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Inside Linklaters it was known as "the three Michaels dinner." In late September, Linklaters German senior partner Michael Lappe took his colleagues Michael Abels and Michael Oppenhoff to dinner in a central Cologne restaurant. Lappe had some bad news for his guests. The U.K. firm was about to close its Cologne office and move part-but not all-of the 100-attorney workforce to a new outpost, 25 miles to the north in Düsseldorf. By opening an office in Germany’s industrial capital, Linklaters was following on the heels of Magic Circle rival Allen & Overy, which had established its own Düsseldorf presence in June [see " A&O's Quiet Entrance"]. The Cologne lawyers unlucky enough not to be tapped for Düsseldorf would be cut loose by Linklaters.

Both Oppenhoff and Abels would be among the 11 partners left behind. "I was surprised [by the news]," admits Oppenhoff. But Lappe had a plan. Oppenhoff’s father had been name partner in the German firm that had merged with Linklaters in 2000, while Abels was one of the Cologne office’s more senior partners. To soften the blow, Lappe suggested that the partners left behind in Cologne had an opportunity to form a new independent practice. Their best chance of success lay in regrouping under the Oppenhoff name.

As the Cologne partners digested the news, Linklaters moved ahead with its plans to open in Düsseldorf. The day after the dinner, the firm’s senior partner, David Cheyne, e-mailed the firm’s 400 or so equity partners with full details. Not only was Linklaters to shutter its Cologne office, but the firm was also hiring two of Freshfields Bruckhaus Deringer’s most senior German corporate lawyers, Ralph Wollburg and Achim Kirchfeld, for the new Düsseldorf office. Adding these two rainmakers and hanging a shingle in Düsseldorf would, Linklaters’s management hoped, give the firm ready access to a corporate world in Germany that so far it had failed to crack.

Düsseldorf and Cologne are close enough that people joke you can see the dark stone spires of Cologne’s imposing cathedral from Düsseldorf’s high-rise offices. Culturally, though, the cities are farther apart, even down to the different beers that locals drink. (Kölsch is the beer of Cologne, while in Düsseldorf they favor the darker Altbier.) Düsseldorf is the historic seat of Germany’s corporate rainmakers, with the industries of the Ruhr valley within easy reach. Steel company ThyssenKrupp AG and energy multinational E.ON AG both have their headquarters in the city. Deutsche Post AG, Deutsche Telekom AG, energy company RWE AG, and pharmaceuticals giant Bayer AG are only a short drive away. The concentration of corporations and their advisers has led to Düsseldorf being known as the "desk of the Rhineland." Germany’s two leading law firms, Hengeler Mueller and Freshfields, both have long roots in the city and enjoy close relationships with many of the region’s major clients. Shearman & Sterling, arguably the most prominent U.S. firm in Germany, opened its first German office in the city in 1991 and has its share of local clients, too.

For all its attraction as a corporate center, however, Düsseldorf has largely missed the recent influx of foreign firms into Germany. Almost none of the large international firms have opted to establish new offices in the city. The U.S. firms that have poured into Germany in the past decade-including, most recently, Paul, Hastings, Janofsky & Walker in December-have each established their base in the financial capital, Frankfurt, or Munich, home to a burgeoning private equity community. So, just what have Linklaters and A&O seen on the banks of the Rhine?

As a statement of serious intent, Linklaters certainly couldn’t have chosen a more apt location for its new Düsseldorf office: The Magic Circle firm has taken over the lavish former offices of Deutsche Bank AG, Germany’s premier financial institution. The Deutsche Bank board used to split its time between Düsseldorf and Frankfurt, before decamping entirely to the country’s banking capital. Today, the offices’ marble walls, finely chiseled and painted ceilings, and antique furniture look far removed from Linklaters’s more modern settings in London or New York.

Wollburg and Kirchfeld moved into their new digs in November, crossing the Rhine from Freshfields’s offices on the city’s left bank. Their new Linklaters Düsseldorf colleagues-among them Wolfgang Sturm, Linklaters’s former head of corporate in Germany, and nine other partners-had a little further to come.

The Cologne outpost was the spiritual home of Linklaters’s German practice. Oppenhoff & Rädler, the German firm that Linklaters acquired in 2000, was itself the product of a merger of German firms; the Oppenhoff portion can trace its roots back in the city 100 years. Former Oppenhoff & Rädler senior partner Michael Oppenhoff, 69, having retired from the Linklaters partnership in 2002, had continued to practice as of counsel at the English firm. But for Linklaters, the Cologne office was part of a wider problem in Germany-namely, a failure to win prized M&A and corporate assignments from the local blue-chip corporations and deliver the kind of profits to keep the firm’s London HQ happy. As a result, Linklaters’s most senior equity partners in Germany earn less than their counterparts elsewhere in the firm.

