Companies

Kenyan lawyers beat rivals in race for big corporate deals

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Lawyers at the Cockar Commission that investigated the sale of the grand regency hotel in Nairobi. Photo/CHRIS OJOW

Indigenous Kenyan lawyers are making a stab at the multi-million shilling corporate legal advisory business, causing major realignments in a market segment that has long been dominated by an elite group of local law firms with foreign roots.

Fresh market information shows that a half a dozen law firms run by indigenous Kenyans backed by a powerful clique of the world’s top legal advisers have become the new oligarchs of the lucrative corporate and commercial law market shepherding major deals and pocketing millions of shillings in transaction fees.

The new kids on the bloc — most of whom are small to medium-sized outfits — have been off the radar for the big corporate deals, leaving well-known brands with foreign roots such as Kaplan and Stratton (K&S) and Hamilton Harrison & Mathews (HH&M) to dominate.

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More recently, however, the second to third tier law firms mostly run by indigenous Kenyans who took their pupilage at Kaplan & Stratton or Hamilton Harrison & Mathews have been winning the deals at home and in the region to dislodge the former industry leaders from the top positions.

Chambers and Partners, a global law firm that ranks law firms based on the value of deals handled, says indigenous firms such as Anjarwalla and Khanna, Iseme, Kamau and Maema (IKM) Advocates, Muthaura Mugambi Ayugi and Njonjo (MMAN), and Muriu Mungai have broken into the top end of the corporate legal advisory market, eating deeply into the market share of the known players.

Chambers and Partners’ latest ranking indicates that Anjarwalla and Khanna last year dislodged Kaplan & Stratton to become Kenya’s top corporate law firm — the first time in the country’s history that an indigenous firm has occupied the coveted position.

The International Financial Review 1000 (IFRL1000) survey has produced a similar listing of Kenya’s top corporate law firms.

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Top scorers in this league of new kids on the bloc include Karim and Atiq Anjarwalla of Anjarwalla and Khanna, James Kamau, William Maema, Karori Kamau (all of IKM Advocates) and Suzanne Muthaura of MMAN and who is the daughter of Francis Muthaura, the head of civil service and Secretary to the Cabinet.

There is also Nani Mungai of Murui Mungai & Co and Mwangi Karume of Njoroge Regeru & Company Advocates.

The listings act as reference tools for multinational companies looking for advice in a market where advertising is controlled.

Legal practitioners say appearing in the Chambers & Partners and in the IFLR1000 rankings has turned into the biggest marketing tool for the upcoming firms, paving the way for them to gun for international tenders for projects located in Eastern Africa.

“The gap is closing fairly quickly,” says Nani Mungai of Murui Mungai & Co. “Change is under way in the legal landscape and indigenous law firms are either going to be at par with the old guards or even surpass them.”

Players in the local scene partly attribute the narrowing of the gap to the acquisition by Kenyans of the skills needed to shepherd corporate legal deals such as mergers and acquisitions, joint ventures and due diligence investigations from the seasoned players.

People familiar with Kenya’s legal landscape say weak teaching of corporate law at the University of Nairobi and Moi University has been the biggest obstacle to a strong presence of indigenous firms in the lucrative market.

The bulk of law graduates from these universities have flocked to the less lucrative litigation and conveyance business, leaving corporate advisory services in the hands of HH&M, K&M and Walker Kontos — who have been mainly using the services of experienced UK-trained lawyers to execute their mandates.

The unfolding change in the corporate advisory services market is being driven by Kenyans who have worked for the top firms, learning the ropes from the foreign experts and backing it up with training in foreign schools.

“In certain areas they are undertaking work they never used to take,” says Oliver Fowler, the managing partner at K&S on growing legal advisory market.

A number of lawyers reckon that the transformation of the Kenyan economy has widened the scope of corporate legal work in the region offering new firms opportunities.

The growing shine of East Africa to international investors, notably private equity funds, and a revamp of the region’s infrastructure has created fresh opportunities in project finance, mergers and acquisitions, joint ventures and business formation as well as due diligence investigation that require legal advice to pull through.

Other legal practitioners reckon that the emergence of a new crop of indigenous executives in corporate Kenya in the ‘90s has also helped to bridge the gap between pre-independence law firms and the new rivals.

Mr Mungai says networking is critical in the corporate legal advisory business, adding that firms like K&S and HH&M have won deals based on networks established over decades.

“We have been getting lots of recommendations from local executives who know us well and our capabilities,” he added.

In their latest rankings, Chambers and Partners, and the IFRL1000 say Anjarwalla and Khana is the indigenous firm that poses the biggest threat to the top dogs.

Last year, the firm joined the top tier of corporate law firms in what the two rating agencies have attributed to “the quality and volume of its work.” “In fact, many competitors say it is the firm they would recommend in the case of conflict,” says the IFRL1000 survey.

It topped the ranking ahead of K&S, which has been perched at top for decades.

Private equity, mergers and acquisitions (M&A) and project finance in the telecoms and energy sector are the key strengths for the 27-lawyer team at Anjarwalla & Khanna.

It still however has to add prominent capital markets works such as IPOs and corporate bonds in the list of deals it has pulled through.

