Still more promise than delivery but Paul Hastings shows signs of progress

Thomas Alan assesses the fortunes of the US giant after a (relatively) expansive 2018

Paul Hastings’ recent London history could be seen as a story of tempered ambitions. In the mid-2000s, the firm talked about hitting 200 lawyers in the City, while in 2012 the hope was to be at around 140 lawyers by 2016. With lawyer headcount only reaching 100 this year, it is clear that those lofty ambitions are hard to realise. However, between 2012 and 2017, the firm’s City headcount increased by 78%. If you aim high, falling short does not mean disaster.

‘We’ve increased in size, but more importantly we’ve been very clear sighted on our strategy,’ argues global managing partner Ronan O’Sullivan. ‘We identified areas important to us in the US and globally, and built our City offering around that.’

In the US, the firm counts real estate as one of its leading practice areas and a credible 2017 means Paul Hastings’ domestic business remains on solid form. A global five-year growth track of 23% does not quicken the pulse, but it is steady. American counterpart Gibson, Dunn & Crutcher registered 27% growth over the same period, while Paul Hastings’ performance outstrips that of another US real estate player, Greenberg Traurig, which has achieved 19% growth over five years.

Better still, a revenue-per-lawyer figure of $1.2m puts Paul Hastings close to matching more storied US firms, such as Davis Polk & Wardwell and Ropes & Gray. Alongside this, increasing client demand in London saw the firm record 25% growth in the City for 2017 and, nine months into its current financial year, the firm expects a record showing for 2018. The metrics tell a good story. However, if the firm is to make good on its ambitions, it will have to continue its active run of form in the City’s recruitment market. With successful US firms on the prowl, the market is as competitive as ever. ‘We want to be as strong here where we are strong in the US,’ says London chair Arun Birla. ‘The battle for talent is huge and we’re not struggling on that front.’

Paul Hastings is more than holding its own in the sharp-elbowed London lateral market. Over the summer, the firm engaged in a swift one-two of headline hires, securing private equity star Anu Balasubramanian from DLA Piper and M&A partner Roger Barron from Linklaters. Meanwhile, the firm has almost doubled its leveraged finance headcount in the City every year over the last four years.

It is hard to look past Balasubramanian and Barron as the defining hires for the firm in 2018. Mainstream M&A is the last bastion for the institutional City firms and the recruitment market tends to reflect that. But Paul Hastings restructuring partner David Ereira, himself a former Linklaters man, is quick to laud the hires and points to a seachange in City M&A. ‘It’s huge. It gives us much greater depth in terms of what we’re capable of. Both of them are enablers of what we want to do in the City.’

In London, Paul Hastings has improved its client list. In 2017 it secured The Co-operative Bank as a client during its £700m capital raising plan, while in 2018 the firm acted for Goldman Sachs and Citigroup as arrangers in the public-to-private acquisition by Advent International of Laird for around £1bn. The firm also won clothing retailer New Look as a client during its company voluntary arrangement in March. ‘The Co-op Bank deal is very important,’ says Ereira, who led on the mandate. ‘That’s a deal Paul Hastings wouldn’t have done a few years ago.’

Externally the view is the firm will have to do more to strengthen its City bench before truly making its mark. As one Gibson Dunn corporate partner says: ‘They’re led by very nice guys and they’re a decent firm in the US. But they’re not expanding in the City at the rate I’d like to expand if I were there. I don’t think they’ve made a big splash.’

Moreover, while broad and strong in the US, some rivals feel Paul Hastings’ City real estate offering could be more expansive. ‘They only really act on the finance side,’ says one City real estate partner. ‘For pure real estate, I’d struggle to name a partner there.’ Veteran David Ryland, who joined the firm in 2013 from SJ Berwin, was a much-cited real estate name, but his retirement at the end of 2017 has created a gap.

However, it is obvious which practice areas are the focus for Paul Hastings in the City: ‘We were very clear six or seven years ago about how to build London out,’ says O’Sullivan. ‘We agreed the way to do that was through finance. And we’re taking a long-term view: we understand it’s absolutely critical to expand our corporate offering in the City.’

The challenge will be for Paul Hastings to make a place for itself among the Global London firms, with it never spoken of in the same breath as Latham & Watkins, Kirkland & Ellis or White & Case. But if the current trends continue, the City may soon know the answer to ‘Paul who?’

thomas.alan@legalease.co.uk