Focus: Latham & Watkins, Hard corp
8 November 2010 | By Matt Byrne
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Latham & Watkins is probably the easiest US firm in London to recruit for,” claims one City-based legal market recruitment consultant.
“If you say ’Latham’ when people pick up the phone, if they’re a decent lawyer they’ll at least want to hear about the role. That hasn’t changed in the past year or so.”
The timeframe comment is as relevant as the US firm’s need for recruitment services. A year ago Latham was coming to the end of the most turbulent period in its history, summed up by its 200-lawyer layoff programme. If you spoke to any Latham insider back then it was obvious this was a firm where the confidence had been shaken.
The past year has seen it rebound, a dramatic change in fortune illustrated by strengthening financials and one of the most aggressive periods of lateral hiring seen at any firm.
At the start of this year the firm recruited 14 partners in less than a month from White & Case alone. The indications are that the financial results for 2010 will be positive, while Latham has also regained its fondness for opening offices. This year has seen launches in Beijing, Houston and Saudi Arabia, driven in part by the arrival of new blood.
The contrast is considerable. And the effect on Latham is a renewed confidence that is almost tangible.
Take finance, for example. The firm has long been a leader of the pack in high-yield, but the White & Case hires have added considerable clout to the banking side of leverage finance. Latham, in bullish mood, believes it now has a banking and finance practice to rival the best in London.
So far, so credible. But what, at first glance, is less believable is the fact that the top brass in Latham’s City office also has no problem claiming that the firm is a match for any rival in corporate - magic circle included.
“It’s fair to say that three years ago we’d sometimes get bumped off the core M&A part of big deals while we’d win the underwriting or financing part,” says former London head and now global executive committee member Andrew Moyle. “That doesn’t happen anymore.”
Up, up M&A
If that comment comes as a surprise, try this: Latham claims it is currently having its best M&A year in London. Ever.
That will certainly come as a shock to many in the market, who readily admit that the firm has beefed up an already strong finance franchise with the White & Case hires, but which looks thin on the ground in corporate.
Last week The Lawyer popped in to 99 Bishopsgate to meet a cabal of senior Latham partners to get their take on whether the US firm’s City corporate group is, as one rival puts it, “underweight”.
London managing partner Nick Cline, the corporate specialist who led one of the City corporate group’s recent landmark deals - the £1.5bn sale of Harrods to Latham client Qatar Holdings - argues that his firm’s current group of eight core corporate partners is more than capable of matching any team in London, pound for pound.
“The eight are just our core English M&A partners,” says Cline. “This excludes other corporate partners in areas such as capital markets, US corporate and commercial outsourcing that could easily be included in the corporate group. With those the number’s above 20.”
Cline adds that the Harrods deal was a “great example” of the kind of deal Latham’s London weight, which broke through the 200-lawyer barrier for the first time three months ago, now allows it to handle.
“The deal included pensions, real estate, IP and tax issues, all of which we handled in-house,” adds Cline. “We don’t send anything out.”
Cline’s view is echoed by the other partners in the room - Moyle, fellow global executive committee member Bill Voge and M&A partner Graeme Sloan.
“We believe we can hold our own with any English law firm,” contends Sloan.
Latham’s line on its London corporate team - that it is a match for any firm in the City, including the magic circle - is backed up by the several multibillion-dollar deals it has handled in the past few months.
Along with Harrods, these include: advising Onex Corporation and the CPP Investment Board on the £2.89bn acquisition of engineering and manufacturing group Tomkins; Norsk Hydro on its is $4.9bn (£3.1bn) acquisition of Vale’s aluminium businesses and associated rights issue; and Vedanta Resources on its $9.6bn acquisition of up to 60 per cent of Cairn India.
It is a list any firm would be proud of, but despite Latham’s bullishness about its capabilities the corporate group still looks overachieving but underweight. Cline and co admit that growing an English law corporate practice is now a priority.
“It’s a tough task to be in the magic circle’s back yard and recruit top English M&A partners,” admits Voge. “But we’re not in a rush.”
Search for a star
Not in a rush maybe, but that last comment at least flushes out Latham’s ambition. It is hardly surprising that in the current market this growth-mode firm is seeing a steady flow of CVs from the UK’s top firms. But the flood of finance arrivals is yet to be matched by a similar influx in corporate.
True, that smacks of quality control, but it also raises the question of where Latham is going to find its new corporate recruits.
“Latham’s weak in corporate, they need a big-hitting, marquee-name M&A partner,” argues one well-placed legal market consultant. “The thing is, there aren’t that many big-hitting M&A moves. Adam Signy to Simpson Thacher & Bartlett was the last really big one. In fact, there aren’t that many big-hitting M&A partners in London full stop. And lots of firms would like to hire a big-hitting corporate partner.”
That leaves the option of hiring a bunch of better-quality younger guys from good firms, including the big four, or older lawyers nearing retirement. The smart money is on the former, but there are also problems with this approach.
“The problem is that younger lawyers don’t have the following, and these days so much has to be self-financing,” argues a corporate partner at a rival firm. “Where’s the income going to come from? Big firms are incredibly good these days at institutionalising their relationships.”
Latham’s most recent London corporate hire, private equity partner Graeme Ward, who joined earlier this year from Ashurst, points to what might be the attractions of a resurgent Latham.
“I was interested in the fact that London’s very much targeted for growth in the Latham network,” he says. “We have lots of US, European and Middle or Far East deals that come through London, so there is a number of different strands which make the office appealing.”
Earmarking London for growth has almost become a policy decision at Latham. All four partners in the meeting agree that growing Latham’s London office across the board has risen to the top of the firm’s to-do list.
“For a long time we’ve recognised that London’s important and that it needs to get bigger,” says Cline. “In fact, nothing dramatic has changed, but there’s now a greater recognition that London and the development of the English law practice is critical.”
It is tempting to see the events of this year and the buy-in to growing London as a seismic shift at Latham, but Sloan argues that this would be a misreading.
“The seismic shift was Latham changing from a Californian firm into a global one,” he says. “But the key thing is that London’s really only a shorthand for English law, it’s not just about the City. We’ve made English law hires in Asia, the Middle East and Moscow.”
Internationally, as this year’s office openings prove, Latham has been back where it feels most comfortable - in growth mode. And if the firm is to grow its London corporate group, leveraging off its overseas network will be crucial.
While the US firm would never dismiss the idea of growing a domestic corporate practice acting for FTSE250 clients, in the real world it is never going to compete with the likes of Slaughter and May on its own patch. And nor does it want to.
The impact on the sales pitch to both clients and potential recruits of Latham’s return to form, highlighted best by its new offices in the Middle East and Houston, is the growth of its English law capability. And that stretches way beyond Bishopsgate.
“Riyadh is now one of our busiest offices,” says Voge. “And I’d say every deal we’ve worked on in Riyadh this year we wouldn’t have got if it hadn’t been for the opening of our new office there.”
Off the record, Latham insiders admit that the firm has been struggling for a decade to get into the Saudi market. Now it is seeing a return on its investment, with deals including the SR2bn (£33m) debt issuance for Apicorp and the banks on the SR7bn sukuk issued by Saudi Electricity Company.
It all adds up to a surprising bullishness among this group of partners, considering that not long ago Latham was reeling from redundancies and falling profit. But times change.