The twin surveys found that clients of the firm speak highly of UK-trained Atiq and Karim Anjarwalla who are partners at the firm.

The duo has been leading the company in the past decade after they took over its management from their father Safuddin Anjarwalla — who founded it in 1958 in Mombasa.

Anjarwalla & Khanna’s growth from the small time player it was 10 years ago to the top league is attributed to Mr Karim’s decision to open offices in Nairobi — the nerve centre of the big corporate and commercial legal work.

Some of the high profile transactions that the firm handled last year include the Sh55 billion Lake Turkana Wind Power project and the Sh8 billion East African Marine System (TEAMS) fibre-optic cable project.

Corporate lawyers attribute the drop in Kaplan &Stratton’s fortunes to the exit of two top partners Richard Harney and Philip Coulson, and two other long serving lawyers Angela Waki and Joyce Karanja in 2008 to found Coulson Harney. That left Oliver Fowler as the only experienced practitioner at the firm.

Intellect business

“Law is an intellect business, and a firm can only handle various projects if it can retain and build talent. Anjarwalla has done well on this,” said a lawyer who requested not to be named for legal reasons.

In the short span it has been in operation, Coulson Harney has secured big contracts including the $10 million (Sh750 million) NIC Bank’s acquisition of Tanzania’s Savings & Finance Commercial Bank, WFP’s acquisition of a 27.5 per cent stake in Scangroup for Sh1.3 billion, and the purchase of the 23 per cent stake in Carbacid Investment by Centum Investment for Sh450 million from the Matiba family.

“Coulson Harney debuts in tier four, but the market is anxious to see how the firm develops. It is being seen as the M&A and capital market specialists,” says the IFRL1000 survey.

Richard Omwela’s HH&M company was third but remains one of the most recognised names in Kenya’s legal field having been formed in the colonial times.

Last year, the firm bagged several lucrative deals including KenGen’s Sh15 billion infrastructure bond. It was also the legal adviser in the Sh1.8 billion ($25 million) merger of Brookside Diary and Spinknit Diary and Telkom Kenya syndicated loan of Sh8 billion that was arranged by Standard Chartered Bank.

The 36-year old Paras Shah, a graduate of Kings College London, is another partner at the firm who got glowing tributes from IFRL1000 and Chambers and Partners.

These top dogs are, however, facing stiff challenge from young, ambitious and aggressive homegrown firms such as IKM Advocates, which IFRL1000 describes as “the firm that is building up a reputation, particularly for banking work.”

“They are not getting the top-tier work, but I can see that changing in the next two or three years.” Headed by James Kamau, the firm boasts acting for nine commercial banks in Kenya on security documentation with aggregate values in excess of Sh2 billion.

IKM’s list of clients includes multinationals such as Microsoft Kenya, Hewlett-Packard and Coca-Cola.

Its recent tie-up with DLA Piper (the largest global firm by revenues), is expected to bring in more multinational clients especially those bidding for international legal tenders for projects in Eastern Africa.

Increased foreign investor interest in East Africa, linked to natural resource projects (oil in Uganda and the Sudan), set up operations hubs in the common market or getting involved in the multi-billion infrastructure deals — is expected to generate billions of shillings in legal fees.

Also listed among the top-tier firms is Muthaura Mugambi Ayugi & Njonjo Advocates (MANN), which IFRL describes as “a newcomer to the rankings, and is noted by several partners as a good up-and-coming firm that is developing a reputation for M&A work.”

“‘Suzanne Muthaura is the driving force’ says one competitor,” the report says.

Last year, the firm advised Simba Energy, which is linked to investment firm TransCentury on the Sh7.5 billion ($100 million) construction and operation of an electricity generating plant in Mombasa.

The firm’s entry into the top league was marked by the Safaricom IPO in 2008, but was dragged through controversy after a letter from the Attorney General’s office nearly scuttled the firm’s successful bid to advice on Safaricom.

The letter had alleged a conflict of interest because a partner in the firm, Suzanne Muthaura, was the daughter of the Secretary to the Cabinet, Francis Muthaura.

Nonetheless, the firm was eventually allowed to offer the services after consultations between the A-G’s office and Treasury.

Njoroge Regeru & Company Advocates is another firm that is making its presence felt in the corporate scene.

The 36-year-old Mr Karume, who heads the firm’s corporate division, is carving a niche as an M&A specialist.

It advised Econet Wireless Kenya on Essar Communications Holdings’ acquisition of a $137 million (Sh10.2 billion) stake in the company and the purchase of a majority stake in City Finance Bank by Baraka Africa Consortium.

Another contender

Muriu Mungai & Co counting on government contacts that deliver it work is another indigenous top contender.

The firm is best known for its work representing the Kenyan government on the Safaricom IPO and is led by Mr Mungai — whose years of working on capital market matters has put it in good stead to seal advisory work on joint ventures, due diligence investigations and mergers and acquisitions that have increased in volume and size across East Africa.

The firm is involved in the privatisation of the five sugar companies in a transaction set to be completed by July this year.

“We are getting enquiries from two to three PE (Private Equity) firms every month asking about buying interests,” says Mr Mungai.