Baker Botts walked away from this year’s Legal Business Awards with the trophy for energy/infrastructure team of the year, in recognition of the firm’s work advising Air Products and Chemicals on Saudi Arabia’s landmark NEOM Green Hydrogen Project. LB spoke with two of the lead partners on the deal to discuss getting it over the line, the importance of sector expertise, and what it means for the future of green hydrogen.
Herbert Smith Freehills (HSF) has made no secret of its ambition to grow in the US, and has long been touted as a potential merger partner for Stateside firms. Even so, Monday’s news (11 November) that it is intending to combine with New York’s Kramer Levin came as a surprise to some partners within the firm – let alone the wider market.
Should the partner vote go through early next year, the pair will unite in May as Herbert Smith Freehills Kramer; a $2bn, 2,700-lawyer firm that will operate as HSF Kramer in the US.
With US expansion still a strategic priority for many UK firms, Legal Business spoke to senior figures in the market to gauge opinions on the merits of the deal and predictions on how the latest transatlantic tie-up will play out.
Why Kramer Levin?
HSF has had a disputes-focused base in New York since 2012, launched on the back of a series of hires from legacy Chadbourne & Parke, before that firm’s merger with Norton Rose. The office now has around 50 lawyers, including 17 partners, the majority of which focus on disputes.
The Kramer Levin deal will substantially broaden HSF’s US presence, adding new offices in Washington DC and Silicon Valley, as well as some 300 lawyers in New York.
As a result, the noises from within HSF are largely positive so far, with one partner telling Legal Business: ‘The US is one of the most important legal markets in the world today, and we’ve been exploring ways to achieve greater scale there for some time. It has been a key priority for us.’
‘This merger will enable us to offer broader global coverage and move us closer to our goal of becoming a truly global, top-tier firm. This is exactly what our clients want – having a strong US presence is crucial.’
‘The partner buzz is really positive,’ another HSF partner remarks, framing the merger as a logical next step in the firm’s US strategy. ‘We’ve been so open that we wanted to do something in the States, and we’ve been fussy about getting a good fit. Kramer are well known in New York market and our New York office has a good relationship with them.’
Peer perspectives
Snap reaction to the deal among partners at peer firms has been mixed.
‘This is a very smart move,’ says one management figure at a leading global firm, of HSF’s solution to plugging the gap in its US presence. ‘If you look at the narrative over the past three or four years, there’s been a lot of talk about US firms dominating the market and taking over others. Recent deals, however, show a new dynamic: international firms are now able to persuade US firms to fully merge. It’s a very promising shift.’
Others, however, point out that given HSF’s size, they would have expected a tie-up with a larger firm, despite the inevitable challenges such a deal would have brought.
‘I had suspected HSF would have ended up with a bigger firm in the US, but availability likely played a big role in this,’ said one London managing partner. ‘Many US firms are powering ahead, so there’s only a certain type of firm open to this kind of arrangement.’
Another law firm leader echoed this view: ‘If they had approached a much more profitable firm, there would have been little incentive for the US firm to engage. They had no choice but to merge with a firm that wants to globalise, rather than just focusing on profitability.’
Putting the doubts more bluntly, one sourced joked: ‘One partner at HSF said they would update me once they had Googled the firm’. (For the full lowdown on the US firm, see: Getting to know Kramer Levin – a guide to HSF’s merger partner)
The profits puzzle
While in previous years, many transatlantic deals adopted the verein model, allowing them to dodge the challenges of combining profits, HSF and Kramer intend to have a single global profit pool from day one, following in the footsteps of other recent transatlantic tie-ups such as A&O Shearman and Bryan Cave Leighton Paisner.
Past reluctance to financially integrate was often down to the higher partner profits at US firms, and indeed Kramer Levin is more profitable than HSF, with 2023 PEP of $2.41m (£1.87m), compared to HSF’s equivalent figure of £1.315m.
