The Schroders dynasty is swallowed by US retirees

One scoop to start: Goldman Sachs general counsel Kathy Ruemmler will resign this summer after documents released by the US Department of Justice revealed the extent of her ties with sex offender Jeffrey Epstein.

And another one: Paramount is in discussions to nominate Pentwater Capital Management, a top Warner Bros Discovery shareholder that has voiced support for its rival bid, to the studio and streaming giant’s board as it seeks to derail Netflix’s takeover.

And a last thing: New York broker Clear Street has postponed its initial public offering hours after slashing the size of the planned deal by two-thirds, blaming volatile market conditions for its last-minute retreat.

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In today’s newsletter

The end of an era in British finance

One of the last bastions of British finance is falling into American hands.

Schroders, the more than 200-year-old British asset manager backed by its founding family, shocked London on Thursday morning with a deal to sell to US rival Nuveen for £9.9bn.

The company, with its £824bn of assets, has been a big champion of the London stock market. Schroders’ chief executive Richard Oldfield said as recently as July that the family had no intention of selling.

But in the end, the decision to sell would have been difficult for the family but “inevitable”, Philip Augar, who formerly worked at Schroders, writes in the FT.

Bankers at Wells Fargo — rarely involved in big-ticket UK M&A — were the lead adviser to Schroders alongside Barclays and JPMorgan Chase, while BNP Paribas advised Nuveen.

Asset managers had been among the last holdouts in the City of London to remain under UK ownership.

Stalwart British investment banks such as Cazenove were acquired by American lenders a couple decades ago. Schroders sold its investment banking arm in 2000 to Citigroup.

In the ensuing years, foreign groups have also dominated London’s law and insurance industries.

Now, changes in the asset management industry have meant firms can no longer hold out. Smaller asset managers have cut jobs and consolidated as the rise of low-cost passive investing has redrawn the asset management industry.

One person close to the deal said a crucial factor was the industry’s need for scale to support growth and offset mounting costs. “You need to be a global business because asset management is global and in active management you need to be in the $2tn club.”

The proposed Schroders sale comes on the heels of activist investor Nelson Peltz’s move late last year to acquire UK-headquartered money manager Janus Henderson. Private capital giants Blackstone, Apollo and Brookfield are also lurking acquirers.

Schroders’ Oldfield called the sale to Nuveen, whose $1.4tn of assets is mainly in private markets and fixed income, a “huge opportunity”. Nuveen’s parent company, TIAA, was founded in 1918 by Scottish-American industrialist Andrew Carnegie and provides retirement plans and annuities.

While there are some concerns over whether Schroders sold out too soon in the midst of a turnaround, the combined group should have a better chance of competing as one of the world’s largest asset managers.

As Schroders prepared to depart the UK stock market, its CEO struck a more supportive message for London. Oldfield said: “We can obsess about the listing, but what is absolutely undiminished is our commitment to supporting and driving the UK capital markets.”

However, the direction of dealmaking seems clear.

The clash of Trump’s antitrust lawyers

Last year as Gail Slater was seeking confirmation to a top antitrust role in the Trump administration, observers questioned whether she’d actually have the leeway to enforce competition rules.

Slater will “be ultimately working for an extremely impulsive boss who I’m afraid is going to paint her into a corner . . . by making dramatic pronouncements that are intemperate”, former FTC chair William Kovacic told the FT at the time, referring to US President Donald Trump.

He added: “How are you going to cope with that?”

It was a prescient question, with Trump weighing in publicly on major mergers such as the battle between Netflix and Paramount to buy Warner Bros Discovery. But it turned out that the boss who Slater would run up against was attorney-general Pam Bondi.

On Thursday, after Slater had led the justice department’s antitrust unit for less than a year, she announced she was leaving, following FT inquiries about her imminent departure.

The upheaval comes after Slater faced internal pressure from Bondi and allies over her handling of antitrust investigations.

Slater was a somewhat atypical appointee. A Trump loyalist, she seemed to satisfy the anti-business sentiments of both right-wing populists and progressives, who thought she would continue the Biden administration’s vigorous antitrust enforcement.

But her position had apparently become untenable. Slater has been frustrated with what she viewed as persistent political interference from Bondi and those linked to her, people familiar with the matter told the FT.

The friction has played out across staffing decisions, public messaging and case strategy. Several of Slater’s deputies have been dismissed or sidelined in recent months, and people familiar with the internal dynamics describe tighter oversight from Bondi’s office over politically sensitive merger reviews.

