If you can make it there… Helen Mooney asks how outsiders can make a significant imprint on the world’s toughest legal market
All the magic circle firms except Slaughter and May have now set up significant offices in the Big Apple.
New York and the wider US market is definitely on the radar screen for the top four UK firms, but as yet none have successfully managed to break into the US legal services arena.
Two weeks ago Allen & Overy (A&O) hired four new US-qualified partners in New York. In March the firm hit the headlines and caused ripples across the Atlantic by bringing on board Cravath Swaine & Moore M&A and derivatives partner Dan Cunningham.
By taking a proactive approach to the domestic US legal arena A&O has sent out clear signals to its white shoe neighbours that it is shying away from a US merger.
In the same week Freshfields Bruckhaus Deringer announced it had hired two new US-qualified partners. Structured finance specialist Tim Little has joined the firm from Shearman & Sterling and project finance partner Mark Spivak has been brought on board from Texas-based Vinson & Elkins. However, the UK firms, no matter how they argue their case, have not yet managed to gain any credible foothold in the market to rival their old school New York counterparts.
The UK firms claim that they are not attempting to compete with the white shoe elite for a slice of the US domestic market. Yet both Freshfields and Linklaters & Alliance have signalled their intention to try to merge with a top US firm to guarantee high quality US work.
Other than Clifford Chance’s (CC) merger with Rogers & Wells in January 2000, a UK/US merger has failed to become reality.
So how can the UK firms make any significant imprint on the Manhattan skyline?
The magic circle could do worse than to take some tips from some of the out of town firms that have succeeded in carving out a place for their East Coast practices.
One firm that has succeeded in gaining a New York presence is Los Angeles headquartered Latham & Watkins. The West Coast firm has had a New York practice since 1985, much longer than any of the UK practices. Linklaters and Freshfields only really began to position themselves for a US assault in 1998. But time is not the only reason the firm’s New York rivals reluctantly concede that it is one of the few out of town practices to have broken the Wall Street lawyers monopoly on top-tier finance work.
Lathams has managed to secure itself a place on the list of firms used by investment banks Goldman Sachs and Lehman Brothers for capital markets and M&A work, a position the UK firms can only look on with envy.
And it is true that Lathams has worked hard to do so. Not surprisingly partners at the firm believe they give more than their rivals.
“We try to provide a better service than the New York firms, we give more partner time and we are more flexible as to how we approach our work with the investment banks,” says Kirk Davenport, a New York-based partner and head of Lathams’ corporate practice. “Some of the New York firms seem to put more emphasis on keeping the partners happy rather than their clients,” he adds.
Lathams has earned the respect of its peers. One leading partner at a top New York firm readily admits that the firm appears to have succeeded where others have not. “Lathams has somehow got the formula right. Even though they are not from this neck of the woods they have earned a level of respect, something I doubt we will see from either the Pillsbury Winthrop or the Sidley Austin Brown & Wood mergers,” he says.
Lathams is consistently ranked top 10 for turnover in The American Lawyer’s top 100 law firms annual table. This year the firm repeated last year’s performance coming fourth with a turnover of $624m (£455m). This is higher than both Sullivan & Cromwell which ranked eighth with a turnover of $516m (£374m) and Shearman & Sterling, which came fifth with a $590m (£418m) turnover.
In order to build up a credible New York office Lathams has managed to hire some quality lawyers. Most recently bankruptcy specialist Shari Siegel joined the firm’s insolvency practice as of counsel from white shoe giant Simpson Thacher & Bartlett.
In January the firm also brought on board M&A partner Charles Nathan from Fried Frank Shriver Harris & Jacobson to head the firm’s M&A practice. At associate level, Davenport claims that the attraction is the degree of involvement that junior lawyers have in the running of the firm, not least the fact that they get to vote in partnership elections. With 184 lawyers the New York office is the firm’s second largest and it plays to the firm’s overall strengths in corporate and project finance, M&A, litigation, tax and IP.
The key element in Lathams’ success has been patience. Its New York operation is 16 years’ old, but the success it is currently enjoying in the corporate field is a more recent phenomenon. Initially, the firm concentrated on litigation, tax and project finance while quietly building its corporate capability. It did not, comment some of its admirers, try to do everything at once.
Lathams does seem to be well on its way to orchestrating a New York practice which is well regarded by East and West Coast lawyers alike, and has almost overcome the obstacle of winning over the investment banks.
From this side of the pond there would appear to be obvious comparisons between Lathams’ New York practice and the newly-created Sidley Austin Brown & Wood.
When Chicago firm Sidley & Austin merged with New York’s 425-lawyer Brown & Wood in May, the firm became the fourth-largest in the US. But size does not automatically equal success and many New York lawyers are sceptical.
One partner at a New York-based firm says the merger has not been well received.
“You cannot put two B firms together to form an A team, it just doesn’t work like that. To compare Sidleys with Lathams in New York does not make sense.
“Although Lathams has a way to go before it completely enters the Wall Street clique it is well on its way, and the fact that it has not merged in order to do so is much to its credit.”
Lathams may not yet have a prime Manhattan location but native New York lawyers have granted it a certain admiration that UK firms can only dream of.
Ultimately the UK firms could do well to take a leaf out of Lathams’ strategy book. Yet even if they do, the inherent problem is that Latham & Watkins is a US firm. And US clients will choose a US firm over any other if it can provide all the services they require.
