It’s been a challenging period for European firms, but a growing band of players see a substantive City presence as core to their future prospects
Top-tier French outfit Gide Loyrette Nouel is the only continental European firm ever to have made our list of the 50 largest foreign firms in London and its fortunes in the Capital in recent years tell the story of many international firms post-Lehman. In 2008, it had 45 lawyers in the City. By 2013, this had fallen to 34. This is against a backdrop of poor financial performance in recent years, with turnover dropping 30% from £7.8m to £5.5m in the 2011/12 financial year, alongside a gross profit drop of 63% from £3.8m to £1.4m.
However, with results for 2013 to be confirmed this month, Gide’s London managing partner Rupert Reece predicts growth of 40% and ‘putting the ship right after a tragic 2012’.
Partner headcount in the City has remained consistent at nine throughout this period. With 75% of the London team specialising in finance and the rest a mix of disputes and tax, the firm has endured a dramatic downturn in financial performance in recent years, with London takings contributing to the slide in firmwide turnover.
Despite this, Reece is confident about the firm’s offering in the City, particularly being the only French player with a significant UK presence. ‘London is crucial for us. Having an office has enabled Gide to continue playing in the upper tiers of international law firms. It’s important to all of our offices. We are mainly specialised in finance here, so we went through a rough time in the crisis. But we are modestly and prudently optimistic.’
The firm’s commitment to building its strength in the City was further demonstrated in its most recent partner promotions in December, which saw one London partner promoted to equity out of only four firmwide. This commitment is borne of market confidence, something that many of the European and offshore firms active in London have noticed returning.
‘I spend a lot of time working with UK-based lawyers – from firms of all shapes and sizes,’ says Stephen Keogh, partner in charge of Irish firm William Fry’s fledgling City office. ‘I’ve noticed a definite improvement in sentiment recently compared to a year ago. Before, people were very confident about their firm’s performance in some foreign markets, but less so about the UK market – I’ve seen a discernable shift lately, with teams in London more positive about their visible pipeline.’
‘A boom town again’
Despite much of mainland Europe being left beleaguered in the wake of a global recession that has seen law firms look to spare themselves the cost of underperforming and expensive foreign offices, commitment to a functioning London outpost remains a key priority.
With London becoming increasingly significant for some firms, such as Italy’s Bonelli Erede Pappalardo, priorities have shifted. ‘We’ve changed the focus of the firm,’ says Andrea Carta Mantiglia, head of the London office and a partner in Milan. ‘London is not only a place to do business, but acts as a platform for our business development aimed at international enterprises that have a European hub in London from which to do business with the rest of Europe.’
At fellow Italian firm NCTM, Anthony Perotto, head of the firm’s London office, says: ‘Activity in London is positive. We’ve seen growth and increased interest in our international operation – we have increased our commitment.’
In using the City as a commercial hub with which to provide Italian legal advice, NCTM’s strategy is to ensure senior people are physically available to London-based clients as they grow confident in Italy’s economic prospects and keep an eye on potential investment.
Equally, recession-scarred Spain has forced its law firms to seek alternative sources of revenues elsewhere – most notably Latin America, but London has played a role too. Indeed, Madrid-headquartered Gómez-Acebo & Pombo has enjoyed the benefits of enhancing its presence in London, with income increasing significantly every year since 2010 and the City office turning a profit, according to the firm’s resident partner, Miguel Lamo de Espinosa Abarca.
While conceding that the office constitutes a small part of the overall firm, he maintains it is fundamental to accessing clients in key practice areas. ‘There’s a lot of soft income produced by having an office here,’ he says. ‘The past two years have been extraordinary in terms of the level of activity. Spain has had very troubling times and now seems to be a place for opportunity – that’s purely financial investment, which is conjured through New York or London, and we do a lot of that.’
He is clear also that being in London is not about having a ‘representative’ office: the firm has three lawyers permanently in the City that handle client work – with up to 70% of the office’s workload coming via direct instructions from general counsel.
As for Europe’s largest national economy, Germany, which by most international standards has remained robust in the face of sustained downturn, Hengeler Mueller, Luther and Noerr head the pack of firms operating in London. ‘There are good reasons to be on the ground there – a top firm like ours needs a presence in London,’ says Noerr’s Berlin-based corporate partner and firm co-spokesman Alexander Ritvay. ‘The reason we went into London is it’s the financial centre of Europe – it emerged after the crisis as that. Right now, judging from what I can see, it’s becoming a boom town again.
‘You can either be present by sending partners or open up shop. It has served us well – helping us to be closer to clients and financial sponsors, investment banks, and English and American firms,’ he adds. ‘We’re quite confident that London as a hub will generate a lot of business.’