DD suspects companies including Live Nation, Google and Apple that are facing antitrust suits are glad to see the justice department preoccupied by the break-ups happening within its own ranks.

How to buy a law firm if you’re not allowed to buy a law firm

DD was talking to the head of a law firm recently who described the American legal profession as “the last unplucked turkey”.

Basically, it’s the only professional service so far that has been immune to the tentacles of the $22tn private capital industry.

Could that be about to change?

Ethics rules ban non-lawyers from owning US law firms, but there are a bunch of clever people who see that not as an insurmountable hurdle so much as a puzzle to be solved.

Some of them spoke to the FT’s Stephen Foley and DD’s Kaye Wiggins about how they think it could work.

It’s similar to the structure private equity firms have used to buy accounting firms in recent years, and for doctors’ and dentists’ practices before that.

It involves splitting the law firm into two parts. One entity, fully controlled by lawyers, provides legal advice to clients. The second, called a management services organisation, houses the back office and other assets, including all the non-lawyer staff.

The MSO sells services back to the other side of the business in exchange for fees that make the entity profitable. And the MSO sells an ownership stake to private equity.

Got it? No worries. Here’s a diagram.

A diagram showing how institutional investors and law firm partners invest through a management services organisation, which provides services to a separate law firm under a services agreement.

Austin Maloney, a lawyer at Hunton Andrews Kurth, which advises private equity, says the trick is to define “legal work”, which must be done in the lawyer-owned entity, as narrowly as you can. “The goal is to perform as many services as possible in the MSO. No investor is going to sign up to this if they can’t get the right amount of juice out of it.”

The clever people are all sure it’ll pass the legal profession’s ethics tests.

What about you, DD readers, do you think it’ll pass muster as a financial proposition? stephen.foley@ft.com and kaye.wiggins@ft.com would love to hear from you.

Job moves

Debevoise & Plimpton has hired Rachel Ehrlich Albanese, Sam Newman and Daniel Shamah as partners in its restructuring group. Albanese joins from DLA Piper, Newman joins from Sidley Austin and Shamah joins from Cooley.

Sanofi has replaced chief executive Paul Hudson with Belén Garijo, head of German drugmaker Merck.

Moelis has hired Kyle Reidy as a managing director to lead its private credit secondaries business. He was previously global head of structured credit origination at Barclays.

Saudi Arabia has named Fahad Al-Saif as the kingdom’s investment minister. Al-Saif is head of investment strategy at the Saudi sovereign wealth fund, the Public Investment Fund.

Latham & Watkins has hired Joel Weinberger as a structured finance partner in Chicago. He rejoins the firm from Kirkland & Ellis.

Willkie Farr & Gallagher has hired Maurio Fiore as a private equity and M&A partner in New York. He joins from Cravath, Swaine & Moore.

Smart reads

Cold war China is designing a fleet of ships that can plough through icebergs, the FT reports, the latest sign of the country’s growing presence in the far north. The Trump administration, for its part, recently set aside funds for icebreakers as well.

Brain drain The US talent premium is disappearing, John Thornhill writes for FT Opinion. Indian tech entrepreneurs who stayed close to home have been outperforming their counterparts who did stints at US universities or companies.

Well-placed bets New research finds that prediction markets are about as good as professionals when it comes to some types of economic forecasting, The New York Times reports. One explanation: Gamblers only bet when they think they’re right.

News round-up

Anthropic raises $30bn at a $350bn valuation in latest funding round (FT)

Citigroup raises CEO Jane Fraser’s pay to record $42mn (FT)

Rally in corporate bonds prompts ‘bubble’ fears (FT)

Israel charges two over Polymarket bets on military operations (FT)

SoftBank swings to profit on $4.2bn gain from OpenAI investment (FT)

Four partners leave EY after independence rule breach on Shell audit (FT)

Due Diligence is written by Arash Massoudi, Ivan Levingston, Ortenca Aliaj, Alexandra Heal and Robert Smith in London, James Fontanella-Khan, Sujeet Indap, Eric Platt, Antoine Gara, Amelia Pollard, Kaye Wiggins, Oliver Barnes, Tabby Kinder and Julia Rock in New York, George Hammond in San Francisco and Arjun Neil Alim in Hong Kong. Please send feedback to due.diligence@ft.com