Legal Business’ 14th annual Global London survey assesses the breakthrough of the City’s leading US shops in the past 12 months
Recently appointed to jointly lead his firm’s expansive City office, Gibson, Dunn & Crutcher tax partner Jeffrey Trinklein recalls a visit to London in the early nineties. ‘Back then, the US offices in London were 100% American lawyers. Now it’s 10%.’
How times change. US firms in the last two decades have grown in the UK primarily through hiring English-qualified lawyers. This year’s Global London survey reveals the 50 largest foreign firms in London now house 5,953 fee-earners, a record-breaking tally for this report. Of this total, 83% or 4,955 are English-qualified lawyers.
The overall headcount is up a striking 21% from the 2015 report when the total reached 4,937. Before this latest spurt since 2013, the last highest recorded year was 4,444 in 2008, when firms were still in their boom-era shape ahead of the banking crisis. Total partner headcount also soared over last year’s level to a new high of 1,677, up 20% from 1,403.
However, this overall headcount increase is significantly distorted by the addition of three international giants into the top 15; firms that were once bona fide English practices that have become subsumed into much larger global practices: Dentons, King & Wood Mallesons (KWM) and Squire Patton Boggs.
‘A lot of people had not heard of Fried Frank before Graham joined. We are creating an external brand that just didn’t exist in the London legal market.’
Stuart Brinkworth, Fried Frank
Dentons bolstered its US ranks by combining with Atlanta-based McKenna Long & Aldridge in July 2015, shortly after it announced its merger with Chinese firm Dacheng in January 2015 – a deal which established a 6,600-lawyer giant operating under a Swiss verein structure. This ‘polycentric’ beast ranks at number three in the Global London table with 366 fee-earners and the largest group of 121 partners. The firm’s legacy in the UK goes back to the 1780s and the formation of two UK firms, Denton Hall and Wilde Sapte, but the addition of a vast Chinese practice and further capability in the US means the firm is far larger outside the UK than its legacy.
Similarly, SJ Berwin & Co was formed in 1982 but its merger with Sino-Australian practice King & Wood Mallesons in 2013 means it too can no longer be considered a UK law firm.
Hammonds was also a sizeable national player in England and opened its London office in 1991 but a merger with Squire Sanders in 2011 was followed by the addition of Washington-based Patton Boggs in 2014, tilting the balance outside of Britain.
Combined, these three firms amount to 878 fee-earners and 273 partners – 15% of the total fee-earner headcount and 16% of the partner headcount of the 50 firms that make up the Global London table.
On a knife edge
This distortion due to our change in methodology aside, US firms generally have increased headcount noticeably on average and lateral hiring remains active. Partner recruitment largely stabilised in 2015 with total partner hires across the top 50 up slightly (4%) in 2015 to 122, compared to 117 hires made in 2014. Forty-six (38%) of these partner recruits came from the ten largest firms in our table, compared to one-third last year.
However, in terms of overall headcount, 15 firms grew by 10% or more compared to 24 last year. But more firms this year showed higher headcount increases over the last five years, with 14 firms growing 50% or more across the table. From these, six firms – Milbank, Tweed, Hadley & McCloy; Simpson Thacher & Bartlett; Akin Gump Strauss Hauer & Feld; Cadwalader, Wickersham & Taft; King & Spalding; and Paul Hastings – have more than doubled their teams since 2010.
Nonetheless, experienced partners express concerns over a softening market. ‘2016 is going to be a more difficult year than 2015,’ comments Simon Jay, corporate partner at Cleary Gottlieb Steen & Hamilton, which saw London headcount dip 3% in 2015. ‘Some firms will get lucky with a mega-deal or two. But we have many uncertainties, including the Brexit vote, the US elections and fluctuating commodity prices, so a lot of investors will consider holding off. Litigation is great in a downturn, but some of the big enforcement actions that originated from the financial crisis are tailing off.’
