In the contest for the biggest legal story of the moment, the A&O Shearman merger may be more transformational for the firms involved, but it is fair to say it has not quite captured the imagination like Paul Weiss’s dramatic and audacious hiring spree in London.
‘The question is whether a firm can genuinely build an elite PE practice by lifting out the top guys from different shops,’ muses one US firm partner, on Paul Weiss’s bid to crack London.
‘The only other space where you see this sort of super high-value team move is in professional sports,’ another adds breathlessly, before questioning whether it will ‘all come crashing down’.
It is exceptionally early days, but the indications so far suggest otherwise. Since news first broke last summer that Paul Weiss was to make its long-awaited English law launch in the capital with the head-turning hires of a Kirkland team including debt finance star Neel Sachdev and private equity (PE) partner Roger Johnson, Paul Weiss has grown to no fewer than 140 lawyers, including some 12 partners from Kirkland (although it is important to say only four of these were in the equity at the Chicago powerhouse). And it has not finished yet.
‘The excitement and electricity surrounding our London office is extraordinary,’ remarks Brad Karp, chair of Paul Weiss, who says the firm is fielding ‘daily enquiries’ from leading partners at other firms.
‘Our PE clients in particular had urged us to broaden our platform and provide a credible and effective London solution. This opportunity was a strategic godsend and we jumped at it.’
Brad Karp, Paul Weiss
Little wonder given the salaries whispered to be on offer for lawyers at the Wall Street firm’s glamorous new base in the West End, where it can be closer to PE clients like Apollo, Bain Capital and KKR. While the firm will not comment on compensation, Sachdev and Johnson have joined on deals reportedly worth close to $20m apiece.
Meanwhile, senior figures at rival firms grumble that the scale of Paul Weiss’ ambitious hiring and the generous comp packages on offer for lawyers of all levels have amplified City salary wars to such a height that even some large US firms are wondering how to compete or whether they should wait for things to calm down.
They complain the problem has been exacerbated further by Kirkland (which also does not comment on lawyer pay) allegedly significantly pushing up some partner equity allocations and associate comp packages to encourage some to stay.
So far, Paul Weiss has added M&A, debt financing, high-yield capital markets, IP, tax and competition expertise in London, with litigation, funds and restructuring hires also on the cards for office heads Sachdev and Johnson, who also serve as co-chair of the firm’s global finance and capital markets and M&A practices respectively.
The rapid recruitment means that in little more than six months Paul Weiss has achieved a scale in London that puts it roughly on par with Gibson Dunn, Cleary or Greenberg Traurig. It is only some 30 lawyers behind Paul Hastings, which is one of the fastest-growing firms in London by lawyer headcount over the last five years, according to Legal Business’s Global London survey.
Crucially, many of the partners joining the firm previously worked with Johnson when he was at Linklaters (2002-15) or with both of them at Kirkland (which Johnson joined in 2016). Many are lifers at their former firms.
‘They are hiring who they know, and they have barely paid any recruiter fees,’ laments one legal recruiter.
This explosive growth is all the more remarkable given that since opening in London in 2001 the firm had only ever made one City lateral partner hire – that of corporate heavyweight Alvaro Membrillera in 2017 from Simpson Thacher & Bartlett.
In fact, the firm’s London team was so small last year that, in the days between Membrillera’s shock swap to Kirkland and news of Sachdev and co joining, one senior industry figure described Paul Weiss to Legal Business as ‘not having enough partners in London for doubles ping-pong’.
Karp is open about some of the issues the firm has faced in its attempts to grow in London in the past. He comments: ‘For several years, we attempted to scale our London office and develop UK law capability to meet the increasing needs of our large public company and PE clients, but we were unable to find partners with the requisite talent and market reputation who were also cultural fits.
‘Our PE clients in particular had urged us to broaden our platform and provide a credible and effective London solution. This opportunity was a strategic godsend and we jumped at it.’
With a commitment to use the firm’s very large cheque book to fund the growth and Sachdev and Johnson at the helm, Karp looks to have found his solution to the previous problems.
Internal politics
If lateral hiring of this scale is unprecedented in London, so too is seeing the unstoppable Kirkland thrown even slightly off course. While partner departures are nothing new, particularly from Kirkland’s large salaried rank, the firm usually gains headlines for its bold hiring from the Magic Circle, rather than exits on this scale.
Add in the drama around the way the moves panned out, and it is no surprise that interest has been piqued across the City.
In truth, both Sachdev and Johnson had become disenchanted with Kirkland and its direction for some time; concerned about the scale of recruitment at Kirkland, that rank-and-file partners in London were not getting a say, and the impact of the expansion on office culture.
