For a 109-year-old giant that fielded just 12 offices at the beginning of 2017, Kirkland & Ellis has had an expansive 18 months. Of course, there is never a better time to invest than the year in which your firm became the highest-grossing legal outfit in the world as Kirkland did in 2018 after posting $3.165bn. But it is still notable that of the five branches launched since Jeffrey Hammes took over as chair in 2010, three were announced since May 2017.
While earlier Boston and Dallas launches reflect a well-established ambition in its home market, news of Kirkland’s plans for a new arm in Paris signal a more symbolic extension of empire. Only Kirkland’s third branch in Europe, it comes more than two decades after London and almost 14 years after its Munich debut.
While still awaiting official sign-off from the Paris Bar, which is managing to take even longer than normal with its bureaucracy thanks to the wonders of Brexit, news that the firm is recruiting French private equity partners Vincent Ponsonnaille and Laurent Victor-Michel from Linklaters sent a jolt through the City and Paris markets in October.
A base in France’s booming transactional market was a strange omission for a firm focused on rapidly pushing its European corporate/PE business emphatically from mid-tier to marquee work (Kirkland’s muscular debt business is, of course, another story). And while Brexit doesn’t look as big a problem for private equity as other areas of the City, it is certainly a little more wind in the sails for an already-active Paris LBO market.
Moreover, Paris was on Kirkland’s radar long before Brexit sullied the horizon. As far back as the early 2000s, the firm had attempted to woo leveraged finance star Thomas Forschbach, then at Ashurst’s Paris base. At the same time, Kirkland was trying to lure Forschbach’s friend and colleague, Jörg Kirchner, to mastermind a Munich launch. Both were German-born partners and leading lights in Ashurst’s once-forceful European private equity team, both working with Kirkland’s key client, Bain Capital. As it happened the pair both ended up choosing US rival Latham & Watkins, at the time a far stronger global brand than Kirkland. Forschbach made the switch in 2004, Kirchner in 2005.
Beyond that point, Kirkland’s tactics in mainland Europe diverged. The firm decided to push ahead with Munich in 2005, with the backing of American PE veteran Erik Dahl and hiring former Clifford Chance (CC) PE partner Volker Kullmann. But ex-partners talk of a growing frustration from its highly-influential chair Hammes at the failure to build stronger links with Bain in mainland Europe. Kirkland finally convinced Kirchner to join from Latham in 2015, but the clash with the old guard soon came to a head. Kullmann, Dahl and six Munich partners quit for Sidley Austin in 2016-17.
Paris, meanwhile, never entirely left the agenda but the bench of well-regarded PE hands who can move their business in the French capital is small. Yet, as Kirkland made increasingly daring and potent forays into the City leverage scene, lesser-known US rivals like Goodwin Procter were making lucrative incursions into the local LBO market.
Ponsonnaille was on around £2m and is said to have moved for a package in the region of $5m.
Enter Linklaters’ Ponsonnaille and Victor-Michel. While the latter was
promoted last year and is following his mentor into the new adventure, a key question is how much business Ponsonnaille can generate. A Linklaters partner for 12 years, he was on around £2m and is said to have moved for a package in the region of $5m, hefty even by the standards of a nicely simmering French market.
Certainly, Ponsonnaille is well respected in Paris’ PE circles but he is yet to build the reputation of Forschbach or Weil, Gotshal & Manges’ David Aknin, thanks in part to being based in London for several years.
At Linklaters he worked on high-profile mandates, including the €1bn sale of The Body Shop from L’Oréal to Natura last year and the firm’s first-ever mandate for BC Partners in 2016.
As with Kullmann in Munich, his client list doesn’t include Bain. All eyes will now be on Forschbach, but his long-time friendship with Kirchner is unlikely to be enough to convince the PE veteran to quit Latham’s 100-strong Paris arm.
But more will come soon. Kirkland’s usual approach is to send a proven veteran to the new base to oversee its launch. London partner Cedric Van den Borren has a France-tilting high-yield practice, while London founder Jim Learner could be hungry for a new challenge now that its City arm is nearing maturity.
In any case, the model will be Munich rather than London: a lean, transactions-focused team (the German headcount is around 35 lawyers), plus some finance, tax and possibly competition capability.
The individualism of the Paris market should play well with Kirkland – a culture that one former partner memorably dubbed the ‘warlord system’ – and also aid the transfer of business with partners. Also, France has long been dominated by foreign firms, the local elite being made up of Linklaters, CC, Latham and Cleary Gottlieb Steen & Hamilton, alongside local champion Bredin Prat. Weil’s hugely-successful buyout operation speaks volumes of how far a lean team can go. An important caveat is that they have all been in Paris for decades – ‘no firm opening in the last ten years has become a top name in the market’ notes one local veteran. But then, this is Kirkland, a firm boasting a formidable track-record, superb buyout pedigree and very deep pockets. Mixed fortunes in Munich demonstrated that even Kirkland can struggle to hit form outside the US but few Parisians are expecting this venture to ultimately go against the Chicago juggernaut.