City life
Two groups of firms in particular have made the most of cultural and geographic affinities to make London a key route to weighty commercial mandates, both in the UK and in their home markets: Irish and offshore firms.
For many of the foreign firms in London, the preferred approach is about co-operating with the leading UK and US players, rather than pushing for UK law work or direct instructions. Irish firms in the City recognise the significant amount of referral work coming from the UK, something Matheson’s Stanley Watson is all too aware of, having been head of the office since 2011. ‘We’ve seen a lot of work come through London,’ he says. ‘One of the reasons we’re here is to advertise ourselves as one of the leading Irish firms among the international legal community. I have three targets – the English firms; the US firms; and the European law firms.’
And part of ensuring referrals keep flowing is consistently developing bonds with London. ‘We get work directly from GCs, but they’ll sometimes go through the London partner first,’ adds O’Gorman. ‘But once you’re introduced, a follow-on instruction will come from the GC. The London law firm is critical to relationship building, getting in clients and maintaining those relationships. That’s the dynamic.’
At A&L Goodbody, firmwide managing partner Julian Yarr, who himself headed the London office from 2003 to 2010, says the firm has always focused heavily on the City. ‘Our firm would see 60% of revenue coming from the international market and London is Ireland’s best trading partner. When we opened up in the 80s, we wanted to ensure we were at the centre for building relationships.’
Cayman Islands-based practice Walkers, which according to London managing partner Jack Boldarin has seen City revenues more than double since last year – with December 2013 being the office’s highest-billing month since February 2009 – relies heavily on referral work, amounting to 65% from law firms it has good ties with.
‘For entrenched clients, you don’t need to do anything per se – it’s simply turning up and making sure the relationship is healthy,’ he says. ‘And we don’t push work back to the Cayman office – we work on mandates from start to finish.’
As for 50-year-old Maples and Calder, also based in Cayman, London has been critical. Having opened the office 17 years ago, office managing partner Paul Govier refutes any suggestion that it is simply a representative branch. ‘We’re not just transaction driven. That wouldn’t keep us going. For us, it’s about building relationships – not advertising or broad-brush marketing, but brand awareness and being entrepreneurial. We are committed to the one-stop model and being a cradle-to-grave offshore law firm. With more players active in the market now you can never be complacent.’ LB
sarah.downey@legalease.co.uk
SELECTED FOREIGN PLAYERS: A LONDON OVERVIEW |
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| Firm | Home Country | London office opened | London head | Number of London lawyers | Recent London work highlights |
| Maples and Calder | Cayman Islands | 1997 | Paul Govier | 17 | Acted as BVI counsel to Videocon Group on the $2.5bn sale of a 10% stake in a Mozambique gas field to ONGC Videsh and Oil India in January 2014 |
| Walkers | Cayman Islands | 2001 | Jack Boldarin | 14 | Acting for Uranium One on a private placement of €300m aggregate secured notes to be listed on the Luxembourg stock exchange |
| Gide Loyrette Nouel | France | 2003 | Rupert Reece | 34 | Advising BNP Paribas on a €650m pan-European securitisation transaction for the Teva Group involving eight jurisdictions |
| Noerr | Germany | 2010 | Hans Radau | 5 | Advising American hedge fund Paulson & Co in connection with the Lehman insolvency |
| A&L Goodbody | Ireland | 1988 | Niamh Ryan | 9 | Acting on the special liquidation of IBRC – the former Anglo Irish Bank – including the €4.2bn UK loan book sale to US private equity house Lone Star in February 2014 |
| Arthur Cox | Ireland | 2001 | Kathleen Garrett | 9 | Advising Lloyds Banking Group on its exit from the Irish market |
| Matheso | Ireland | 1989 | Stanley Watson | 7 |
Irish advice to the Barclay brothers on UK High Court proceedings taken by Patrick McKillen over the value of the Maybourne group hotels |
| McCann FitzGerald | Ireland | 1986 | Hugh Beattie | 6 | Advised Marubeni Corporation on its investment of up to €100m in Mainstream Renewable Power for a stake of approximately 25% |
| Bonelli Erede Pappalardo | Italy | 2002 | Andrea Carta Mantiglia | 12 | Advising De Cecco on its €55m acquisition of Russian pasta-producing plants from Ekooffice |
| NCTM | Italy | 2008 | Anthony Perotto | 7 | Advising Rhône Capital fund on an investment agreement with online retailer Dixons |
| Gómez-Acebo & Pombo | Spain | 2007 | Miguel Lamo de Espinosa Abarca | 3 | Advising a number of London-based funds on distressed investments in Spain |
| Froriep | Switzerland | 1989 | Dunja Koch | 6 | Advising the European Bank for Reconstruction and Development in a substantial rail finance project in Eastern Europe |