Gibson Dunn has been one of the fastest-growing firms in London over the past couple of years. Since the eye-catching recruitment of Charlie Geffen from Ashurst and Stephen Gillespie from Kirkland & Ellis in 2014, the firm pushed on in 2015, notably hiring Philip Crump from Kirkland as well as Herbert Smith Freehills (HSF) capital markets partners Steve Thierbach and Chris Haynes. Nonetheless, Trinklein agrees with Jay’s prognosis: ‘Our London office works very closely with Europe and there is lots of uncertainty. Clients are worried about the implications if the UK does leave the EU and there is all the volatility in the oil and gas markets.’
FOCUS: Fried, Frank, Harris, Shriver & Jacobson
London office headcount: 36 lawyers; 12 partners
Fee-earner headcount change since 2010: -5%
London head: Graham White
Office speciality: Funds, private equity, finance, restructuring and litigation
Representative London work: The firm advised BlueBay Asset Management on the raising of its Direct Lending Fund II SLP, which exceeded its revised target of €2bn; acted for CVC Capital Partners in the acquisition of Wireless Logic from ECI Partners and in Wireless Logic’s acquisition of SimService SAS; and advised Kohlberg Kravis Roberts & Co (KKR) in its acquisition of a minority interest in Marshall Wace.
After a troubled run post-banking crisis, Fried, Frank, Harris, Shriver & Jacobson has shown signs in the last 18 months of attempting to get back into City law’s increasingly competitive game.
The London office had certainly drifted, struggling with the challenge of being tethered to a parent that had proved unable to hit its stride for years, despite a solid Wall Street pedigree.
The firm is now pinning much of its hopes on the recruitment of former Kirkland & Ellis City head Graham White and a brace of new hires. White took the reins in 2014 and the office has seen the addition of seven notable partners and the launch of three new practice areas – asset management, restructuring, and regulation – while its finance and private equity (PE) offering has also grown.
The investment is in line with the firm’s overall strategy, which began in early 2015 with its Hong Kong and Shanghai offices winding down, leaving the US firm without an outpost in Asia. This meant the firm could re-focus operations in its core offices, namely London, even if many would argue that a lack of a functional Asian network makes for an awkward narrative in the increasingly globalised City market.
The London revamp saw Mayer Brown co-head of restructuring Ashley Katz join in February 2016, which followed the launch into asset management last year after the firm hired Kirkland’s high-profile funds trio Mark Mifsud, Kate Downey and Alexandra Conroy. The funds move was followed up with the hire of Gregg Beechey from King & Wood Mallesons.
Other recruits included O’Melveny & Myers PE partner Daniel Oates and Hogan Lovells finance partner Stuart Brinkworth, who joined the firm in September 2015.
In addition, corporate partner David Selden relocated from New York to lead the London hedge funds practice in March this year.
Katz tells Legal Business: ‘We are a reasonably small and nimble team. We have the people that form the funds, whether it be private equity or hedge funds, then we have our private equity guys, and then leveraged finance, and the restructuring piece. Sitting on top of that is the regulatory, tax and litigation overlay. The aim is to integrate these practice areas for our clients and give them the full cradle-to-grave service. We can set up a portfolio company, we can set up the debt, we can put in the bond issuance and we can also restructure the company.’
The firm will, of course, face formidable competition building on a foundation of PE/leveraged finance/restructuring/funds, pitting it against a number of larger and more profitable players such as Kirkland, Latham & Watkins and White & Case.
The hope will be that core clients, such as Goldman Sachs and KKR, and new clients like CVC, BlueBay, Vision Capital and Norvestor Equity, a credible New York platform and profitability still above the Global 100 average will be sufficient for a band of more entrepreneurial partners to build on.
