Helen Mooney and Felicity Clarke assess the efforts UK magic circle firms are making in trying to break into the ultra-competitive US legal market
On the road to legal globalisation, the US market is the final frontier.
Expansion by magic circle firms in recent years has seen them gain dominance in key European and Asian markets, but when it comes to the US, firms such as Linklaters & Alliance, Allen & Overy (A&O) and Freshfields Bruckhaus Deringer are still trying to get a foothold. So far Clifford Chance is the only one to pull off a merger, but the success of the resulting Clifford Chance Roger & Wells remains to be seen.
In the meantime, there is little prospect of heavyweight mergers on the New York horizon for other magic circle firms, which places a major stumbling block in the road to achieving the critical mass of 200-400 lawyers they need to establish an influential presence in the US legal market.
So in the absence of any New York-based firms wanting to play ball, it looks as if a cherry-picking approach is the only way to infiltrate the US market for the time being. And this is exactly what A&O and Freshfields are doing.
A&O claims to have put merger aspirations on the backburner to concentrate on building its US-based M&A practice through lateral hires. In March this year, it recruited Dan Cunningham from Cravath Swaine & Moore to head the department and boosted the team again with its recent hiring of four partners and one senior counsel, led by Vinson & Elkins’ Eric Shube.
But a star recruit here and there is hardly going to dent the market – and it is widely predicted that the trickle will not become a flood until profits per partner at the UK-based firms catch up with New York levels.
Arthur Golden, a partner at Davis Polk & Wardwell, confirms that A&O’s recent recruitment drive is not ringing any alarm bells in New York, yet. “You are not going to see the likes of Dan Cunningham leaving top New York firms in any great numbers,” Golden says.
Freshfields followed A&O’s lead with its recent hires of Tim Little from Shearman & Sterling and Mark Spivak from Vinson & Elkins. But unlike A&O, Freshfields’ goal is a top-tier US merger.
This, says partner Stephen Revell, means playing the waiting game while watching for someone to make the first move. “If one top-tier US firm did do a merger, then the rest of them would do one.”
The spectre of a UK firm merging with a top-tier US firm does loom in US lawyers’ collective consciousness, and it focuses on Freshfields ahead of other magic circle rivals.
“If Freshfields merged with Cravaths would that worry us?” asks one eminent New York partner. “Maybe, but it is not going to happen at the moment.”
UK infiltration of the US market, with its fierce client loyalty and hard-to-match profits, is not going to happen overnight.
A long-term plan that includes law school recruitment as well as the cherry-picking of star partners and associates is needed because it is only on the junior lawyer front that UK firms are able to compete with the salaries offered by the New York firms.
Recruitment for UK firms in New York relies heavily on the international scope they can offer as worldwide firms, and Gary Lee of Lovells agrees this is a trump card. “US lawyers that decide to join a UK firm are not going for the money but to do international work,” he says.
The more collegiate working environment and better quality lifestyle that UK firms claim that they provide may also prove an attraction to US lawyers. In its recruitment booklet, Freshfields uses these lifestyle issues to draw a contrast with US firms.
‘Lawyers who have joined us from other
firms remark on the support they receive
from other parts of the firm,’ the booklet states.
‘Many of them were seeking a change from the ‘eat-what-you-kill’ culture prevalent at many top US firms to a more co-operative environment.’
Maybe this is the way that the UK’s global giants will finally crack New York. But it will be a long wait.
