Hot air from the Windy City?
8 February 1999
2 May 2013
15 October 2013
4 November 2013
7 October 2013
31 October 2013
Last week's front page of The Lawyer carried a photo of four men in suits striding purposefully down a City street.
The image, and other publicity shots from the men's PR agency, heralded
the arrival of yet another US firm in London, this time Chicago's Altheimer
& Gray, as revealed in The Lawyer (5 April).
The firm intends to attract as much comment on its work as its publicity
shots, by building a London office of up to 100 lawyers in two to three
years and expanding into Paris, Frankfurt and Milan.
We have heard this kind of talk before from US firms keen to make an
impression in the crowded London market. So is there really anything
different about Altheimers?
For most US firms, London is the first port of call in forays into Europe.
The popularity of English law for major transactions and London's place at
the centre of Europe's financial markets mean a UK outpost is often
sufficient to serve clients with a continental presence.
Other firms establish themselves in the City and then decide to expand
into other European centres.
But Altheimers is unusual for two reasons. First, it already has six
offices in central and eastern Europe (see box). Second, observers say, the
270-lawyer firm's international operations are out of proportion with its
relatively modest presence in Chicago and its standing in the US as a whole
(its only other US office is a one-man operation in Washington DC).
The driving force behind the firm's expansion is Louis Goldman, chairman
of the international practice group based in Chicago.
In 1989, Goldman was looking at China as an emerging market that the firm
could tap into, but after the violent crushing of protests in Tianaman
Square the uncertain political and business climate meant that China would
have to wait.
The firm eventually got a licence to practise in Shanghai in 1996, beating
stiff opposition from the likes of Sullivan & Cromwell and White & Case.
Although protest failed in China, it succeeded in eastern Europe.
And when the Berlin Wall came down in 1989, Goldman smelled his chance and
was "one of the first off the plane".
Also touching down behind the former Iron Curtain that year was Robert
Bata, managing partner of the firm's new London office.
Bata has worked in eastern Europe since 1989 and founded the Budapest
office of US firm Stroock & Stroock & Lavan before joining Altheimers in
In 1990 Altheimers became the first western law firm to open an office in
Warsaw. This move, and the firm's later European expansion, took other
Chicago firms by surprise.
"It's a good firm, but not a nationally recognised firm by any means in
the States," says a rival's partner.
Joel Henning, a director of legal consultants Hildebrandt International's
Chicago office, says: "It is a highly unusual situation.
"Altheimer & Gray, it's fair to say, was very much a local Chicago firm
with a local middle-market client base.
"Unlike most US firms that establish themselves in the UK and then
cautiously move into western Europe, they did it the other way round.
"What is truly extraordinary about them is that you have this local law
firm that has found enormous success in relatively exotic places abroad."
So why has the firm decided to open a base in London? Goldman and Bata say
the main reason is to support the firm's eastern European network.
Markets such as Prague and Warsaw are now relatively mature, and clients
are looking to raise money in the west. But they will also compete for UK
"We expect to see the regional representation of clients grow as well as
significant local deals, which we will get as the result of the
confidence-building exercise that the last 10 years in eastern Europe has
been," says Goldman.
Bata explains the importance of London for the firm's existing network. We
wanted to be in the place where clients could most easily tap into capital
markets," he says.
"More often than not, the relevant capital market for work outside the US
is done out of London and we see that as a key source.
"When you are very close to institutions, many of whom often make
decisions about which lawyers will be selected for a transaction, you are
in a better position to compete with those that are perceived as being
longer-term players in that area."
The firm advises a number of clients in eastern Europe, including BP, the
European Bank for Reconstruction and Development, Gillette, insurance giant
CGU, and Fiat.
"We were in the right place at the right time with the right idea, and we
picked up an enormous number of top-tier clients," says Goldman.
But competition in eastern Europe has increased enormously since
Altheimers made its first moves, with big UK and US firms like Clifford
Chance and White & Case moving in.
A Prague source believes Altheimers is finding the competition tough.
"They came to the region early and they have got a good market share in
Poland and the Czech Republic, but I think they're slowly losing business,"
says the source.
"I think they realise they need to have offices in the big financial
Goldman rejects the charge that the firm's success is beginning to wane.
"I don't think that is true," he says.
