Bright young things
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Here's a new way to get bums on seats. Instead of spending months coaxing a highly paid partner to join you as a lateral, aim our sights just that little bit lower. Start wooing senior associates in magic circle firms who are fretting about the diminishing prospects of partnership. Tell them it's the greatest opportunity of their careers. Talk about the supportive culture and make them an offer.
Best of all? It's cheap.
This is the new trend in recruitment. Simmons & Simmons and Herbert Smith have both been trying to bolster their finance practices with magic circle recruits, for example. But the firm that's really on an associate hiring mission is Norton Rose. And nowhere has it been more dramatised than in its capital markets business.
In the wake of the calamitous exodus from that group last year, the City firm is pinning all its hopes on Sandrine Sauvel, a former Freshfields Bruckhaus Deringer associate, and Tak Matsuda, a former Allen & Overy (A&O) associate. That is, as they say, a big ask.
Sauvel and Matsuda are not the only juniors to transfer into the Norton Rose partnership. Unable to attract the big-name partners, last year Norton Rose picked up a number of associates from other firms. Nico Abel came to Norton Rose in Frankfurt from Freshfields, while Nicole Guski is set to join next month from A&O in Frankfurt.
The money doesn't seem altogether compelling. The top of the lockstep last year was around £380,000, say insiders. (For Norton Rose's tenuous grasp of transparency when it comes to its financial results, see The Lawyer, passim.)
The lockstep runs from 80 points to 200. Recently, though, Norton Rose has introduced another rung at the bottom of the ladder: a two-year waiting room of 10 and then 20 points. After that, the new partner moves to 80 points for two years and then advances up the ladder at a rate of 12.5 points a year. Even assuming the new partners come straight into the equity and are not in the waiting room, they would be on £150,000. That's a pretty bargain-basement way of relaunching a practice.
Corporate head Tim Marsden, who has had a strong hand in Norton Rose's Continental hiring, admits that the associate campaign is entirely opportunistic. "It started with Germany, where are there so many good people caught under the glass ceiling," he says. "We want to back ambitious young people who are prepared to take a gamble."
And a gamble it certainly is, warn recruitment consultants. "It can be quite risky, although if you get it right, it can be fantastic - if you're willing to give them the backing," comments Mark Brandon of First Counsel. "But you have to be very, very careful of the incumbents."
A series of unfortunate events
But it is in the capital markets group - dubbed internally 'BT6' - where the pressure on the new arrivals will be most acute. This time last year, Norton Rose had six partners in that group. Within a year, every single one of them had left.
Christian Parker resigned to join the London office of Cadwalader Wickersham & Taft in March last year, taking key client European Credit Management with him. Liz Jones left to go in-house at Standard & Poor's. And, most dramatically, Jonathan Walsh, Vincent Keaveny, Simon Porter and Bruce Somer all quit for Baker & McKenzie (B&M) in April.
Leaving Norton Rose as a partner is never made easy; look at the prolonged exit of the acquisition finance team in 2002 to A&O. Norton Rose kept the B&M four until the end of November amid what appears to have been an atmosphere of increasing rancour.
But it wasn't just partner departures. Profoundly unsettled, associates left in their droves. The energetic Abradat Kamalpour, an Islamic bond specialist just below partner level who has worked with BNP Paribas and a number of Gulf institutions, left to become a partner at Dechert.
Benedict Price, Vicky Jones and Emma Osbaldeston, all between one and three years post-qualification experience (PQE), followed Christian Parker to Cadwalader. The B&M quartet took three: the highly rated Rebecca Ford at nearly six years' PQE, Ed Bracken and Sarah Porter. Eileen Wong and Ken Sim joined Rachel Hatfield's group at White & Case. Jackie Cheng left for Milbank Tweed Hadley & McCloy; Ben Tan for A&O. And Raj Singh, another highly promising associate of around five years' PQE, went in-house to Rabobank.
When partners leave, most law firms will tend to make every effort to keep the worker bees. But there seem to be mixed messages as to whether Norton Rose tried to hang on to the talent at all. Two former lawyers say managing partner Peter Martyr was nowhere to be seen during the chaotic spring and summer months last year. Instead, the task of trying to keep the whole group from collapse was left to London banking head Stephen Parish, who has subsequently been promoted to global head for his pains.
The situation was not helped by certain actions on the part of the management, which consistently maintained that the B&M group had merely acted for the firm's institutional clients. An email sent to the partnership by Martyr not long after the quartet's resignation which reinforced this internal spin inflamed the situation; the four-partner team had indeed built its own client following, as senior Norton Rose figures now admit.
Other former Norton Rose lawyers claim that the firm made little effort to speed them up the career track, which contributed to some of the lawyers' feeling that the firm was unsure strategically whether it was going to rebuild the group at all. "There was uncertainty," says a former assistant. "What was going to happen? Who was going to lead us?"
Ford, described by a former colleague as "bloody good", was regarded as a future partnership candidate. Nevertheless, she opted to follow Walsh and the others to B&M. That is in itself a risky move for any senior associate, who essentially has to re-establish herself all over again - and as such, it is telling.
