Cadwalader London: five ways to say goodbye

Losing seven partners from its City office highlights the frailties of Cadwalader’s global strategy. It also provides a perfect example of what not to do in the current economic climate.


Cadwalader London: five ways to say goodbye Two weeks ago The Lawyer exclusively revealed that seven partners from the London ;office ;of ;New York’s Cadwalader ­Wickersham & Taft handed in their resignations with the ­intention of joining Paul Hastings.

Former chairman Bob Link is moving to the UK in February to rebuild the office, but his chances of success are limited. He has only four partners, none of whom are ­guaranteed to stay.

Although the firm’s massive redundancy programme is not so shocking given that the lawyer redundancy count in the UK now exceeds 2,000, it suffered some reputational damage from the ‘snakepit politics’ that removed Link from the management committee and saw him exiled to London (TheLawyer.com, 17 November 2008).

Link’s task is challenging to say the least. And, as chairman, he oversaw a period of decline in Cadwalader’s London office that provides a case study of how to lose an entire office.

No one from Cadwalader’s management team wanted to comment on the story.

1 – Do battle with your best clients

Cadwalader reopened its London office in September 1997. It made a splash with the hire of Clifford Chance’s then head of insolvency Andrew Wilkinson together with Wilde Sapte partners Russell Jacobs and John Walker, who have since moved on to Milbank Tweed Hadley & McCloy.

Wilkinson was phenomenally ­successful in building up one of the City’s leading insolvency practices, representing bondholders in their tussles with banks. But it was the banks that were the main clients, with Bear Stearns and Lehman Brothers (remember them?) the firm’s biggest clients. “Wilkinson’s practice was basically beating up the banks,” says a former partner.

The ;firm ;poached ;former ­Shearman & Sterling partner Stephen Mostyn-Williams to helm a leveraged finance team, which ­included the likes of Chris Kandel, who is now at White & Case, but in April 2000 Wilkinson recruited ­litigation partner Michelle Duncan from Weil Gotshal & Manges to assist him in his battles. While the banks quaked, Mostyn-Williams’ job became a lot tougher.

“The fundamental problem was that Andrew Wilkinson had destroyed their relationships with banks to an extent that none of us really appreciated. It was a tricky task going to banks and asking for ­leveraged finance deals while Andrew was suing them,” says a former ­leveraged finance partner.

2 – Let your top practice wither away

The departure of Wilkinson to Goldman Sachs in June 2007 was not mourned by many New York Cadwalader partners, who could breathe a sigh of relief that they would no longer be fielding awkward calls from irate bankers.

But the huge fees generated by Wilkinson kept New York interested in London, even if the relationship was sometimes difficult. Wilkinson also held a seat on the firm’s ­management committee, and he was not replaced.

Duncan became administrative partner for London, with none of the influence that came with a seat on the management ­committee. To those back in London, it looked like New York was losing interest.

“We’ve seen no action. Since Wilkinson left I’ve watched the restructuring group wither away and they’ve done nothing,” claims a ­Cadwalader partner.

They all went to good homes. Peter Baldwin joined Jones Day, Tony Horsepool joined Weil and Jackson Taylor left for Latham & Watkins, while James Douglas returned to his native New Zealand.

There was little left to keep ­Duncan from moving on.

3 – Axe anything that’s not earning

A strong restructuring and litigation team would have been a real asset in the current climate, but the management had a one-track mind. In New York it was starting to get rich on the back of real estate securitisations.

“I love real estate,” head of real estate finance, and now chairman, Chris White is famously reported to have told one of his partners. “I work in real estate.

When I’m not at work I buy real estate. I think ;about ;real ;estate when driving home and before I go to bed. I dream about real estate and when I wake up I think about real estate some more.”

Leveraged finance was always on a hiding to nothing. Mostyn-Williams left by mutual consent after becoming tired of the conflict with Wilkinson’s group and a lack of understanding from New York. Kandel left for White & Case. You could sense his relief when he said: “It’s exciting to go to a firm where the core practice is ­banking,” (The Lawyer, 13 June 2005).

The project finance team was pushed out and the office refocused on structured finance. Last year, when the firm made 131 redundancies, a disproportionate amount of jobs were shed in London.

Another former partner says: “As far as they’re concerned, if you don’t have a practice that’s very profitable, you fire them. You don’t wait. You don’t invest and try and build ­something up. You don’t support young lawyers and help them develop. It’s very short-termist, and that’s why they’re struggling.”

“Cadwalader is still very profitable and in the short term might remain so,” says a partner. “But there’s a risk that it’s in run-off. They’re so focused on cutting costs and boosting profit per partner that they’ve lost touch with building the firm’s future.”

4 – Refer work to your London rivals

Other than Link and White, the other key player in New York is Dennis Block. Block is a force of nature with a unique practice that takes in both M&A and litigation. In a good year Block bills around $60m (£43.5m).

Block’s clients have kept the firm busy – but not London. Block would happily refer work to Herbert Smith or Slaughter and May rather than his own firm’s City office. Although understandable for corporate work, as the firm has no UK M&A lawyers, ­Duncan and barrister Tom O’Riordan are very talented litigators.

5 – Keep everyone in the dark

Following the resignations of the seven partners two weeks ago, White and Link flew to London to convince them to stay. The partners were told that Europe, not the US, is the future and that Link would be moving to London to lead the strategy of the office.

It was meant to be a statement of commitment, but the London ­partners were aghast that their futures were being plotted without any ­consultation. “It reaffirmed all our ­reasons for leaving,” sighs one ­partner.

The partners handed White a wishlist of things that might convince them to stay. They wanted a role in developing their own strategy. They wanted a marketing budget. They asked for no more redundancies in London this year and a seat on the management committee.

It took White and Link just 40 minutes to decide there was no point in negotiating any longer.

Cadwalader opened its first ­international office in London in 1997. It opened its second one in China, a bit later, then shut it.

The final word goes to another ­former partner: “It’s a very, very old American law firm that doesn’t quite understand the rest of the world. It takes time to get it right. George Bush never quite got it.”

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