Increase in UK turnover the result of a patient build-up on the Continent
ONE FIRM stood out when The Lawyer published the financial figures of the top 30 US firms in London last month.
While its competitors floundered amid the worst recession in decades, Paul Hastings posted a 40 per cent increase in UK turnover. Its success has been acknowledged with nominations in two categories at this year’s The Lawyer Awards: Litigation Team of the Year and International Law Firm of the Year.
Its achievements in London show the wisdom of the firm’s decision to step up investment in Europe at a time when many of its rivals chose to look towards Asia, where Paul Hastings opened its first office in Tokyo in 1988. It has since set up shop in Beijing, Hong Kong and Shanghai.
“We’d already expanded in Asia and have established a good footprint there,” explains London office chair Philip Feder, who relocated to the City from the firm’s Los Angeles office two years ago.
“A lot of other firms are now playing catch-up with us. In Europe it was the opposite story. We saw a lot of competition here, but we also saw a lot of the US firms coming to London and failing by bringing in people whose business declined rapidly during the downturn.
“We took a more patient approach and we’re now in a position to expand and come out much stronger across Europe.”
Over the past six years the firm’s push into Europe has seen it open offices in Brussels, Paris, Frankfurt and Milan. Its most audacious move came last year when it snapped up 19 lawyers, including seven partners, from the London office of Cadwalader Wickersham & Taft.
Among the new arrivals were litigation partner Michelle Duncan, financial services litigator Tom O’Riordan and finance partner Charles Roberts. They have become key figures in London, where litigation and restructuring have provided lucrative revenue streams in the downturn.
The two areas have complemented one another well, with the firm’s disputes practice largely feeding off its restructuring, structured finance and corporate groups. The London litigation team has in the past year advised on four pieces of litigation totalling more than £3bn.
Paul Hastings has also forged a reputation as one of the leading advisers on commercial mortgage-backed securities (CMBS), acting on several major transactions across Europe.
It represented CB Richard Ellis Loan Servicing, the servicer of White Tower, in a £1.15bn securitisation by Société Générale of a loan made to the Protractor Group.
Protractor owned numerous landmark London buildings and when the loan was advanced in 2006 the properties were valued at £1.8bn, but this figure had fallen to £900m by 2009, causing a default on the loan. It was new arrival Roberts who headed the team working on the deal.
Paul Hastings also acted on the first European CMBS deal to be extended and modified, advising Capita Asset Services in the Fleet Street Finance Two transaction, which became the first European deal to extend the maturity date on CMBS notes.
Feder is optimistic this stream of work will continue for the rest of 2010 and beyond.
“If you look at the major CMBS deals that Charles Roberts worked on, those deals have maturity dates in the next year or two,” he says. “If one assumes that banks such as RBS and Lloyds won’t be willing to refinance loans, I think there’s going to be increasing pressure for restructurings, particularly in the real estate area.”
While counter-cyclical activity remains strong, the firm’s strategy is now to strengthen its corporate capability as it looks to balance out its offering.
“We certainly want to grow the corporate practice, it’s really seen as an increasing area of strength for us,” says Feder. “We’re confident in the UK and world economy and we believe that now’s the time to invest in areas such as corporate, M&A and capital markets. Our corporate lawyers are busy and we need to expand our team.”
Investment could take the shape of lateral hires – Feder claims the firm is “in discussion with a few people” – or bringing in lawyers from the US. “We’re really looking for bright, up-and-coming individuals who have established reputations and who clearly want to work,” says Feder.
“There’ll be major opportunities for private equity funds and others with money to invest – that’s why we need to be strong in both restructuring and corporate. We’re looking to represent the businesses that are suffering and the ones that are looking to invest. We need to hedge our bets and be prepared for both sides.
“On the private equity and real estate side a lot of big players are trying to take advantage of low prices.”
Despite its strong showing in London, the firm’s global turnover fell by 10 per cent last year from $986m (£639.6m) to $889m, and its PEP figure also dropped by 2 per cent to $1.87m.
But Feder is bullish about the firm’s prospects in London and Europe – and with good cause. “We’ve seen some very positive trends,” he says. “Profits are
ahead of this time last year, and we’re seeing the level of activity increasing steadily on 2009.”