Brinkworth is alive to the challenge: ‘A lot of people have not heard of Fried Frank because it used to be an internal-facing office before Graham joined. We are creating an external brand that just didn’t exist in the London legal market. Aside from longstanding clients like Goldman Sachs on the finance side, the mass of the market is not used to seeing the Fried Frank name acting for lenders and debt funds because it hasn’t really happened before.’
In funds at least, Fried Frank has some history and critical mass with the addition of a seasoned team that joined under Mifsud. It is also an area in which relatively lean teams can quickly establish themselves.
With further recruits expected in litigation, corporate, restructuring and real estate within the next six months, Fried Frank’s London arm pledges to stay in investment mode. The firm surely has no realistic alternative. The days when steady progress was a credible option in the City have long since passed.
But while the market remains uncertain, overall growth remains strong – and this has largely come from the mid-pack. Paul Hastings made perhaps the biggest play in London with average headcount swelling 42%. Legal Business‘ US Law Firm of the Year, Ropes & Gray, saw its London headcount jump 37% in 2015, underlining the firm’s City ambitions. Last year it signed a deal to move to larger offices in London, nearly doubling its current space in line with its ambition to have 150 lawyers in the UK by 2017.
‘Clients are worried about the implications if the UK does leave the EU and there is all the volatility in the oil and gas markets.’
Jeffrey Trinklein, Gibson, Dunn & Crutcher
Paul Hastings saw gross revenue rise 6% in 2015, with the firm crossing the billion-dollar mark for the first time in 2014. Meanwhile, its aggressive push in London last year saw restructuring and finance veteran David Ereira join from Linklaters and Berwin Leighton Paisner’s head of structured debt and capital markets Paul Severs jump ship. The firm also hired Duncan Woollard from KWM to spearhead its private equity team in London and Ashurst partner Luke McDougall to expand its leveraged finance team in the City.
The investment has paid off as the office picked up various new clients in the City, including Facebook, Lloyds Banking Group and Airbnb. One of its highlight deals included partner Peter Schwartz – who joined from Milbank in 2014 – advising JPMorgan and BNP Paribas on the financing of Altice’s $9.1bn acquisition of Suddenlink; and London head Ronan O’Sullivan representing City Football Group on its partnership with China Media Capital.
‘We wouldn’t have had these deals five years ago,’ says O’Sullivan. ‘US firms continue to have opportunities to attract talent from English firms. We have been smart in capitalising on this. We have experience of bringing in new practices areas and integrating them.’
Yin and yang
One notable trend is that while US players continue to hire partners in London, they have lost them as well, with Kirkland being a standout example of this trend. Latham & Watkins too has seen a few partners leave.
‘I can’t say we’re top of the M&A market, but if I look at the quality of our practice now, it is vastly superior to 15 years ago and we continue to move upmarket.’
Gary Senior, Baker & McKenzie
The revolving door appears to have been turning more rapidly during the first few months of 2016. In February, Sidley Austin hired a six-partner team from Kirkland, which itself over the past year has recruited five partners from a combination of Linklaters, Freshfields Bruckhaus Deringer and Weil, Gotshal & Manges (see ‘Kiss the ring’).
‘When the crisis hit, we knew we had to be more diverse,’ says George Petrow, managing partner of Europe and co-head of finance at Sidley. ‘We had capital markets, restructuring and regulatory before the crisis, and since then have grown in disputes, funds and insurance.’
Fried, Frank, Harris, Shriver & Jacobson kick-started 2016 with the launch of a restructuring practice, appointing Mayer Brown’s co-head of restructuring, Ashley Katz. The hire forms part of a wider strategy to build out capability in Europe and comes after a trio of practice areas were launched (finance, private equity and funds) in London in just over a year (see firm focus).
‘US firms continue to have opportunities to attract talent from English firms. We have been smart in capitalising on this.’
