filing due to objections from private equity buyers Kohlberg Kravis Roberts and Texas Pacific.
TXU gained notoriety this year when the largest-ever private equity buyout ($32 billion plus) was announced. Recently, TXU received a notice from the Texas Public Utility Commission of a proposed a $210 million penalty over allegations of manipulation of wholesale power prices in the summer of 2005.
The company made a filing last week objecting to the penalty that contained a statement that was interpreted that TXU might shut down some power plants if the penalty is upheld. KKR and Texas Pacific were not amused, said they had not been consulted about the filing and disagreed with it (their statement is here).
TXU CEO John Wilder acknowledged that the situation had been mishandled, although TXU denies any actual intent to shut down power plants.
If you had heard that a problem developed between a private equity buyer and a large regulated business, you’d think that the financiers were pushing too hard and were unsophisticated in the nuance of the utility business.
And in this case you’d be wrong. Not only do KKR and Texas Pacific apparently “get it,” they also took the lead when the deal was announced to agree to build fewer new coal plants, gaining support from environmental groups. The closing of the firms’ statement reads:
“We don’t own the company. The more quickly this transaction can be completed, the sooner that TXU can set a different course and a new direction, one that encourages open and productive dialogue with regulators, elected officials and other stakeholders.”
The very least that the promise of $32 billion should get you is a look at a draft of a regulatory filing…
From OffShore to OnRamp
April 6, 2007 | Filed Under Law Firm Trends, Law 2.0, New Services
Last time, I looked at major companies that are showing an increasing interest in sourcing their work globally.
Today, a gaze into the rearview mirror on a stateside initiative that is gaining traction: Legal OnRamp. More than just a website, Legal OnRamp is a online hub that brings together corporate legal departments and leading law firms. Content, always a staple of law for business, is a starting point. But the brains behind Legal OnRamp understand a key fact about law in the 21st century: what really distinguishes lawyers is how they apply the law and drive business results.
That’s where the vein of value can be deep and rich and provide a common benefit.
To this end, the really interesting parts of Legal OnRamp, from my initial experience, are opportunities to work in a community and collaborate in ways that foster learning in new areas and lawyering in new ways.
The network created by Legal OnRamp is growing. Backed by Cisco and other leading law departments, it is helping ease the friction that can cause the gears of legal commerce to grind a bit.
My colleague in the law.com blog network, Bruce MacEwen, has a great overview of Legal OnRamp, including details on the law firms involved.
Further information is available by contacting Legal OnRamp here or me as well.
Technology is best when it is transparent to the user, so that the focus can be on solutions. Legal OnRamp is one example of how the law is moving forward. Which way are you headed?
Outsourcing Moves Up the Value Chain
April 4, 2007 | Filed Under Offshore Services
Yesterday, auto supplier Delphi announced that it was sending 650 corporate accounting jobs to India’s Genpact to consolidate some of its finance workforce in a more lower-cost (and still high quality) environment.
Today the New York Times looks deeper, noting that the stereotype that outsourcing necessarily involves lower-end “backoffice” jobs is no longer valid:
But that has been changing in recent years, and increasingly the jobs of Western white-collar elites in fields as diverse as investment banking, aircraft engineering and pharmaceutical research have begun flowing to India and a few other developing countries.
Companies such as Boeing, Cisco Systems, Eli Lilly and Morgan Stanley are also growing their presence in India. Perhaps even more relevant for legal services are the activities of a certain well-known professional services firm:
Accenture, the global consulting giant, has its worldwide head of business-process outsourcing in Bangalore; by December it expects to have more employees in India than in the United States.
Those last few words that I’ve bolded really caught my eye.
If you can have jet aircraft designed in India, you can probably find someone to draft the leveraged lease to buy it.
I’ve covered this subject before. I still hear some skepticism in the marketplace as to whether legal services are primed to make the jump in a big way. Some companies I know of see opportunity in moving certain legal work from Manhattan to the Midwest as a first step in lowering transactional costs.
I would suggest that law firms representing blue-chip companies (such as those mentioned above) watch this trend closely. When your clients are moving work offshore, they may ask how you are integrating global sourcing into the service mix.
The answer “Huh?” may not be a relationship-extending one.
Should Law Firms Listen to Students?
April 3, 2007 | Filed Under Law Firm Trends, Legal Ed
The WSJ Law Blog provides an interesting link to a new group of law students, Law Students Building a Better Legal Profession. They raise some valid concerns in their Cluetrain-like manifesto entitiled “Principles For a Renewed Legal Profession.”
It will be interesting to see how this group takes hold. Thus far all members appear anonymous as far as I can tell. Far be it for me to criticize that…
The students offer the suggestion that firms should “link partnership with working hard, not working long…” Actually, partnership, especially equity partnership, is also linked to working on getting and keeping clients. I know when I was in law school I presumed clients sort of grew on trees; certainly there was nothing in the course catalog on legal marketing or client service.
In addition, the group offers that a target of 3,000 hours at some firms (!!) should be reduced to 2,200.
I hope the students continue to do research on this; 2,200 billable (and collected) hours is no small feat, unless you have a year of block-billing-friendly M&A deals or major litigation.
The group seems to understand that you can’t get max pay without max work at a max rate when it notes that members are “…willing to accept reduced salaries in exchange for better working lives.” But when that offer letter arrives with a $150,000 starting salary, it’s really an interesting decision.
The more law students head into their first job with eyes wide open instead of shut, the better. There are initiatives underway to make legal service delivery more productive for firms and clients. I’ll take a look at one of these on Thursday.
Law Firm Listens to Associates
April 1, 2007 | Filed Under Law Firm Trends, Managing
According to legalweek.com, the UK Freshfields law firm walks the talk and actually asks “how high?” when the associates say “jump!”
Freshfields Bruckhaus Deringer was so keen to show it cared about what its associates had to say at an away-day last week that it replaced the firm’s reception carpet within hours of complaints about its colour.
More than 200 associates met with the City giant’s management to discuss issues affecting associates, such as remuneration, appraisals and career development last Friday (23 March).
Following a number of complaints about the carpet, which some described as “80s chic”, Freshfields’ management called in workmen to replace it on the same day, with a “more muted” style.
(ed note: unlike in prior years, this is not an April Fool’s Day joke. Reality beats fiction every time. And the Wired GC is all about “70s chic”, such as this little shag number known as “Flamingo Road”).
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