There was a rushed engagement before the union and there is unlikely to be a long honeymoon for the 26 Bingham McCutchen partners, including ten financial restructuring partners, switching to Akin Gump Strauss Hauer & Feld later this month. Such is the size of the investment the Dallas-bred giant has made, with the total number of lawyers set to transfer across London, Hong Kong and Frankfurt expected to reach around 60, the team led by financial restructuring guru James Roome will have to hit the ground running when they transfer in late October. This is, after all, a team with around $50m in annual revenue, by some yardsticks the largest team hire ever executed in the Square Mile.
The move, which Legal Business first revealed online in early September, shifts virtually all of Bingham’s London arm, minus two partners whose futures are undecided.
Despite Akin Gump’s undoubted insolvency pedigree, it is a huge commitment given the relatively subdued conditions for Bingham’s core distressed asset market. London-based restructuring partner Nick Angel of Milbank, Tweed, Hadley & McCloy comments: ‘Akin Gump is a better-known firm for bankruptcy in the US than Bingham. The combination makes Akin Gump more attractive in the US for transatlantic work, which there isn’t very much of at the moment, but they will be another competitor on the field when that changes.’
The London restructuring team, spearheaded by Roome, along with group head Barry Russell, who will co-lead Akin Gump’s enlarged restructuring practice, and partner James Terry, will link up with 20 core restructuring partners at Akin Gump across New York, Washington DC, Los Angeles and Dallas.
The opportunity to jump ship is made more compelling by financial fears within the Bingham partnership, which has seen it turn to Morgan, Lewis & Bockius for a merger after experiencing a dismal 2013 financial year, with turnover falling by 12.6% from $871.8m to $762m. As Legal Business went to press, the management of both firms had agreed an outline merger in what would create a $2bn law firm, though it has yet to go to both partnerships.
Aside from being unconvinced about Bingham’s hunt for a US merger, Bingham’s London office was unsettled by the handover this summer of long-term head Jay Zimmerman, a noted Anglophile, for Steven Browne.
The question this raises now is if the 850-lawyer Akin Gump is ready to use its huge investment to galvanise its small European presence. It had just 14 partners in London and the practice is largely used as a sidecar for US-run mandates. Kim Koopersmith, chair of Akin Gump, says: ‘We have had a strong London office, with some success in the transactions we’ve been involved in, so I liked where we were, but it has been part of our firm’s strategy to grow out London. We have a marquee practice in the States and we wanted to match that reputation in London. We’ve succeeded in building on our core strengths by bringing this group in and it does put us in a very different position in the City. I consider this a huge accomplishment for our law firm and very much hope that joining the ranks as a truly global law firm would be a great legacy for me to have.’
‘It will be a very long time before they see a return.’
Akin also had no mainland European presence and the impact of the London exits led it to create an office in Frankfurt to secure the hire of two German restructuring partners. The ripple also led to the arrival of three partners in Hong Kong, a Bingham office set up and largely managed by its London team.
Still, the timing of the move is hardly ideal, with the era of ultra-loose monetary policy in Europe staving off defaults. Bingham’s London practice was also highly niche; while there is considerable demand to plug restructuring specialists into leveraged finance work, Bingham’s practice focused on distressed asset work with limited deal finance cross-over.
This was reflected in Bingham’s London 2013 financial results, with revenues falling 4% to $52.3m.
One veteran financial restructuring partner in the City notes: ‘It’s a massive investment in the restructuring business and if I was a partner at Akin Gump I wouldn’t be convinced that the back end of 2014 is the right time to be spending millions of pounds building that business. If it had happened five years ago it would have been a stroke of genius, but Akin will borrow to finance this deal and it will be a very long time, at least five years, before they see a return.’
One of the joining partners is unconcerned by market conditions, commenting: ‘Parts of the City are quite quiet. Financial restructuring covers a lot more than just debt restructuring and while we’ve done a large number, and some really big cases this year, there is less pure debt restructuring. However, we do a lot of distressed lending work and distressed M&A work for hedge funds. This is the third record year in a row for direct lending work and we’re doing a lot of it now the market has exploded.’
Bingham’s City office is on track to surpass the record revenue of $54.7m it achieved in 2012, with mandates from the private market, predominantly insurance firms using placements, replacing the shortfall in work from the public bond market.
A leading restructuring partner comments: ‘These things take a little while to bed down. Within two or three years you will see the strongest person, which is James, take the lead over time [to replace Sebastian Rice as head of Akin Gump’s London office]. The challenge for them both is that when you get a big group, getting them to work as a whole is a challenge.’
tom.moore@legalease.co.uk