Ronan O’Sullivan, Paul Hastings
The fastest-growing firm in the top ten is White & Case, which generated £185m, up by 22%, in City revenue, and increased headcount by almost a fifth in just a year, making it the largest international firm in London with 420 fee-earners. The majority of the firm’s recent growth in the capital has come from boosting its associate ranks, in line with the firm’s 2020 strategy, which aims to have over 500 lawyers in London in four years. However, the firm also made up eight London associates to partner in its latest promotion round.
FOCUS: Baker & McKenzie
London office headcount: 391 lawyers; 87 partners
Fee-earner headcount change since 2010: 7%
London head: Paul Rawlinson
Office speciality: Corporate crime, capital markets, employment, private client, tax, TMT
Representative London work: Partner David Allen advised Bain Capital and Brakes Group on the European food distributor’s $3.1bn acquisition by Sysco
Despite having built one of the largest City practices owned by a foreign-bred law firm, Baker & McKenzie is still one of the few global players where profitability is behind its 2008 level, with partners taking home on average $1.2m in 2008 compared to $1.14m last year. While most firms have cited a slowdown in the finance and deal markets in the fourth quarter of 2015 – Bakers had seen revenue tumble in the 12 months to its financial year end on 30 June, when many peers were in robust form.
In that period, Bakers’ revenue dropped 4% to $2.43bn while profits dropped 12% to $799m. With last year’s performance blamed largely on currency movements and the US dollar having strengthened further against most currencies during the first eight months of its current financial year, some Bakers partners are expecting another year of falling revenues.
The firm has stuck to operating a huge global footprint, expanding aggressively into commodities-reliant economies ahead of the slump in the mining sector. At a time when others have sought to focus on more profitable hubs to draw lucrative work into London, New York, Hong Kong and Singapore – Bakers was merging with a 100-lawyer firm in Peru.
Gary Senior, Bakers’ EMEA chair, comments: ‘Our broad strategy has not been very different for 20 years. If you’re a client that is global and you want a firm that truly understands the global marketplace and can not only serve you in lots of countries but across a range of specialities, there is no firm set up as we are to serve those clients. All of the other firms have gone through some fairly big lurches in strategy, usually involving mergers or extreme international expansion.’
Despite London, Chicago and the firm’s German practice controlling many of its global client relationships, those offices have seen relatively little investment over the past five years. London headcount at just under 400 lawyers is just 7% up over five years while many US firms have substantially expanded their City practices. Nevertheless, the firm can more positively point to 19% growth in revenue in the City to £145m during that period as organic and underpinned by improving productivity.
Bakers’ once-unique selling point of having the largest footprint of any law firm has also been diminished with the merger spree at Dentons in 2015 that has seen it add 4,000 lawyers in China through Dacheng. Bakers on the other hand has no PRC law capability other than a small joint venture in the Shanghai free trade zone, though it still has a distinctive platform.
A programme to capture more FTSE clients in London was set up by Senior during his time as London managing partner and has yielded some results, with the firm recently landing panel spots with Colt, Unilever, British American Tobacco and Weir Group.
But for many, the key test for Bakers to pass is consistently securing more high-end work. Having struggled with this for years, there have been some encouraging signs of late, with the City office recently advising private equity house Bain Capital on its $3.1bn sale of food supplier Brakes Group to Sysco, and insurer Towers Watson on its $18bn merger with Willis. Other successes in the City have come in the tax and the white-collar crime space, but the office has been leapfrogged by a wave of US firms making heavier investments in areas like acquisition finance, disputes and funds.
Senior is adamant that the firm is making progress: ‘We don’t do as many $40bn deals as Latham & Watkins but we do pretty sizeable deals. I can’t say we’re top of the M&A market, but if I look at the quality of our practice now, it is vastly superior to 15 years ago and we continue to move upmarket. We have progressively done it, not in big lurches where we fire 20% of the partnership. We aim to be competitive in a lot of practice areas so we need a certain level of partnership to provide that.’
Perhaps, but many feel that Brand Bakers will need a brush up if the firm is not to see its market position eroded by more aggressive and focused rivals in the City.
