Can Kirkland take Weil Gotshal’s bankruptcy crown? The battle is on
4 August 2008
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Weil has long been seen as housing New York’s pre-eminent bankruptcy and restructuring team. The firm’s brand in restructuring is still strong, but the defections to Kirkland are unwelcome for the firm.
At Kirkland Marcus has joined Weil alumni including partner Paul Basta, who moved in 2006, and associates Joshua Sussberg, Nicole Greenblatt and Catherine Peschkin, who joined the New York office this year.
Compared with Weil, Kirkland is the new kid on the restructuring block.
Kirkland’s ambitious bankruptcy and restructuring group was kick-started by partner Jamie Sprayregen in the 1990s ( Sprayregen is now at Goldman Sachs). Since then the Chicago-headquartered firm has built a debtor-side restructuring practice to rival Manhattan’s top dogs’.
By using its private equity business to feed work to the restructuring team, the likes of senior restructuring partner Richard Cieri and Basta have an excellent platform on which to build their practice. And this is posing a real threat to Weil.
“When I was at Weil we were threatened by Kirkland’s success,” says a former Weil partner. “The difference between the two is that Kirkland is ambitious and working hard for its market share, while Weil is fat, dumb and happy relying on the dominance it once had. Its main problem is that all its good partners tipped for future leadership have moved on.”
That said, reputation does not just disappear. Weil will still win mandates and has proved that it can do so both before and since the credit crunch. Partners Michael Kessler, Martin Sosland and Sylvia Mayer, for example, are advising Semcorp on its $3.1bn (£1.57bn) restructuring.
“In terms of financial products, we have the right expertise in our structured finance department to advise on the complex collateralised debt obligations that are prevalent,” says Weil head of bankruptcy and restructuring Marcia Goldstein.
Well known for its crucial role on groundbreaking restructurings, such as Parmalat and WorldCom, Weil has every faith that it will benefit from the next wave of restructurings. Indeed, the firm believes it is the strength of its practice that has led rivals such as Kirkland to hire from its ranks.
“We’ve been instructed on eight debtor-side restructurings in 2008,” Weil chairman Stephen Dannhauser says. “Our ;business ;finance and restructuring practice has been a core group for decades and we have the best quality of lawyers compared to the market by quite a margin. It’s no surprise firms target us to build up a bankruptcy group.”
It is not just Kirkland that has raided Weil. Last year (30 November) The Lawyer reported on Weil’s New York-based business finance and restructuring co-head Martin Bienenstock joining Dewey & LeBoeuf with partner Judy Liu and associate Timothy Karcher. And last year restructuring stars George Davis, Deryck Palmer, Andrew Troop and John Rapisardi defected to Cadwalader Wickersham & Taft.
Some blame a lack of autonomy and the influence of former bankruptcy and restructuring head Harvey Miller, who left the firm in 2002, but who returned in March 2007 at the age of 75.
“Marcia is officially the head, but Harvey still has a lot of control,” says a former Weil partner. “The talent’s left because you have no control over what you do there. The danger for Weil will be in five years’ time. Who’s going to lead the group now that all the top people have left?”
In contrast, Kirkland’s hunger and desire to build a New York bankruptcy practice has so far proved successful.
Kirkland’s ;Chicago edginess allowed the firm to be a contender in the New York restructuring market, taking the automotive industry by storm and proving itself to be a viable competitor to Weil.
“The firm’s been successful because it recognises the importance of partners across practice groups and offices working very closely together,” says Cieri. “It’s a much more competitive market now and we need to be able to provide cross-border services.”
In 2006 Kirkland won the mandate to advise Dura Automotive on its Chapter 11 proceedings, as well as its $300bn (£151.54bn) restructuring. The firm
has advised on a string of cross-border debtor-side proceedings, which has put the pressure on Weil.
“Weil says that it’s conflicted out of advising on the majority of these deals because of its dedication to General Motors as a long-standing client,” says a former partner. “This is a smoke screen. The reality is Kirkland has muscled into this sector because of its expertise and because Weil has lost so many of its good lawyers.”
Despite its progress in the US market, Kirkland’s international restructuring practice has suffered of late. Earlier this year (22 April) The Lawyer reported on US litigation ;firm ;Quinn Emanuel Urquhart Oliver & Hedges snaring Kirkland London ;restructuring partner Richard East to launch its London office.
“You can’t doubt that Kirkland has become a formidable force in the US, but it doesn’t have the same strength of network that Weil has,” says a London-based Weil partner. “Weil’s done well winning clients for its global network and I don’t think that Kirkland has done this just yet.”
Weil is focusing on building up its global bankruptcy and restructuring team. The firm hired Cadwalader restructuring partner Tony Horspool for its London office earlier this year.
“London, Germany and France are all very important to ;this ;group,” ;says Dannhauser. “Given the market conditions, building up ;in London and broadening the practice area capabilities is certainly a strategic focus.”
Weil will continue to capitalise on its reputation in restructuring across its network. But given that Kirkland has lured a number of crucial lawyers away after a significant number defected to Dewey and Cadwalader, Weil will have to fight to make the most out of the coming restructuring boom.