Other firms, however, have shown that a Cologne office could work. Freshfields’s office in the city has been its most profitable in Germany, according to one former partner. The firm can maintain offices in both Düsseldorf and Cologne, partners insist, because of a high level of integration between them. Cleary Gottlieb Steen & Hamilton opened in Cologne in 2002 and maintains a small, highly focused practice built around antitrust and corporate work.

Linklaters’s full-service offering in Cologne, however, wasn’t in step with the firm’s avowed corporate and finance focus. "Cologne is a great place to be, and it was our oldest and most traditional office, but it’s not the place where German industry goes to see its lawyers," says Linklaters’s Lappe. To serve the kind of clients that fit with the Magic Circle firm’s global vision-acting for Germany’s largest public corporations (primarily those listed on the DAX 30) and financial institutions on complex, cross-border work-Düsseldorf was seen as a crucial location.

Linklaters had been eyeing Düsseldorf for several years but, according to Lappe, the firm wanted a "trigger event" to precipitate a move into the city. In other words, a batch of suitably high-profile laterals to kick-start a practice. Once Linklaters started talking to Wollburg and Kirchfeld in early 2007, it became clear that the firm had found its trigger.

A frequent smoker, Kirchfeld has the easy charm that clearly works well with clients. He’s remembered by former colleagues for the chaos that characterized his office. "You’ve never seen anything like it, papers and ashtrays everywhere," says one. (The joke internally was that someone had broken into the office but that no one noticed.) His personal skills had made him an obvious choice to lead Freshfields’s corporate practice in Düsseldorf.

Wollburg lacks some of Kirchfeld’s charm, according to several who know him and have worked with him. One M&A lawyer describes him as "a buoyant personality," but adds, "When you see him on deals, you can see that he can’t be an easy person to work with." Still, there’s no doubt that Wollburg’s M&A track record and relationships placed him at the heart of corporate Germany. In 1999 he represented the German telecom Mannesmann AG in its defense-ultimately unsuccessful-against a $185 billion bid from the United Kingdom’s Vodafone Group plc, still the world’s biggest takeover.

Today, Kirchfeld and Wollburg bring close ties to clients such as ThyssenKrupp and German health care company Fresenius SE. Their focus on Germany’s large public corporations closely matches Linklaters’s client base, Kirchfeld says: "Linklaters has a clear strategy to focus on leading corporates and financial institutions." Although he declined to comment on his former firm, sources who know him well point to Freshfields’s increased focus on private equity clients-perceived to come at the expense of its major corporate relationships-as a source of frustration. Freshfields’s German managing partner, Manfred Finken, admits that he was "not particularly happy" to see Kirchfeld and Wollburg leave. But he hastens to add: "The corporate group here is so strong that it doesn’t really hit us."

Finken is clearly a man who is well versed in spinning a line on partner departures-as Freshfields has restructured its global partnership, the German practice has seen its fair share of partners move on, including some, such as Hans-Jörg Ziegenhain in Munich and Jürgen Sieger in Cologne, that the firm would undoubtedly rather have kept. The size of the firm’s German partnership has fallen by two dozen, from 159 equity partners at the time of the 2000 merger between Freshfields and Bruckhaus Westrick Heller Löber to 135 equity and salaried partners today. (About 15 percent of Freshfields’s Germany partnership is made up of nonequity partners, Finken confirms, declining to give specific numbers.)

Asked why he didn’t move to a U.S. practice, Kirchfeld says in an understatement: "Linklaters profits are not bad. . . . They’re comparable with most of the leading U.S. firms." (Last year the U.K. firm’s profits per partner of $2.385 million made it the ninth most profitable firm in the world, according to The American Lawyer‘s Global 100.) Such was Linklaters’s determination to land Kirchfeld and Wollburg that the pair joined the top of the firm’s lockstep, set to earn $3.2 million each-the first German partners to enter at the top of the equity. Since the merger with Oppenhoff & Rädler, Linklaters’s German equity partners have operated on a different lockstep system than the rest of the firm’s equity partnership, largely to reflect the lower profitability of the German practice.