White & Case also bumped up the number of training contracts it offers, which is set to increase its trainee intake from 30 a few years ago to 50. London executive partner Oliver Brettle says: ‘London made a very positive contribution to the overall results, following a year of strong growth across practices. In the last three years we’ve added more than 100 lawyers in our London office.’
Conversely, Latham – currently the world’s largest law firm by revenue – increased London headcount by just 5% in 2015 compared to 16% in 2014. Such a deceleration in fee-earner growth was inevitable given Latham’s tendency to set the pace for London growth among US firms in recent years and has had no negative impact on financial performance – London revenues in 2015 were £183m, up 12% on the previous year. This was despite the firm seeing a slowdown in capital markets work.
‘When the crisis hit, we knew we had to be more diverse. Since then we have grown in disputes, funds and insurance.’
George Petrow, Sidley Austin
London head Jay Sadanandan says: ‘The volume of work may have slowed in capital markets and banking, but litigation was busy. There is a fair amount of uncertainty and this has led to a slower start this year but the quality of our mandates is increasing.’
Other reported London office revenues include Quinn Emanuel Urquhart & Sullivan’s impressive 40% rise to £36.8m and Greenberg Traurig Maher, which saw City figures rise 10% to £15.7m in 2015 following a string of corporate mandates.
Fresh prey
Some of the newer entrants to the City continue to grow. Cooley has added partner-level recruits into its year-old London office with senior finance partner John Clark joining from Mayer Brown, and hiring Sullivan & Cromwell litigator Louise Delahunty and Stephen Rosen from Olswang all in the first quarter of 2016. The firm, which has targeted London revenues upwards of $40m, launched in the City at the beginning of 2015 with the hire of teams from Edwards Wildman and Morrison & Foerster. Since then it has recruited Reed Smith life sciences duo John Wilkinson and Nicola Maguire, Paula Holland from Wilmer Cutler Pickering Hale and Dorr and tax partner Natasha Kaye, also from Olswang.
Another recent addition yet to make the Global London list is litigation boutique Boies, Schiller & Flexner, which launched a new office in the City in 2014 and has a few panel wins under its belt, including M&G Asset Management. It also won the pitch for the high-profile Canary Wharf dispute on behalf of Class A1 Noteholders, where it successfully pitched against the likes of Quinn Emanuel, HSF, Sidley, Akin Gump and Freshfields.
London managing partner Natasha Harrison comments: ‘Over 70% of London office revenue is generated from local clients, with the balance being generated by US clients. For us, this is the perfect balance. We are self-funding and profitable, but also connected to the US and able to serve our US clients on their important international disputes.’
But while 2015 proved beneficial for many firms, some of the most established players have stalled in terms of headcount. In the top ten, both Baker & McKenzie and Reed Smith saw a fall in London headcount by 2% and 6% respectively, while Dechert’s headcount dropped by 9%.
Lower down the pack, the headcount of both Gide Loyrette Nouel (-16% – see our separate section on European firms) and McGuireWoods (-8%) fell noticeably. In total, 11 international firms saw their London footprint shrink last year.
McDermott Will & Emery has seen headcount stay unchanged but down 27% over five years. New London office leader, Andrew Vergunst, who replaced Hugh Nineham following his retirement at the end of March, told Legal Business that while the office was not going to set unrealistic targets, it wanted to be more strategically important to the firm.