"I think in Poland we continue to have the dominant position we have
"In Kiev we continue to be one of the two or three players in that market
and the same goes for Romania.
"In Prague we continue to be one of the major players.
"In the beginning there were only two or three [western firms] in each of
those markets and I don't think you could expect those markets to be
satisfied with only two or three western law firms."
Bata points out that the firm advised aircraft manufacturer Aero Vodochody
on a $600m (u375m) bank credit facility and $200m (u125m) high-yield global
bond offering - the biggest single Czech Republic transaction in the last
US partners are often sceptical about their firm's foreign offices, and
London can be a particular drain on resources. But Bata says: "London was
one of those things where there was almost unanimous acceptance.
"The EU is looking to integrate with eastern European countries, so London
is important for that reason.
"I have had different experiences at other firms, where eastern Europe was
seen as a madcap frolic, but at Altheimer & Gray the international practice
has a very high profile."
But will Altheimers' clients choose it to do their finance and
transactional work in London or are they more likely to be tempted by the
established expertise of the top US and UK firms?
Bata says: "I think in some cases that will be true. In other cases it
will be true that clients who have used us in eastern Europe but have
relations with City firms for UK business are going to see us as able to
provide them with additional service as well as eastern European service.
"For clients who have worked with us it will offer an opportunity to
diversify their legal representation and we don't intend to stand in the
way of that."
Bata says all the firm's foreign offices have made money "from day one".
This, he says, is because Altheimers hires local lawyers.
"Our view has never been to try to import American branch offices into
foreign countries," he says.
As well as giving the firm lawyers with local reputations and expertise,
this strategy avoids high expatriate costs, Bata argues.
But a Chicago source points out that London's high costs are an immense
drain "both in terms of real estate and hiring talent", and it can take
firms a long time to make any money.
Altheimers dismisses the idea. "We have heard those stories but frankly we
are mystified by them," says Bata.
The firm's declared strategy is to hire rainmakers who will bring
immediate business with them and can then "double or treble their business"
by tapping into the firm's eastern European clients, according to Goldman.
The London office is to concentrate on three areas - mergers and
acquisitions, finance and capital markets, and property transactions and
It has hired Watson Farley & Williams corporate partner Nick Towle,
Eversheds property lawyer Andrew Astachnowicz and, reportedly, Nabarro
Nathanson property partner Andrew Bond as partners.
And the firm has also hired Freshfields associate Jonathan Baird who is
joining the Chicago office.
These appointments do not seem to match the profile of the initial
signings by, say, Weil Gotshal & Manges and McDermott Will & Emery, which
recruited Clifford Chance banking rainmaker Maurice Allen and Simmons &
Simmons' high-profile corporate partner William Charnley respectively.
But Bata says the firm is eschewing the big-name-as-bait strategy for a
Bata will head the office and provide a link with the firm's network, but
the office's strategy will be made up by a management committee comprising
the London office's key partners.
But there is no certainty that a new arrival will bring business with
them, no matter how good their list of clients appears.
Bata concedes "you can't be 100 per cent sure", but says the firm is not
interested in "buying business".
Instead he is seeking people who have a proven record for building close
"One of the people coming in has many clients and a couple of
relationships that go back to his days as a trainee. That is the sort of
person people follow," he says.
Richard Levick, president of US legal consultancy Levick Strategic
Communications, says: "This is a firm that has been successful in
developing in eastern Europe and the Pacific Rim, and I'd bet on them.
But an ex-Altheimers lawyer, now working for a rival firm, is sceptical
about the firm's grand ambitions in London.
"It sounds like a very ambitious plan. If it happens, I would say
congratulations to them," the source says.
"In eastern Europe they are profitable because they pay substantially
lower salaries than they would in the States.
"But London is going to be different and they won't hire people if they
are not going to pay substantially the same or probably more [than London
Bata agrees that in eastern Europe the firm pays more than local rates but
below levels in Chicago.
As for the UK, he says: "We are able to pay more than UK firms do, because
we are more profitable, but we are not interested in skewing the levels in
the UK so that we create unrealistic expectations."
Goldman has no doubts, saying the firm may even exceed its target of 25
lawyers by the end of the year, with more to come.
"We don't want to do things unless we feel we can make a big impact," he