Although Lappe refuses to comment on the workings of the lockstep, a source at the firm confirms that the German partners are paid on a scale of 7.5-20 points, compared with a scale of 10-25 for the rest of the firm. This means that German partners are currently paid $985,000-$2.6 million, compared with $1.3-3.2 million for all other equity partners.

That’s changing. Linklaters has announced that by May 1, 2009, it will merge the two locksteps. Linklaters always intended to bring the two systems together, Sturm insists, but the hiring of Kirchfeld and Wollburg means that it’s happening sooner than expected. "Since the merger [with Oppenhoff & Rädler], we’ve tried to simplify the lockstep system," Lappe says. "We’re in talks about it right now, but it will take months of consultations before anything is finalized."

Despite these changes, Lappe stresses that deciding which partners would join the new Düsseldorf practice-and who would be jettisoned in Cologne-was not based on financial performance but more on practice fit. The new office is built as though it were a high-end, bottom line-driven, corporate finance boutique. Six of the partners who moved from the Cologne office are M&A specialists (Kirchfeld and Wollburg make it eight). Two tax partners and two antitrust partners also moved. For expertise in specialties such as employment and real estate, Düsseldorf will call on Linklaters’s other German offices in Frankfurt, Munich, and Berlin.

Left behind in Cologne, the 11 former Linklaters partners have regrouped to form Oppenhoff & Partner. Michael Oppenhoff is managing partner, and with several internal promotions, the firm now has 21 partners. (In total, the new firm is composed of 40 attorneys cut by Linklaters.) Their expertise covers a broad range of practice areas including corporate, litigation, IT, real estate, tax, and labor. (One Cologne partner, Georg Maier-Reimer, was invited to move to Düsseldorf with the Magic Circle firm, but opted instead to join Oppenhoff & Partner.)

Despite his initial surprise at Linklaters’s decision to close its office in Cologne, Oppenhoff says he took the change in stride. There was little point in getting agitated over a decision that was already a done deal, he says. "I informed the partners who were not part of the move, we met, and we decided to set up on our own," Oppenhoff says. Former clients of the Cologne office such as Ford Motor Company, French insurer Axa, and Johnson & Johnson have agreed to use the new firm, he says. Oppenhoff & Partner, he emphasizes, will remain full-service while adopting an approach far removed from Linklaters’s global vision.

"Linklaters has gone too far in the direction of making a partner more of a work organizer than a working partner," he maintains. "We don’t believe in a [partner-to-associate] leverage of 1:6 or 1:4. We’d be happy with 1:2. It’s a different approach [than] the Linklaters of this world."

Düsseldorf has its detractors. "Is the Düsseldorf market declining?" asks Mario Schmidt, a Frankfurt-based Willkie Farr & Gallagher partner. "Industrial companies aren’t as dominant as they were, Düsseldorf banks are not in their best shape, and the old Düsseldorf club [of businessmen and advisers] is breaking down," he says. Willkie is one of a group of U.S. and U.K. firms that have focused their expansion efforts on Germany’s financial capitals: Frankfurt, the banking stronghold, and Munich, the private equity center.

But Düsseldorf retains a unique place in the German market as the gateway to Germany’s industrial heartland. That’s still where German products-and deals-are made. It’s not so hard to develop a taste for Altbier-especially if there are plenty of deals to toast with it.



Attorneys in Düsseldorf 60

Attorneys in Germany 300

Linklaters shocked the market by closing in Cologne, opening in Düsseldorf, and poaching two of Freshfields’s leading M&A advisers. The move prompted Linklaters to review its lockstep compensation system in Germany, so the pressure is on the new recruits to win clients and prized M&A assignments.

Allen & Overy

Attorneys in Düsseldorf 13

Attorneys in Germany 150

Allen & Overy made a less dramatic entrance into the Düsseldorf market than Linklaters-but like its Magic Circle rival, A&O is hoping that the new office will deliver lucrative work from the local corporations.

Freshfields Bruckhaus Deringer

Attorneys in Düsseldorf 110

Attorneys in Germany 590

Freshfields traces its roots in the city back to 1919, so it’s considered part ofthe Düsseldorf establishment. The firm is one of the top two corporate advisers in Germany, although the market is watching for the impact of the loss of two top M&A partners to Linklaters.

Shearman & Sterling

Attorneys in Düsseldorf 35

Attorneys in Germany 120

Shearman lost former cohead of global M&A Hans Rolf Koerfer to Allen & Overy’s new office, but it’s still one of the leading corporate practices in Germany. Its principal German rainmaker and global co-managing partner, Georg Thoma, is based in Düsseldorf.

E-mail: [email protected]

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