| The firms that made the most Lateral hires in 2015/16 | |||
|---|---|---|---|
| Firm | Partner | Previous firm | Date |
| Morgan, Lewis & Bockius | Matthew Duncan | K&L Gates | July 2015 |
| Julian Goodman | K&L Gates | July 2015 | |
| Paul Matthews | K&L Gates | July 2015 | |
| Gawain Hughes | DLA Piper | July 2015 | |
| Pulina Whitaker | King & Spalding | July 2015 | |
| Theresa Kradjian | K&L Gates | August 2015 | |
| Paul Beausang | K&L Gates | October 2015 | |
| Simon Currie | Covington & Burling | November 2015 | |
| Omar Shah | Latham & Watkins | March 2016 | |
| Dentons | Brendan Slack | Charles Russell Speechlys | March 2015 |
| Celia Gardiner | Watson Farley & Williams | June 2015 | |
| Tracey Sheehan | Taylor Wessing | October 2015 | |
| Adrian Magnus | Berwin Leighton Paisner | November 2015 | |
| Martin Mankabady | Clyde & Co | November 2015 | |
| David Collins | Berwin Leighton Paisner | December 2015 | |
| Peter Voisey | Clifford Chance | January 2016 | |
| Steven Levy | Pinsent Masons | February 2016 | |
| King & Wood Mallesons | James Douglass | Linklaters | March 2015 |
| Ian Wood | DLA Piper | March 2015 | |
| Jeremy Brooks | Eversheds | May 2015 | |
| Simon Burson | Eversheds | May 2015 | |
| James Walsh | Eversheds | May 2015 | |
| Laura Brunnen | Fried, Frank, Harris, Shriver & Jacobson | July 2015 | |
| Adrian Brown | Olswang | August 2015 | |
| Bart Capeci | Sidley Austin | November 2015 | |
| Cooley | Nicola Maguire | Reed Smith | March 2015 |
| John Wilkinson | Reed Smith | March 2015 | |
| Paula Holland | Wilmer Cutler Pickering Hale and Dorr | September 2015 | |
| Natasha Kaye | Olswang | November 2015 | |
| John Clark | Mayer Brown | February 2016 | |
| Louise Delahunty | Sullivan & Cromwell | March 2016 | |
| Stephen Rosen | Olswang | March 2016 | |
‘We will look for opportunities to grow in private client and corporate,’ he says. ‘Good growth will have knock-on effects, particularly in corporate, so that will be the focus. A lot of the corporate work is for privately-owned businesses so there’s a very neat fit that will mean growth will be greater than the sum of the parts.’
‘For Latham, it made sense to expand outside of the US and it worked. Our aim is to take market share.’
Jay Sadanandan, Latham & Watkins
While US firms have grown in confidence, there remain a few areas of work in which they have yet to make their mark – notably public M&A and major listings work (see M&A focus). Meanwhile, US firms have been successful in their chosen practice areas and sectors, particularly private equity and deal finance. While there was a perceptible slowdown in high yield at the back end of 2015, it remains an important area for US firms and increasingly the Magic Circle – Freshfields’ hire of Kirkland’s high-yield heavyweight Ward McKimm was one of the few standout lateral hires by a leading UK firm from the US elite in London in recent years, but hardly reverses the tide. London is no longer about competition between US firms or between the Magic Circle – it is the global elite going head to head.
Co-publishing feature
‘Earth has not anything to show more fair’
– Mark Husband, Cogence Sarch
Cleary’s Jay comments: ‘A lot of firms are now seen as international firms and companies with global operations are naturally drawn to these. So some of the cultural ties which gravitated clients to their home-state firms are weakening. Many firms are losing their national stamp. Even within the Magic Circle, the firms are not as homogeneous as they used to be.’
Five-year growth for many Global London firms shows the fight for market share continues in the capital.
Latham’s Sadanandan sums up: ‘For Latham, it made sense to expand outside of the US and it worked. Our aim is to take market share away from the current main advisers.’
Their aim – along with 49 other firms. LB
jaishree.kalia@legalease.co.uk
Methodology
The firms that appear in Global London are the 50 largest non-UK-originated firms in London, ranked by headcount. Partner and lawyer numbers were all requested as full-time equivalents as of 1 January 2016. All partner hires were up to and including March 2016. Total lawyer numbers include partners, associates, assistants and trainees, but not paralegals.
- For further analysis, see: Global London 2016