Clifford Chance must trade on more than reputation to take Manhattan
16 June 2008
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Clifford Chance must trade on more than reputation to take Manhattan" />The criticism in New York of Clifford Chance's 1999 merger with Rogers & Wells is like a stuck record. One is tempted to say to Manhattan lawyers: enough already. Clifford Chance has moved on. These days, the UK-headquartered firm is adamant it will carve out a significant place for itself in the New York corporate market.
It is undisputed that Clifford Chance has one of the leading corporate and private equity practices in Asia, Europe and the Middle East. But, like the other members of the magic circle, the firm knows its prestige elsewhere is not going to be enough to make it in the infinitely more mature New York market.
Just look at the competition. Simpson Thacher & Bartlett, Davis Polk & Wardwell and Sullivan & Cromwell all have entrenched relationships with legions of top-tier corporates and private equity houses.
With the competition in New York more ferocious than any other place on earth, how can Clifford Chance succeed in its ambition to tap into the domestic US corporate market?Can it just leverage off global clients or must it build a domestic corporate client base? And, critically, has the firm got the right people in place in New York to drive its strategy and deliver the prestige it has elsewhere in the world?
"It's about getting a balance between serving global clients and domestic US clients," says Clifford Chance US corporate head Brian Hoffman. "As a global firm, it's vital that we're in the US as well as our other locations so that we're able to do US work for our global clients. But, equally, we need to be able to build a domestic base to be able to grow in the market."
New York corporate contributes 10 per cent to the group's global turnover, so the firm has clearly made headway in developing its US client base. One trophy client relationship is with Siemens, formerly a client of both Clifford Chance and Rogers & Wells.
Siemens relationship partners in New York, John Healy and Alex Camacho, have led on several deals that have helped put Clifford Chance on the map in the US. For example, Healy advised Siemens on its $7bn (£3.58bn) acquisition of medical devices company Dade Behring in July last year.
"Siemens is a great global relationship for us and one that has been particularly successful for New York's corporate team," says global head of corporate Peter Charlton. "Our relationships with US corporates such as Kraft and Philip Morris have also contributed heavily to our growth."
The firm's relationships with Kraft and Philip Morris have clearly benefited from the move of London relationship partner Sarah Jones to the New York office in 2006. Jones has since led the firm advising Kraft on its $7.2bn (£3.68bn) acquisition of Danone's biscuit business. This was Kraft's first acquisition since it spun off from parent company Altria in May last year.
While Jones is a significant player in the New York corporate team, both Charlton and Hoffman admit the firm needs to recruit more lateral talent from the New York market to capitalise on opportunities in domestic M&A.
"There's not the need to have as many UK lawyers in the US office," says Hoffman. "We need to focus on organic growth in New York. We'd have liked to have recruited more from the market here but we're realistic and know it will take time. We're a top 10 firm in New York on a number of metrics, including prestige. This is a substantial benefit for us."
Well, prestige is nice, but it's a bit of a woolly claim to greatness. There's no doubt Clifford Chance has global prestige, but there are one or two US firms that could make similar claims while having US corporate and private equity relationships that far outstrip Clifford Chance's. 'Prestige' alone cuts little mustard in Manhattan.
"I can't see how Clifford Chance can muscle in on the corporate and private equity relationships that the New York elite have," says one US partner. "Yes, it has good global presence, but a private equity house will go to a US firm every time in the States because of the ties it has."
Hoffman begs to differ. He led the firm, with UK partners Geoffrey White and David Pearson, on Terra Firma's $5.2bn (£2.66bn) acquisition of US finance company Pegasus Aviation Finance in May last year.
While the firm understandably defends its position on serving its global private equity client base, it's fair to say that Hoffman and his partners are reasonably realistic about the type of clients they can expect to serve in the US.
"It would be wrong to focus all our attention on getting big private equity clients away from New York firms like Simpson Thacher," admits Hoffman. "For us, building on new relationships with firms that have recently moved into the New York market is a better way of developing our brand and client base."
Hoffman points to European private equity house EQT as an example. The organisation, for which Hoffman is relationship partner, recently expanded its operations to the US.
A healthy dose of realism from any firm is always refreshing, but it is doubtful whether Clifford Chance will be content with legions of smaller private equity clients in the US for long, particularly as it represents giants in most other jurisdictions.
It must be a source of frustration for magic circle partners in the US to hear locals conclude that UK firms are unlikely to build a successful corporate and private equity base in the US, but it is obvious that these firms do have a long way to go.
Big names, such as Siemens, Kraft and Terra Firma lend Clifford Chance kudos in the US, but its private equity relationships there are relatively new. There is no denying that it is early days for Clifford Chance's relationship with EQT and Macquarie.
Jones and Healy are the stars of the New York practice, but a successful Manhattan corporate group needs more than two high-flying partners.
Clifford Chance has enjoyed another strong financial year, posting an 11 per cent hike in revenue from £1.19bn to £1.33bn in the 2007-08 period. With US firms feeling the pain of the credit crunch this may be a rather good time for it to attract the New York stars it needs to build a truly outstanding corporate practice.
#clifford chance's big us deals
In July last year New York partner Sarah Jones advised longstanding client Kraft on its $7.2bn (£3.68bn) acquisition of Danone Group's global biscuits business. The deal was the first transaction the company completed after its spin off from parent company Altria in May 2007.
New York Siemens relationship partner John Healy led the firm advising global client on its $7bn (£3.58bn) acquisition of medical devices company Dade Behring in July last year.
Healy also took the lead advising private equity house Terra Firma on its $5.2bn (£2.66bn) acquisition of Pegasus Aviation Finance Company in May last year.
Partner Paul Meyer and Healy advised Spanish insurance company Mapfre on its $2.77bn (£1.42bn) acquisition of Massachusetts-based insurer Commerce Group.