Michael Klein: I just want you Spac for good

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In today’s newsletter: 

• Michael Klein’s latest Spac

• BT’s new turnaround expert boss

• “Magic circle” law firms feel the profit squeeze

Michael Klein keeps the Spac nostalgia alive

One day you’re doing nuclear fission deals with Sam Altman, the chief executive of OpenAI and one of the most talked about people on the planet. The next it’s Simon Orange — who as the brother of boy band Take That singer Jason Orange of “Back For Good” fame, is perhaps the less famous member of his family.

Such is the life of Wall Street rainmaker Michael Klein, who despite a slowdown in deals and an almost non-existent market for special purpose acquisition companies, has still somehow managed to announce two transactions this summer. (That’s if you don’t count his pivotal role in brokering a peace deal in professional golf.)

The latest is a deal to take public CorpAcq, a company run by Orange that buys up small and medium-sized businesses predominantly located in northern England and led by their founders. Among them are a plumbing company, a diesel generator specialist and a forklift truck supplier.

Churchill Capital Corporation VII, one in a long series of Klein-backed Spacs, will merge with CorpAcq in a deal that values the company at $1.6bn. The Cheshire-based business is expecting to receive almost $600mn from the transaction, which is sitting in the Spac trust.

The reality is that it’s unlikely to get anywhere near that figure. Shareholders have on the whole chosen to redeem their shares rather than take a punt on a newly-listed company.

But let’s say it does get the whole $600mn. Only $129mn of that will go to the company’s balance sheet. The company will use $158mn to pay back costly financing it has taken out from Goldman Sachs (also an equity owner) and, providing there is still some money left, that will go to existing CorpAcq shareholders. The transaction costs amount to about $55mn.

Klein’s plan to list CorpAcq shows how far even some of the best-known Spac sponsors are having to roam in search of targets. His forfeiting of 15mn founder shares also shows that Spacs are no longer the pot of gold they once were.

BT scores a turnaround expert. Will it be enough?

When BT needed a new boss, Allison Kirkby answered the call.

That’s not to say it was her first choice. The telecoms turnaround expert would have left the industry had Manchester United’s owners not turned her down back in the day as chief financial officer of her favourite English Premier League team.

“The Glazers didn’t like me,” the Glaswegian executive told a Nordic television station. Already a member of BT’s board, she’ll replace outgoing boss Philip Jansen as the British multinational’s first female chief executive by January at the latest.

The 56-year-old described by a prominent investor as “one of the best telecom executives in Europe” is now tasked with confronting a losing streak at BT, the FT’s Oliver Barnes and Harriet Agnew report.

The group’s share price has fallen nearly 24 per cent to £1.21 over the past year as its fibre optic rollout has lagged rivals.

Its investors — including Patrick Drahi’s Altice, which owns a near 25 per cent stake, and Deutsche Telekom, whose chief Tim Höttges told the FT earlier this year that its BT stake was the “biggest mistake” he ever made, — have fared poorly.

BT is also embarking on one of the most radical cost-cutting drives since it was privatised in the 1980s, with a plan to cut 42 per cent of its jobs by the end of the decade.

Kirkby at least has some time to boost BT’s value. Once speculated as a potential takeover target of Drahi’s telecoms empire (the Franco-Israeli tycoon is having his own problems, as DD covered yesterday), the state of the debt markets means BT is “probably an unpurchaseable company” for the time being, said one investor.

When and if the time comes, Kirkby has the dealmaking experience under her belt.

She was the architect of a $3.3bn takeover of local cable and broadband group Com Hem while running Sweden’s Tele2 in 2018 followed by a break-up of Denmark’s TDC Group in her next CEO gig.

More recently, while in the top job at Sweden’s Telia, she inked a deal to sell mobile towers to private equity giant Brookfield Asset Management where she sits on the board.

“BT is going to need capital and she’s going to have to make some of those same decisions that she made at Telia,” said Brookfield boss Bruce Flatt.

Flat profits dull the magic circle’s sparkle

In tough economic times, spare a thought for most of the UK’s elite corporate law firms, which have found their profits flatlining.

After a deluge of mergers and acquisitions helped push earnings to record levels for the City’s “magic circle” after the pandemic, their most recent financial years have brought them back down to earth.

Equity partners at Allen & Overy saw their average profit shares drop by almost 7 per cent, to £1.82mn each, while Linklaters’ equity partners took home £1.78mn each on average, almost 5 per cent less than the previous year. Clifford Chance’s profit per equity partner was flat.

All three magic circle stalwarts boosted their revenue in their most recent financial years. But the dwindling pipeline of deals and rising salaries — pushed higher by last year’s cut-throat battle to recruit junior lawyers — have weighed on their bottom lines.

UK firm Freshfields Bruckhaus Deringer was the only firm in the group to nudge up its partner profits, by 1 per cent. Its equity partners took home just over £2mn each on average in the year to the end of April. Freshfields also said that it planned to stop revealing its average profit per equity partner after this year, a sign of how the law firm wants to keep its relative success under wraps and out of the limelight.

The broader slowdown comes as Allen & Overy stands on the precipice of a blockbuster $3.4bn merger with New York’s Shearman & Sterling, as Freshfields invests heavily in its own push into the US.

In this dealmaking environment, firms headed across the pond have even less room for error.

Job moves

• Goldman Sachs veteran Lisa Opoku, who was named as the first head of the Goldman Sachs Partner Family Office last year, is leaving the firm after two decades, Bloomberg reports.

• Goldman’s David Rusoff is joining Citadel Securities as chief legal officer, per Reuters.

• Hiromichi Mizuno, the former investment boss of the $1.4tn-in-assets Government Pension Investment Fund of Japan, has joined MSCI as a special adviser to the chief executive officer.

• Manish Jain, Standard Chartered’s co-head of corporate, commercial and institutional banking for India, is leaving the firm after more than 23 years to join Yes Bank, per Bloomberg.

• The PGA Tour has added Tiger Woods to its board as part of wider changes in governance structure after receiving player pushback over its tumultuous deal with Saudi Arabia’s Public Investment Fund.

• Angus Lennox is set to join Simpson Thacher & Bartlett as a real estate private equity partner in London. He is currently a managing director in Blackstone’s European real estate business.

• Fried Frank has named Lawrence Natke as a partner in its M&A and private equity practice, based in New York. He joins from Schulte Roth & Zabel.

Smart reads

Apollo 2.0? Marc Rowan is looking to revamp the firm’s ruthless image as it pursues stabler business lines — what rivals have called the “Apollo Apology Tour”, Bloomberg reports. Will it pay off?

Expectation vs reality CrowdStreet raised $4bn by promising big returns to small real estate investors. Instead, multiple deals have gone bust and $63mn in customer cash is missing, The Wall Street Journal reports.

Pick a side Washington is wooing South Korean chipmakers and battery manufacturers with large subsidies, but demanding they loosen ties with China to reap the benefits, the FT reports.

News round-up

Wirecard’s auditor EY was too gullible, Singapore suspect claims (FT)

Blue Owl: Rees’s pieces must mesh to keep egos and investors sweet (FT)

Daniel Křetínský in talks to buy unit of ailing French tech group Atos (FT)

French newspaper faces mass departures over appointment of rightwing editor (FT)

Glasgow university spinout raises $43mn to ‘digitise chemistry’ (FT)

HSBC: Quinn’s defence of the universal model is paying off (Lex)