‘It’s well known that generating profits in the US is generally easier than in Europe or regions like Australia,’ notes one source. ‘In past mergers, firms often aimed for similar profitability levels to simplify integration. It means that, when a US firm merges with a UK firm of equal profitability, the US firm is often perceived as the ‘inferior’ partner outside the US.’
The decision to push ahead with financial integration despite a difference in PEP marks a turning point in how UK and US firms are willing to approach mergers, according to partners .
‘This shift proves that some US firms are willing to look beyond short-term profitability and adopt a more global, entrepreneurial mindset, which has traditionally been difficult in the US market,’ one partner observes.
One key question is the extent to which HSF’s existing US referral relationships will be affected by the deal. One former HSF partner suggested that the Kramer merger could minimise disruption to existing relationships with larger US firms.
‘By merging with a smaller firm, they could be trying to avoid stepping on the toes of the bigger firms they rely on for referrals,’ the partner explained.
However, others doubt this hypothesis, with one law firm leader describing an impact on US referrals as ‘unavoidable’. ‘This will inevitably have an impact. That said, it now has a US base from which it can expand, positioning itself as one of the most integrated, truly global businesses. This move serves as a wake-up call to US partners who may be resisting integration for the sake of profits. It highlights the urgency of pursuing more innovative strategies.’
Combining cultures
As with any major merger, the success of the deal will depend on how effectively both firms integrate cultures and align strategies. ‘They have a lot of work ahead of them—particularly around attracting clients and creating a solid business rationale for why clients should engage with them,’ says one London managing partner.
One managing partner with experience in past transatlantic mergers notes that this will take ‘time and effort’. ‘They’ll need to ensure both firms align culturally, that their strategies mesh, and that the integration process works smoothly.’
Sceptics of the deal point to the contrast between the two firms as a potential problem. ‘They are like oil and water – they are so different,’ one source bluntly remarks. ‘HSF is global, while Kramer Levin has a strong focus on high-end private equity clients. Can they really leverage the synergies they believe are there?’
However, that disparity is also cited as a potential positive by another recruiter. They noted that HSF being ‘the senior partner’ in the merger, as the bigger firm and with its leaders set to retain their positions in the merged firm, means it could avoid ‘the painful integration issues we’ve seen with other transatlantic mergers.’
What next?
With the deal following hot on the heels of the A&O Shearman merger, attention will inevitably focus on whether other similar tie-ups will follow – and whether HSF’s decisiveness has handed it a head start on competitors.
According to one recruiter, the deal gives HSF ‘a distinct advantage’. ‘People will now be looking at firms like Simmons & Simmons and Ashurst, who haven’t yet made similar moves,’ he explains.
The deal could also have a knock-on effect of encouraging other comparable US-UK tie-ups involving firms of differing scales. ‘This could actually make it easier for other international firms to negotiate full mergers with mid-sized US firms, something that would have been much harder even five years ago,’ according to one law firm leader. ‘Larger US firms might start looking for merger candidates as well, realising that waiting may not be in their best interest.’
Another partner at top 20 global firm notes that the merger has implications beyond just HSF. ‘For firms that are global but not fully integrated, this creates a challenge. An integrated firm is generally more efficient, and now, with HSF’s example, these semi-integrated firms aren’t just lagging behind in efficiency – they’re no longer unique in their global presence either.’
With additional reporting from Tom Cox and Elisha Juttla
While Herbert Smith Freehills is one of the best-known legal brands in the UK, it is fair to say that Kramer Levin does not have the same name recognition. So who is HSF’s prospective merger partner? Here’s everything you need to know.
It’s been an active start to the week for restructuring lateral moves in the City, as Sidley co-heads Mark Knight and Jifree Cader have joined Davis Polk, and Adam Plainer, co-chair of Dechert’s global restructuring group, has moved to DLA Piper.
