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Despite the increasingly onerous regulations meted out to banks since the 2008 credit crisis, including the heightened strictures placed on capital reserves (most recently as set out in Basel III), lenders are, for the right assets, more than willing to provide funding. Banks’ increased willingness to lend, the relatively vibrant CLO market (despite its own regulatory hurdles with the risk retention rules), and a paucity of deals (due to a continued disconnect between buyer and seller price expectations) has meant that sponsors and corporate acquirers can increasingly dictate the terms with which acquisitions are funded. The current buzzword in the industry is “convergence”, namely convergence between New York and European loan documentary terms. Current investor appetite means the most attractive terms potentially can be selected from both markets and across product lines, with the result being that European based loan arrangers, investors and advisers are seeing more US market derived provisions than ever before. European lenders have been much more inclined to provide terms to sponsors that more closely resemble covenant-lite loans and loans that resemble Term Loan B facilities, particularly on the larger mandates. On the larger deals in the market flexibility is key, and the law firms that are most valued by participants in the industry are those that can provide a credible offering across the key financing products including high yield bonds, Term Loan B, Yankee loans and hybrid European leveraged loans with New York style covenant packages.

This trend of cross-pollination naturally plays to the strengths of the US firms based in London, the most prominent of these in the leveraged market being Latham & Watkins, which is able to provide a flexible approach to clients on both New York and English law financing products in the loan and bond markets. White & Case LLP’s broad and comprehensive finance offering makes it another key player among the US law firms.

In spite of this changing dynamic in the leveraged finance market, the Magic Circle firms remain at the heart of the highest-profile deals in the market and have to varying degrees been relatively successful in building up their high yield and Term Loan B capability. Of these, Allen & Overy LLP, Clifford Chance LLP and Linklaters LLP all remain at the top of the acquisition and investment grade finance market. The sheer strength and depth of their teams, as well as their large international spread of offices ensures that they are able to handle a tremendous range and volume of multi-jurisdictional mandates. The hire of high yield specialist Ward McKimm from Kirkland & Ellis International LLP was a statement of intent from Freshfields Bruckhaus Deringer LLP and adds even greater bandwidth to the firm, which benefits from a particularly strong debtor-focused client base of loyal FTSE clients and private equity sponsors. Slaughter and May is also able to leverage an enviable roster of corporate clients, as well as often being involved in sensitive matters involving government input.

Direct lending continues to inform a significant amount of work in the mid-market in particular and the unitranche product remains popular with companies requiring more leverage than banks are prepared to provide, but are too small to issue on the debt market. Ashurst and Hogan Lovells International LLP’s remain the dominant players in this space, although there are many other firms that are seeing opportunities in an increasingly mature market. In addition to its deep penetration with credit funds, Ashurst’s longstanding ties with private equity sponsors and numerous banks ensures that it picks up a raft of new money deals as well as matters that require restructuring. Other key players include Baker McKenzie LLP, for emerging markets and bank lending; Dentons, for trade finance and asset finance; and Simmons & Simmons, for derivatives and trade finance.

Clyde & Co LLP, Hill Dickinson LLP, Holman Fenwick Willan, Ince & Co, Reed Smith LLP and Stephenson Harwood all have standout commodities (physicals) practices, a practice area that relies heavily on a strong complementary shipping group. Able to tap into their respective pre-eminent sponsor client bases, Kirkland & Ellis International LLP and Simpson Thacher & Bartlett LLP perform well for acquisition finance and corporate restructuring, as does Weil, Gotshal & Manges, which, in addition to its entrenched private equity ties has an increasingly formidable roster of banking clients.

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Legal Developments in London for Overview

  • New revised guidelines for administrators in pre-pack sales

    Pre-pack sales by administrators are now used frequently enough for most people in business to be aware of them and many have come across them in their business lives. A small amount of controversy still attaches to pre-packs, but it is probably right to say that they are now an accepted part of the UK business scene as a useful means of rescuing a business in difficulty and preserving some or all of the jobs connected with the business.
    - Druces

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