The charismatic Sachdev, who joined Kirkland in 2003 and is said to have had a close relationship with former Kirkland chair Jeff Hammes, had played a large part in driving Kirkland’s phenomenal growth in London, helping to turn it into the 500-lawyer powerhouse that it is today.
Crucially, he helped influence this growth without ever sitting on the management board.
However, with no management position, some in the market suggest that in recent years his influence had waned amid a fallout with fellow banking partner Stephen Lucas (who sits on the global management committee along with London PE partners David Higgins and Matthew Elliott), as well as the replacement of Hammes as chair by Jon Ballis in 2020.
As has been widely covered in the press, it was the hire of Membrillera that tipped things over the edge and accelerated the departures of Johnson and Sachdev.
While talks between Sachdev and Paul Weiss were underway last summer, when Johnson found out in July that Membrillera was, in fact, set to join Kirkland as part of a push to strengthen its ties with KKR in Europe, he is understood to have argued with Ballis about the merits of bringing him in without consultation with the wider partnership.
Membrillera is often described as a Marmite figure in the market, and according to one partner, ‘no-one at Kirkland had even met him’.
On 1 August Johnson was fired by Ballis, accused of trying to lead a team move to Paul Weiss. Ironically, it was this decision that ultimately accelerated Sachdev’s own move to the firm and those of the team that followed, including Johnson (see box, below).
Sachdev rapidly added Kirkland equity partners Matthew Merkle (capital markets) and Timothy Lowe (tax) before he and Johnson went on to add big names from Linklaters including Nicole Kar (competition), Dan Schuster-Woldan (M&A) and Will Aitken-Davies (M&A), as well as PE star Christopher Sullivan and acquisition finance partner Taner Hassan from Clifford Chance.
Less scale, culture and quality
With further lawyers following from Kirkland, Paul Weiss’s build-out around PE has only served to increase comparisons with Kirkland; as has the fact that Paul Weiss is considering introducing a salaried partner rank that would align it better with other US firms like Kirkland, or Cravath, which announced plans to introduce a similar tier in 2023.
But there are key differences between them. While Paul Weiss’s growth has been rapid, its longer-term vision is not to become a huge firm in London.
Insiders point to the fact that almost every new partner hire has worked with at least one other at some point before and all have been chosen by partners in London, meaning there are no ‘unknowns’ that could negatively impact on culture or performance.
As one London partner comments: ‘We are not focused on being the biggest, but the best, both in terms of excellence and firm culture in London.’
The firm has also already added a presence in Brussels, recruiting Macfarlanes partner Richard Pepper (who will split his time with London) and Ross Ferguson from Simpson Thacher, underscoring its commitment to rapidly building up a practice in key European centres.
‘Law firms used to have one totemic partner for each client, but now you need a deep bench to look after key relationships. Kirkland isn’t about individuals, but about a collegial team.’
David Higgins, Kirkland & Ellis
The Kirkland difference
In contrast, Kirkland’s more heavily managed growth emphasises the need for a deep bench of lawyers and clients across the full spectrum of the PE market to better hedge the practice.
The firm’s scale both in terms of partner numbers and breadth of client base make it unrivalled in the PE market and it would take significantly more departures – or a big shift in attitude from its client base – for anything to change this.
Since 2013 the firm has seen revenues soar from $1.6bn to $7.2bn last year, with profit per equity partner up from $3.3m to $7.5m.
Over the same ten-year period, the firm has almost quadrupled its London headcount from approximately 127 lawyers to 501 as of January 2024. It has added new practice areas, including ESG and infrastructure over the last 18 months alone.
And its approach has not changed since news broke of the team exits.
In addition to Elliott and Higgins being involved in the recruitment of Membrillera, the firm has also shored up its debt finance practice with the recruitment of highly regarded duo Ian Barratt and Sinead O’Shea from Simpson Thacher. Including Membrillera the firm has added nine partners since the Paul Weiss raid, spanning practices including M&A, tax, investment funds, capital markets and banking. By any other standards a remarkable pace of recruitment of its own.
‘We’ve continued to grow over the last six months,’ says Elliott. He adds: ‘When I moved here [from Linklaters] just under a decade ago, Kirkland was already a leading firm in private equity. Since then, our M&A team in London has grown to over 120 lawyers in order to support the continued growth of the private capital market.’
While Kirkland initially moved to reassure clients that its service would not suffer as a result of the Paul Weiss exits, evidence of its strengthening ties with key buyout houses over the period include its role for KKR on its €22bn acquisition of Telecom Italia’s fixed-line network in November 2023 and advising Actis on its sale to General Atlantic in January this year.
Freddie Lawson, head of partner search at Montresor Legal, says: ‘Change is always scary, but Kirkland’s hire of Ian and Sinead shows the firm is open to new opportunities, especially deepening the relationship with KKR.’