Since the A&O Shearman merger went live in May, there has been no shortage of market speculation about which transatlantic duo would be next to tie the knot.
However, few had predicted Monday’s (11 November) news that Herbert Smith Freehills is set to combine with New York’s Kramer Levin, a deal which will create a new $2bn, 2,700-lawyer firm.
The proposed tie-up, which the firms announced in a joint statement, remains subject to a partner vote at both firms, but if confirmed, is set to go live on 1 May next year.
The combined firm will be known as Herbert Smith Freehills Kramer – operating as HSF Kramer in the US – and will operate with one single global profit pool, following in the footsteps of A&O Shearman, which also eschewed the verein model.
While HSF is the much larger of the two firms, with 23 offices across Europe, Asia-Pacific, the Middle East, New York and South Africa, Kramer Levin is the more profitable, with 2023 profit per equity partner of $2.41m (£1.87m), according to law.com, compared to HSF’s 2023-24 figure of £1.315m.
HSF’s revenues of £1.3bn will be boosted by around £330m by the deal, pushing it past the $2bn mark and placing it on the fringes of the world’s 25 largest law firms.
While HSF has had a small New York base since 2012 – the same year the merger between legacy UK firm Herbert Smith and Australia’s Freehills went live – it has long harboured ambitions to bulk up in the States. In a statement, HSF chair and senior partner Rebecca Maslen-Stannage (pictured) described the deal as ‘transformational’.
‘We have long been committed to expanding our offering in the US and Kramer Levin is the perfect fit,’ she said. ‘The combination delivers immediate growth for both firms from day one.’ Global CEO Justin D’Agostino added that the deal was ‘just the beginning… an excellent long-term, strategic move.’
Kramer Levin is led by co-managing partners Howard Spilko and Paul Schoeman, who described the deal as ‘a one-of-a-kind opportunity’, while also citing the firms’ cultural alignment.
In addition to its three US offices in New York, Washington DC and Silicon Valley, Kramer Levin also has a well-established Paris base, which has been in operation since 1999, although this office will be spinning off and will not be part of the merger.
In terms of practice strength, Kramer Levin has five top-tier Legal 500 rankings: advertising and marketing litigation; immigration; land use/zoning and both corporate and municipal restructuring.
The US firm also has rankings for commercial disputes, employment litigation and appellate work, adding heft to HSF’s traditional disputes credentials, as well as transactional capabilities in mid-market M&A and private equity.
Announcing the deal, the firms cited shared strengths in private capital, M&A, restructuring, securitisation, real estate, white collar corporate crime and investigations, class actions, IP, and arbitration.
Lucie Cawood, the head of Travers Smith’s private equity and financial sponsors group, has left the firm, marking the latest in a series of exits from the City firm’s transactional practices.
Cawood has led the firm’s PE group since January 2023, when she succeeded Ian Shawyer, following his move to Cleary Gottlieb Steen & Hamilton. She has spent over 20 years at the firm, making partner in 2012, and was also on the firm’s diversity and inclusion board.
Recent key deals she has been involved in include co-leading on Inflexion’s £342m take-private of DWF last year alongside corporate partners Richard Spedding and Ben Lowen.
In a statement, the firm said that she had decided to retire from the partnership to focus on her family. She will be replaced as practice head by Will Yates, has been at the firm since 2007, making partner in 2015.
Cawood’s departure is another blow for Travers’ private equity practice, which saw the double departure of partners Ian Keefe and George Weavil to Goodwin this spring. Other recent departures include Genna Marten, who joined Linklaters in March 2023, and James Renahan, who moved to Fried Frank in mid-2022, as well as Shawyer’s predecessor as practice head, Paul Dolman, who left for Latham & Watkins in 2021.
Eight partners remain in the firm’s private equity and financial sponsors group – Yates, Victoria Bramall, Alex Dixon, Tom Hartwright, Emma Havas, Adam Orr, Laura Kelly, and managing partner Edmund Reed. The team has recently handled matters such as advising Sixth Street Partners and Patron Capital on the £1.35bn acquisition of Cala Homes from Legal & General, on which Dixon took a lead role.
