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Ask New York managing partners to name their chief competitors and they invariably begin with other New York firms. A few minutes into such conversations, the big London firms make their appearance, often accompanied by a pointed remark on the painfully slow progress of U.K. firms’ stateside expansions. Press a little further and the big firms out of Chicago and California come up. As talk shifts from the general to the specific, firms in Boston or Washington may get a mention. But conversation could likely carry on for hours without any mention at all of firms from the South. The major law firms from Texas, Georgia and Florida are not taking such underestimation lying down. Not content to be relegated to local counsel status, they are entering the New York market in increasing numbers. Though relative newcomers, several already count more than 100 lawyers in New York. The top firms in the South have reason to be optimistic about expanding in New York. After all, they have been among the beneficiaries of one of the greatest demographic shifts in modern American history: the migration of businesses and skilled labor from the Northeast and Midwest to the so-called Sun Belt. Not only have large corporations like Exxon relocated south, the region has also spawned homegrown giants like Wal-Mart, now the largest corporation in the world in terms of sales. But while Southern firms have no shortage of experience servicing the needs of large corporations, they face other challenges in expanding in New York and elsewhere. For one thing, the region’s lack of major international financial centers means Southern firms generally enter the New York market with relatively small portfolios of existing capital markets work. Moreover, many Southern firms are particularly challenged by the disparity in the economics between New York and their home markets. Hiring lateral partners in New York is a costly investment for any out-of-town firm, but some Southern firms are facing the fact that associates in New York earn more than partners in some Southern cities. Southern firms may also face unique cultural issues in going after New York lateral partners. Stereotypes die hard, and many New Yorkers are wary of the South in ways they are not wary of other parts of the country. But the challenges facing Southern firms in expanding in New York also point to why those firms see such expansion as crucial. Successful New York expansion can give Southern firms the capital markets expertise and exposure they seek, and improve their firmwide economics as well. And, perhaps more so than firms from elsewhere, Southern firms need a substantial New York presence to counteract perceptions of provincialism and establish their credentials as national firms. The fortunes of Houston law firms have traditionally been tied to those of the energy industry. Owing to the far-flung oil-and-gas exploration and production efforts led by Texas companies, Houston firms have developed formidable project finance expertise. But much of Houston firms’ project finance capability is based in Houston and Washington, D.C. New York offices of Houston firms have often reflected litigation strength and nascent capital markets practices. Those have been the practice strengths of Fulbright & Jaworski’s New York office over the past decade or so. One of the first firms from the South to open a major New York office, Fulbright & Jaworski entered New York with the acquisition of the former Reavis McGrath in 1989, and now counts 114 lawyers in New York. Growth has been muted, considering Reavis McGrath had 105 lawyers at the time of the merger. William Bush, partner-in-charge of the firm’s New York office, said the recession of the early 1990s took its toll on the office. The experience left the firm a little gun-shy about rapid expansion, made more difficult in any case by market conditions in the late ’90s that favored California and New York firms. “Right now it’s different than it was four years ago,” said Bush. “The concern that it’s difficult to expand in New York has gone by the boards.” Bush said Fulbright & Jaworski has increasingly moved in the direction of building a New York-based structured finance group that draws on the firm’s strengths in project finance. The firm’s acquisition of an equipment finance group from the former Lord Day & Lord, Barrett Smith has provided the necessary New York critical mass, he said. Otherwise, the firm’s New York-based corporate practice handles a variety of capital markets work for middle-market companies, startups and private equity groups. The firm is also looking to grow its New York-based litigation group, which is not as strong as it has been firmwide. Intellectual property is also a targeted area; the firm acquired the small IP firm of Felfe & Lynch in 1998. Intellectual property is by far the major focus of Houston-based Baker Botts’ New York office. The roughly 70-lawyer office gained more than half its strength from the firm’s 1997 acquisition of New York IP boutique Brumbaugh, Graves, Donahue & Raymond. Like Fulbright & Jaworski, Baker Botts is looking to build and diversify its corporate practice. The firm wants to expand its project finance strength into New York and it is also fielding a practice group aimed at the telecommunications and media industries. Litigation is also under-strength in New York, according to New York managing partner John M. Huggins. “We get one big case and we’re maxed out,” he said. Huggins said the firm would like to have more than 150 lawyers in New York. The wave of massive mergers by other firms has also not been lost on Baker Botts, he said. “There’s a degree of serendipity to all of them,” he said. “I wouldn’t say it’s beyond the realm of possibility for us.” Vinson & Elkins is now the most well-known of Houston firms, albeit for reasons that have not exactly helped New York expansion, said Philip Weller, the managing partner of the firm’s 54-lawyer New York office. Most potential lateral partners have expressed to the firm their belief that Vinson & Elkins did nothing wrong in its representation of Enron Corp., said Weller. But the potential liability for the firm, which has been named as a defendant in the consolidated securities class action arising from the Enron matter, has created an air of uncertainty. “It clearly has some impact,” he said. “We expect it will fade as people find out more about what happened.” Concerns over Enron have not prevented Vinson & Elkins from substantially bolstering its litigation practice lately, notably with partners from Rosenman & Colin and Squadron Ellenoff