02 November 2009 | By Margaret Taylor
While independent law firms are growing in popularity in Germany, making the move is not without its risks.
When Germany’s top corporate lawyer Rolf Koerfer left Allen & Overy (A&O) for a partnership at Linklaters spin-off Oppenhoff & Partner in September, the latter’s chairman Michael Oppenhoff hailed the move as proof of a growing Teutonic obsession with independent law offices.
While moves such as Koerfer’s certainly do not come along every day, Oppenhoff did have a point: since the beginning of the decade, and more so over the past five years, there has been a growing trend for start-up German firms, many of which have been spun out of large international players.
Koerfer’s move does not fit with the trend for a number of reasons, not least that the firm he joined had been an independent for decades before its 2000 merger with Linklaters & Alliance (Koerfer had been a partner at Oppenhoff & Rädler prior to the merger). Furthermore, Koerfer is expected to be tied up working for ballbearing manufacturer Schaeffler for the next few years after working closely on the company’s massive debt restructuring. It therefore makes sense for him to seek the autonomy that comes with an independent firm.
That said, Koerfer’s move does fit with the mould set by former Bruckhaus Westrick Heller Löber partner Andreas Rittstieg, who set up Hamburg independent Rittstieg in 2000 rather than take part in the merger that created Freshfields Bruckhaus Deringer.
“German lawyers have rediscovered lawyer entrepreneurialism,” comments a source in Germany. “The big firms very much had the run of the playground with their story that this is where you have to be to do interesting work.
“There was a paradigm shift with Rittstieg, who was a leading M&A lawyer at Bruckhaus. He’s been successful, and that’s encouraged a lot of other people to do it.”
Frankfurt-based Smeets Has Wolff, which was set up by a group of associates from Freshfields and Hengeler Mueller in 2000, was one of the earliest. Many others followed, including in 2005 when Willkie Farr & Gallagher’s Germany managing partner Thomas Heymann, who had previously been a partner at Clifford Chance, set up Frankfurt firm Heymann & Partner Rechtsanwälte, while a group of Freshfields associates in Hamburg set up corporate boutique Renzenbrink Raschke Von Knobelsdorff Heiser. A number of Freshfields lawyers have left for Berlin firm Lindenpartners, which was founded by five partners from German firm Boetticher Hasse Lohmann-Buros in 2005, while in 2008 a group of A&O IP partners spun off to form Harte-Bavendamm Rechtsanwälte.
According to Oppenhoff, the relative explosion in start-ups and spin-offs can be put down to the market correcting itself.
“In the late ’80s and early ’90s inter-city mergers took off in Germany and it was smart and modern to enter into one of those,” he explains. “We had a similar situation in the late ’90s and early 2000s, when quite a number of marriages between London firms and German firms were made in heaven, though not every one was.
“Quite obviously the internationalisation of the market has gone further than is borne out by the market.”
While Oppenhoff stresses that he has no regrets over the Linklaters tie-up, pointing out that it was the right thing to do at the time, he adds that many German lawyers feel their practices are marginalised within international firms because those firms are so focused on transactional work.
“Quite a number of people have left the majors because they want to do standalone tax work as well,” he asserts.
Freshfields co-senior partner Konstantin Mettenheimer points out that it is relatively easy for lawyers to set up on their own in Germany because the German system operates with much lower leverage than in the UK. “The UK system requires fairly massive manpower for some commercial work,” he says. “The German system doesn’t always require that, so lawyers have more opportunity to set up a law firm.”
While that could be one factor, another issue relating to leverage has been a stronger motivator for people setting up on their own in recent years. It is common practice for international firms to have a ratio of four or more associates to every partner, which is fine when the associates are relatively junior, but more problematic when they get to the stage of wanting partnership. An international firm with 30-plus offices around the world will not have the capacity or the will to promote heavily in any one European jurisdiction. It is unsurprising, then, that so many of the start-ups have been groups of senior associates branching out on their own.
Retirement age is also an issue that can prompt lawyers to set up on their own, although this is more an issue for those working at UK-headquartered firms rather than at their US counterparts. Most German lawyers continue working until they are well into their 60s, while in spite of age discrimination regulations lawyers at UK firms - the magic circle in particular - are encouraged to leave when they reach their mid-50s. Oppenhoff, who was of counsel during his latter years at Linklaters, is 72 and still going strong as a partner at his own firm.
Setting up an independent firm is not all a bed of roses, and not all survive - first mover Smeets Has Wolff was swallowed up by Paul Hastings in 2007. But, given the promotion prospects currently faced by senior associates at international firms, it is a trend that could be set to continue.