Yates thanked Cawood for her ‘considerable contribution’ and cited ‘a very busy start to the new financial year’.
‘We are excited and energised to drive the private equity business forward, and build on our enviable client base,’ he said. ‘Our dynamic and flexible approach, coupled with a focus on building long lasting relationships puts us in a great position to pursue, alongside our valued clients, the many opportunities arising from current market dynamics, and to provide the right environment for a fulfilling and enjoyable career in the industry for our people.’
Recent departures from other practices include Mahesh Varia, the head of the firm’s incentives and remuneration group, whose move to A&O Shearman was announced last week (8 November), although the firm did recently secure a boost for its funds team with the hire of Joel Grossmark, who joined from Blackstone Credit and Insurance, where he had led the Europe legal function for five years.
Despite the recent exits, Travers posted strong financials for 2023-24, with a near-10% increase in revenue to £215m and a 18% increase in PEP. The firm cited strong performances across core sectors including disputes and investigations, corporate, M&A and asset management, as well as ‘continued success in private equity’, according to senior partner Andrew Gillen.
Almost 1,200 law firms have secured spots in the new Legal 500 UK rankings, which have been revealed after months of research into the legal markets up and down the country.
The rankings, which are based on extensive analysis of the legal markets across England, Wales, Scotland and Northern Ireland, have been put together based on the insight gained from rankings submissions, thousands of interviews with firms, and new record levels of feedback from their clients.
The UK guide includes a total of almost 10,000 practice rankings, of which around 50% are in the London section. The rankings feature 1,176 unique law firms and other legal services providers, with 620 ranked in London.
In addition to the practice rankings, there are almost 13,000 rankings for individual lawyers, including around 2,000 deemed worthy of inclusion in the prestigious Hall of Fame.
Referee response rates once again saw double-digit growth this year, soaring to a new high of almost 65,500, 15% up on the equivalent total last year.
In terms of the most well-represented firms, Pinsent Masons has the most practice rankings across the UK as a whole, with Herbert Smith Freehills holding the most rankings in London.
DLA Piper, Eversheds Sutherland, Addleshaw Goddard and Shoosmiths round out the top five most-ranked across the UK, while in London, HSF is followed up by CMS, DLA, Pinsents and Norton Rose Fulbright.
Pinsents has the highest number of top-tier rankings across the UK as a while, while Clifford Chance has maintained its position as the firm with the most tier one rankings in London.
In terms of promotions, lawyers at three firms will be happier than most – Trowers & Hamlins, which achieved 10 promotions, and Eversheds Sutherland and TLT, with nine apiece.
Cameron Purse and Amy Ulliott
To view the editorial commentary of the rankings go to: legal500.com
Freeths, Freshfields and Vodafone were among the big winners at this year’s Legal Business Awards, which were revealed to a packed house at London’s Grosvenor House Hotel.
Twenty-seven prizes were handed out on the night, with the event hosted by BBC journalist, broadcaster and Mastermind host Clive Myrie and introduced by global head of research and reporting Georgina Stanley.
While last year saw the Global 100 struggling against market headwinds, this year finds firms in much ruder health. But with transactional markets yet to make a full recovery, the legal sector could not rely on big deals alone – LB reports on how the world’s largest law firms beat the odds to hit new heights
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In a year of standout performances, Paul Weiss has made more headlines than most with a new international strategy that has shaken up the market, as LB reports
With the battle to recruit and retain star partners becoming ever more intense, the world’s top firms are going to new lengths to fend off the competition. From partnership and lockstep shakeups to spiralling pay packages, LB looks at the measures elite firms are taking to keep rivals at bay.
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The firms that appear in the 2024 Global 100 are the largest 100 law firms in the world ranked by revenue.