That said, partnership offers may not have made an awful lot of difference to the situation. One departee notes: "To go out and market to banks when they know the team has been devastated is very difficult. If the firm was making real money per partner it would be different."
In this context, Norton Rose's search for external candidates was the only option left. London banking head Stephen Parish argues: "On the rebuilding, we wanted to get away from anyone who smacked of prima donna and get people who fit in easily."
"Well," says a former lawyer, "in the capital markets and securitisation world, there's not much choice. They're accepting reality and trying to step in where the other firms haven't been able to deliver in partnership prospects. But it's more difficult to do due diligence on the people who haven't been made partner yet."
Onwards and upwards
Given the task ahead, Sauvel is extraordinarily upbeat. A forthright Frenchwoman who happens to be married to Simon Porter, one of the B&M four (a former lawyer quips that Sauvel's move represents a Norton Rose "hostage swap"), she spent eight years at Freshfields and, in fact, interviewed for Norton Rose five years previously before deciding to stay at Freshfields.
Sauvel is candid about what her prospects would have been at Freshfields. The magic circle firm has only made up two structured finance partners in London in the past few years. "They have a gearing problem there," she says. "It's a very developed business. There are more opportunities for middle-ranking associates here. There are good partnership prospects for the next few years. We're very conscious that we have to make associates happy. In most magic circle firms, how many women with children stay on?"
Sauvel's colleague in Norton Rose's rebuilding project is Japanese-born Tak Matsuda, an eight year-qualified former A&O associate. The law is a second career for him; he qualified originally as a doctor before embracing capital markets. "One of the reasons to move over to Norton Rose was not being pigeonholed into a specialist area," he says.
"As an assistant at A&O, I was able to witness the pressure partners get put under," Matsuda continues. "There's a constant dread of living under billing targets. Here the atmosphere is different. The most important thing is that here I'm a semi-independent person who can develop my own business, get remunerated appropriately and enjoy it."
Sauvel and Matsuda are not the only partners in the group. There is a third man, Laurence Garside, a derivatives partner who came from Lovells at the end of last year. Garside, who handled work for Barclays Capital while at his former firm, is not being pushed as a business-getter in the same way as his younger colleagues, but is nevertheless an experienced head. "Some firms may get better publicity but have less to offer by way of practice," says Garside of his move.
Norton Rose has an uphill task. At full stretch, during the last financial year the capital markets group turned over some £9m in billings and covered a range of work, from synthetic securitisations to structured derivatives. The capital markets group, which was peopled largely by young partners on fewer equity points, was easily one of the healthiest profit centres at a firm where the average profit per equity partner was declining alarmingly. "There was a lot of frustration," says a former lawyer.
"I think it's going to be quite a challenge to rebuild the securitisation and capital markets practice," says Walsh, now firmly planted at B&M. "I'm not sure it was beneficial to anybody to hold us to six months of our notice."
Walsh, who arrived at Norton Rose 10 years ago as a senior associate from Clifford Chance, and who made partner in 1997, is clever and abrasive, with a hardcore following. Over his eight years as partner, he has built a practice with clients including HSBC, Bear Stearns, Calyon, ABN Amro, National Australia Bank (NAB) and Standard & Poor's. Walsh acted on a slew of HSBC conduits and set up NAB's first conduit here.
Keaveny has cornered the market in Portuguese securitisations, particularly for Deutsche Bank, but also for ABN Amro. Porter is more of a straight capital markets man, while Somer is a derivatives specialist.
The fight for work from Standard & Poor's will be one to watch. Norton Rose hoovered up commercial mortgage-backed securities deals for Standard & Poor's in 2004-05, but former Norton Rose partner Liz Jones will now find herself being wooed along with new general counsel James Penrose. Interestingly, Dechert is the preferred US counsel (and new home of former Norton Rose assistant Kamalpour). Norton Rose is likely to put up a fight, but the odds are on the B&M team getting most of the work.
Norton Rose seems hopeful about maintaining some work from HSBC - as indeed it should, given the firm's institutional links. Not only is Craig Squire of the conduit securitisation team a former Norton Rose lawyer, but Sauvel also handled work for HSBC while at Freshfields.
However, it's likely to be a different story at NAB. Head of European securitisation Tony Gioulis is a close contact of Walsh's. Similarly, Bear Stearns is a Walsh client through and through, while Deutsche Bank's southern European business will migrate wholesale to B&M along with Keaveny.
"The clients don't know us yet," admits Sauvel. "We're as good as Vincent or Jonathan and have a strong competitive advantage here because we have a strong tax team and property team. But we'll have to do some work in getting them comfortable with us. We have to be aggressive."
At Freshfields, Sauvel acted on transactions for Royal Bank of Scotland, Goldman Sachs and Merrill Lynch, as well as for various guarantors and trustees. But her best chances are in the French banks, where Norton Rose has been traditionally strong. Meanwhile, Matsuda has a wide range of contacts from his days at A&O, including Daiwa, Mizuho and Nomura.
Is it a substitute? Norton Rose protests that it will fully support the group, although former lawyers question whether the firm has the appetite for the fight.
For the moment, banking head Parish has fixed the problem. But unless Norton Rose addresses the profitability gap, Sauvel and Matsuda are going to be on the headhunters' lists in little more than two years.