Despite the market chatter about the drama around the exits, it is notable that few are suggesting any long-term impact on the Chicago firm given the breadth of its institutionalised client relationships.
As one leader of a US firm in London comments: ‘There had been a longstanding rumour of dissatisfaction in certain groups within Kirkland. And maybe it was inevitable that they’d lose Neel and Roger. So I think probably for Kirkland in some ways, it’s helpful for them because then they can probably calm down some of the apparent divisions that were happening there.’
One former Kirkland partner adds: ‘People were more worried about the uncollected time that hadn’t been billed, and the other big gripe was non-competes and notice periods.’
City management and culture
Kirkland’s culture has long been a topic of debate given the size of some of the personalities within the firm, but both Elliott and Higgins are dismissive of speculation on this.
‘Collaboration is key to our culture,’ says Elliott. ‘It’s a really collegiate, team-first approach that helps ensure young partners can come through to inherit and continue to build on our strong franchise. The only way you can run a growing and dynamic business like ours is if you have lawyers who want to work as one team, and we’ve found a lot of success in this model,’ he says.
Higgins argues that the way PE houses are structured, combined with the volume and size of their mandates, necessitates multiple partners working together across client relationships – and that Kirkland actively recognises and rewards this collegiate behaviour.
He says: ‘Law firms used to have one totemic partner for each client, but now you need a deep bench to look after key relationships. Kirkland isn’t about individuals, but about a collegial team.’
He continues: ‘Private equity has a bright future, but the market has evolved. The secret for law firms is to have a diversified client base and treat every client with importance; at times when large cap is down, mid cap can be busy and the other way around. It’s about having a big diverse business and people within it who are willing to pivot.’
On why most partners choose to stay at the firm, Elliott adds: ‘It comes down to the business proposition. The Kirkland platform lets you be the most successful version of yourself. People stay because they see the value of being on this platform,’ he concludes.
Having been one of a small number of London partners in the loop on the hire of Membrillera while discussions were still at a confidential stage, Elliott is equally keen to dismiss negative comments about Membrillera, whose negotiating style has sometimes seen him criticised for being ‘difficult’ to work with.
‘Alvaro is super-smart and engaged, speaks with authority and has high standards. Since he joined, he’s knocked it out of the park on every metric, but most of all culture – he’s thoughtful, team-based and collaborative.’
Despite the ongoing debate around the degree of influence wielded by Kirkland’s Chicago headquarters over its London office, it is notable that many recruitment decisions – such as the addition of the three-lawyer infrastructure team led by Sara Pickersgill – have been led by London, with London also driving discussions with Barratt and O’Shea.
Deals don’t lie
With PE partners across the City expecting activity levels to pick up after a slow 2023, in truth, the future looks promising for both firms in London.
While some PE partners suggest clients may tire of paying the high charge-out fees of both firms, and other partners are quick to point out the risks of building a practice focused only on PE, there is nothing new in either of these arguments, whichever firm they are levelled against.
For Paul Weiss, the amount of capital the firm is willing to invest has ensured demonstrable short-term recruitment success and the firm is already making significant inroads with clients, working on some 150 client matters so far.
As Karp comments: ‘The legal market has become a star system, with clients increasingly hiring star lawyers (as opposed to law firms) to handle their most consequential matters. Our recent star hires in London, and the market’s immediate reaction to our hiring of these market leaders, reinforce this point.’
In the longer term, though, the firm still needs to prove that it can bed in the team and culture to ensure lasting success.
‘Eventually, the headlines will fade and the hard work of building a sustainable business will begin,’ says one PE partner. ‘While the venture in London shows promise, it’s still new and it will take more than a year to see if they can sustain their presence.’
Another ex-Kirkland partner notes that this is a ‘test case’ as to whether such a top-tier practice can be pulled together at such speed, and that only time will tell whether it all falls into place.
Whatever the gossip, the real battle is not between Kirkland and Paul Weiss, but rather between all of the firms trying to compete in an increasingly dynamic PE market. This is the case for both star partners and associates, who now have yet another well-paid US recruitment option available to them.
‘It’s clear Paul Weiss is making a serious incursion into the market where Kirkland has operated so well in recent years. With the war for top talent even more pronounced, other global elite firms are likely to feel under significant pressure,’ notes one US practice head.
Whatever happens, success or failure will be easy to track both via deal advisory roles and Legal 500 rankings. For what it is worth, Kirkland currently has 47 lawyers ranked in London, compared to ten for Paul Weiss.
As Higgins concludes: ‘Deals don’t lie – the market is the true barometer of whether you’re doing the right thing’. LB