Plesent & Sheinfeld, two New York firms taken over by out-of-town mega-firms in the past few months. But gaining capital markets work was the goal for the firm when it opened its New York office in 1998, and that remains the case today, though the firm also has project finance and bankruptcy capabilities. “Everyone wants to do that kind of work when they come to New York,” he said. DALLAS FIRMS Over in Dallas, Akin Gump Strauss Hauer & Feld has been planning a highly aggressive growth strategy in New York. The firm now counts 150 lawyers in New York. According to firm chairman R. Bruce McLean, private equity-oriented corporate, project finance and litigation are the core practice groups in the New York office, reflecting strengths in Dallas as well as Washington, D.C., where the firm has its largest office and major government regulatory practices. The private equity group, which handles mergers and acquisitions, corporate finance and the like for investment groups, started in Washington but is becoming the heart of the New York practice, said McLean. Real estate, tax and white-collar crime are also areas where the firm believes it will see growth. The firm expects to double the size of its office over the next five years. Though it has shied away from mergers, the firm would not rule anything out, McLean said. “If we saw the right group or a firm that has our level of practice, we’d have to look at it,” he said. Dallas’ Jenkens & Gilchrist has largely lacked the ties to the energy industry or large corporations that have aided the expansion of other large Texas firms. It has grown rapidly by pitching primarily to middle-market companies, a focus that is also characteristic of its New York office. William Durbin, the firm’s managing partner, said Jenkens & Gilchrist had set forth expansion in New York and Chicago as part of a growth strategy that has seen the firm almost triple in size to 600 lawyers since 1995. The firm acted on its plan in New York in 2000 by acquiring the former Parker Chapin, a middle-market corporate firm. The New York office, which currently operates as Jenkens & Gilchrist Parker Chapin, now counts around 130 lawyers. Durbin said the firm wants to get to 200 lawyers in New York “sooner rather than later.” The firm is now looking to attract laterals from big New York firms by pushing an entrepreneurial culture and a very flexible compensation system. Though the firm’s profits per partner were $535,000 in 2000, according to The American Lawyer‘s AmLaw 100, Durbin said the firm’s biggest rainmakers earn more than $2 million a year. The approach of Atlanta’s King & Spalding is not quite so aggressive. The blue-chip firm represents some of the South’s biggest names, including Coca-Cola, Home Depot and United Parcel Service. Its profits per partner of $820,000 in 2000 place it squarely in the high-end among non-New York firms. Concerns about diluting quality of work and firm culture weigh against rapid lateral hiring and mergers, said firm chairman Walter W. Driver Jr. “Most of the people we look at don’t meet our criteria,” he said. “We aren’t interested in acquiring a lot of second- or third-tier lawyers.” The firm opened its New York office, he said, to take on the major New York firms that had received capital markets business from King & Spalding’s major clients as well as to have a gateway for international expansion. The 125-lawyer New York office retains its capital markets focus. According to Driver, the firm is seeking to strengthen its New York-based M & A, structured finance, derivatives and public finance practices by forging deeper relationships with major financial institutions. FLORIDA FIRMS Of all the law firms in the South, Florida firms Greenberg Traurig and Holland & Knight have attracted the most attention for their massive expansions. Richard Rosenbaum, the New York managing shareholder of Miami-based Greenberg Traurig, said Florida firms have a more acute fear of being left behind by industry consolidation trends. “Over time, if we didn’t expand, we would have been marginalized,” he said. “Important matters wouldn’t reach us except as local counsel.” Greenberg Traurig now has the largest New York office of any firm from the South. At about 200 lawyers, the New York office is, in fact, the largest in the firm. Rosenbaum said the firm is pushing an entrepreneurial culture and a diversified practice in building its New York office. “Unlike other firms, we didn’t just come here to do capital markets, international or IP work,” he said. The New York office, like the firm, is spread fairly equally among real estate, IP, technology, litigation and corporate practices. In the long run, the goal is to grow a much larger New York corporate practice, Rosenbaum acknowledged. Though the firm’s corporate practice has traditionally been aimed at middle-market clients, Rosenbaum said the firm is also hoping its New York office will become involved in larger transactions with larger clients. “We remember where we came from,” he said. “But we feel it will be beneficial to all of our clients if we did more large transactions.” The expansion tear of Tampa’s Holland & Knight continued last week with the acquisition of a 160-lawyer Chicago firm. The firm’s growth in New York also has been achieved largely through merger. The 135-lawyer New York office is mostly comprised of staff from two firms, maritime firm Haight Gardner Poor & Havens, acquired in 1997, and Gilbert Segall, acquired in April 2001. The Haight Gardner acquisition has given Holland & Knight leading maritime and transportation practices. The firm’s goal is to expand its New York-based corporate practice and capture larger clients, said Robert R. Feagin III, the firm’s managing partner. “We are real happy to work our way up by doing a bang-up job for middle-market companies,” he said. The firm’s expansion has created some internal controversy. In a memo leaked to the press in March, one partner complained about the aggressive expansion that was cutting into partners’ profits and creating situations where associates in some markets earned more than partners in others. The firm’s 2000 profits per partner were $395,000. In order to improve its finances, the firm fired 60 lawyers, mostly partners, in May. Feagin said the New York office would reach 200 lawyers in a few years, and he noted that in terms of business generated throughout the firm, the office was already contributing to profits. He said the firm did not track the office’s standalone results. “We know we’re making an investment,” he said. “We think we’ve done our due diligence.”

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