Can Clifford Chance break the mould and succeed with US second coming?
30 July 2007
23 July 2007
23 July 2007
3 September 2007
14 January 2008
Transatlantic Elite 2011
Clifford Chance break the mould and succeed with US second coming?" />
News that Clifford Chance is to launch a fresh assault on the US market will be watched closely on both sides of the Atlantic, not least because the UK giant has failed so miserably in its US jaunts in the past.
Even global managing partner David Childs admits that the firm's merger with Rogers & Wells seven years ago, which gave Clifford Chance a US presence for the first time, was ill-timed. The firm's expansion into San Francisco two years later, via a troubled merger with Brobeck Phleger & Harrison, descended into chaos, with the firm eventually being sued by Brobeck's creditors after the relationship broke down. Add to this the associate revolt that became known as 'Paddinggate' and Clifford Chance's US history becomes something of a mess.
On the back of the firm's most profitable year ever, however, Childs is keen to turn that position around. With the aim of making Clifford Chance the leading international law firm without peer, the firm is ramping up its focus on the US. Having gone from a 600-lawyer firm post-merger to a 430-strong practice today, an intensive focus on the US is planned to reverse its misfortunes of the past few years.
Growth is planned across all practice areas, although according to the firm's US managing partner Craig Medwick the firm's main goal is to be considered the leading M&A practice in New York.
Indeed, Peter Charlton, Clifford Chance global head of corporate, pointed out that, while the US currently contributes 8 per cent of firmwide corporate revenue, he would like to see that figure increase to 11 per cent within the next year. To achieve this, said Charlton, the firm must make a significant investment in people. On the transactional side alone the aim is to increase the headcount to somewhere in the region of 50, with a fifth of those expected to be partners.
Medwick added that in the short term the firm wants to add two partners apiece to the finance and restructuring practices, with the aim of also increasing its energy projects capability. This expansion has already begun, he pointed out, with the addition of Pillsbury Winthrop Shaw Pittman finance and restructuring partner Tom Pax to the Washington DC office (www. the lawyer.com, 24 July). According to Childs, the thrust of the firm's US push is to become a leader on the East Coast, and Medwick added that essentially DC and New York operate as one office.
"There are 75 partners in New York and 15 in Washington DC," said Medwick. "We do everything we can to focus on clients so geography cannot be an impediment. The two offices are totally integrated, so a litigation partner, for example, is not badged as a DC litigation partner but just a litigation partner."
Looking to litigation, Charlton said the firmwide aim of increasing the US's share of total revenue from 14 per cent this year to 20 per cent next year will be achieved by growing the transactional side of the business at the expense of litigation. Currently litigation accounts for 30 per cent of US turnover, but that figure is expected to drop to 25 per cent in the next 12 months.
However, in spite of Clifford Chance's bold plans for its US assault, scepticism remains on the ground about the firm's ability to achieve its goals. One partner from a leading US practice said: "I just don't see that they have a business to expand in the way they want to. I think what they have now in the US is extraordinarily ordinary. No UK firm has done even a decent job of having a US operation and I don't see why Clifford Chance would be the first."
The problem is not Clifford Chance per se (although its initial forays into the US market were hardly designed to impress), the issue has more to do with the fact that the US simply is not ready to view any UK firm as a viable competitor.
The source said: "I don't see what the UK firms offer in the US. US firms that go to the UK generally have a small office, but do work for UK clients who think they do it better than UK firms. I don't think anyone here thinks UK firms can do better work than US firms."
On top of that Clifford Chance has a number of cultural issues to overcome, such as the fact that the generally accepted retirement age at the firm is 55, while most US rainmakers are at their earning peak between their mid-50s and mid-60s. Related to that is the lockstep system so central to Clifford Chance's ethos.
As the US source said: "Why would someone take $2m [£976,900] on the lockstep when they can easily get anywhere up to $5m [£2.44m] or $6m [£2.93m] as a rainmaker? If Clifford Chance keeps the lockstep it's not going to make it in the US because it's too low and won't attract any of the rainmakers."
However, Medwick, who hails himself as a firm believer in lockstep, said the system is becoming a far more common feature in the US. He added that Cravath Swaine & Moore and Sullivan & Cromwell also operate similar structures.
"We're getting more resumés than we know how to deal with and people say they're tired of working in an 'eat what you kill' firm," he said. "Clients now need to be introduced to other clients in the likes of Hong Kong, Singapore and London and they don't want to worry about who's getting credit for what."
Whether Cliffford Chance has the clout to attract the talent needed to bolster the US remains to be seen. In the meantime the New York office can expect to welcome partners and associates from other offices in the network, as per a firmwide mobility strategy. In addition, with partnership nominations getting underway at the moment, Medwick expects a greater number than ever before to be made up next May.
CC's US revenueYear Revenue Per cent £m ($m) of total revenue 2001-02 240.00 (491.35) 24 2002-03 235.00 (481.11) 24 2003-04 205.00 (419.69) 25 2004-05 138.60 (283.75) 15 2005-06 142.00 (290.71) 14 2006-07 166.60 (341.08) 14