Another agreement breaks down among top City firms
The covert no-poaching agreement among the top City firms broke down at the beginning of the year with the move of finance partner Richard Hughes from Herbert Smith to Linklaters.
The agreement – which would now be viewed as anti-competitive – was never openly admitted; it was a tacit part of City etiquette. It did, however, govern law firm behaviour.
The growth in competition had begun the previous year (see 1997, page 58) as the idea of shared information on newly qualified salary levels disintegrated. However, at partner level there was still minimal movement among the top layer of firms, with Allen & Overy (A&O) almost the only City firm to have laterally hired celebrity partners.
The move by Hughes to Linklaters was not the first move of its kind. But combined with the beginning of a City boom in the early years of the New Labour government and the breakdown of information-sharing among the elite firms, it set off a remarkable frenzy of recruitment.
The big legal recruiters at the time – QD, ZMB and Taylor Root – were beneficiaries. “It was important; the whole poaching mania was an important Darwinian principle,” says Gareth Quarry, who ran QD until its absorption into Hudson in 2000. “Law firms were incredibly inefficient creatures: they have become far more efficient. It was all very gentle and clubby and nice. But it wasn’t very businesslike.”
In May 1998 an ad placed by Ashurst Morris Crisp made explicit reference to the fact that a set of five law firms had moved ahead of the rest of the City. It read: “Before you apply to Ashursts, feel free to take up a reference. Don’t take our word for this. Self-recommendation is no recommendation. Ask someone you wouldn’t expect to sing our praises. Ask one of our competitors.” The ad then displayed the logos of A&O, Clifford Chance, Freshfields, Linklaters and Slaughter and May.
Wilde Sapte gets over Andersen
Wilde Sapte moved towards a merger with Arthur Andersen, which had spurned Simmons & Simmons’ charms.
By June, the deal – despite a yes vote on both sides – collapsed when Andersen withdrew, after the surprise departures of asset finance partner David Smith and Mario Jacovides to Allen & Overy.
Andersen, believing that Wilde Sapte management could not deliver a whole partnership to the deal, summoned the management for a meeting and bluntly told them the merger was off.
The following year Wilde Sapte merged with Denton Hall, while Andersen and Andersen Legal collapsed spectacularly in 2002.
Eversheds bulks up
Eversheds finally got its dream of acquiring critical mass in the City when it took over Frere Cholmeley.
In the early part of the 1990s Frere Cholmeley was internationally innovative, with offices in Paris and Monaco and even East Berlin, plus associated offices in Moscow, Rome and Milan.
However, its merger in 1993 with corporate and financial services boutique Bischoff & Co marked the beginning of its decline. By time of its rescue by Eversheds, the firm was a shadow of its ebullient early-’90s self, struggling with a £12m bank debt.
Not all of Frere Cholmeley’s lawyers went to Eversheds; some partners split off to form property and private client firm Forsters. Former Frere Cholmeley chief executive Tim Razzall, who had left the firm two years previously,
re-emerged as a Liberal Democrat peer.
Linklaters dumps its Germans
Linklaters concluded a merger with Oppenhoff & Rädler, but said goodbye to its four-year Frankfurt joint venture with Hamburg firm Schön Nolte Finkelnburg & Clemm.
The formal acknowledgement of the split between the former allies was couched in classic press release speak: “It allows each of the firms to pursue their own, different strategic ambitions.” Privately, however, the Schön Nolte lawyers were furious at having been ditched.
In 2007 Linklaters (symbolically) closed Oppenhoff’s former headquarters in Cologne.
The what if? spot
Clifford Chance’s talks with Ashurst broke down at a preliminary stage in March.
Ashurst senior partner Andrew Soundy said: “We’re a firm that is perceived as attractive. We always listen when people make contact with us and are courteous with them.”
The highly attractive Ashurst would later embark on not-always-entirely-courteous merger talks with Latham & Watkins and Fried Frank, only to realise it preferred to
Absolutely inevitable, no?
Norton Rose M5 agrees to disband.
Tony Angel was selected as managing partner of Linklaters after soundings from the partnership. He replaced Terence Kyle.
The Lawyer noted with some understatement: “He will be something of a contrast to the abrasive Kyle.”
Bill Tudor John, Allen & Overy
The man who singlehandedly introduced partner performance management into Allen & Overy (A&O) was in typically bullish form in 1998. A&O’s longstanding association with French firm Gide Loyrette Nouel and Benelux firm Loeff Claeys Verbeke faced collapse as the UK firm became increasingly impatient to develop its own practices, particularly on the Continent.
The tensions born in 1998 eventually led to A&O relaunching independently in Paris and taking over much of Loeff Claeys in 2000. Tudor John himself was ousted as senior partner the following year, but his no-nonsense approach had changed A&O’s complacent partnership culture for ever.
His decision to hire two Wilde Sapte partners triggered the collapse of merger talks between Wilde Sapte and accountancy giant Arthur Andersen that year. (Wilde Sapte partners may have ended up being rather grateful.)