The Transatlantic Elite 2009: The Sweet Sixteen

Last year, The Lawyer coined a new name for the top layer of elite international law firms. We christened them the Sweet Sixteen, arguing they had the profits, clients, international coverage and brand to stake a robust claim as the leading firms in the world.

A lot can change in 12 months. Since the inaugural Sweet Sixteen was published, the top firms have been plagued by plummeting profits, collapsing clients and widespread layoffs.

Consequently, this year we have looked at how the Sweet Sixteen – still chock full of stellar talent – has fared.

In short, how does the nascent new world order, to borrow a phrase from the rapidly restructuring Linklaters, look after enduring the darkest days seen by the top global law firms since the Great Depression?

A single year is not enough to dislodge any of the firms that we said 12 months ago would set the pace for the next decade. But another year like 2008 could really shake up the elite. Permanently.

Making the grade

“What makes these firms ‘elite’ is their reputation for quality within multinational corporates, financial institutions and governments,” argues Martha Sellers Klein, a senior consultant at US recruitment consultancy Mlegal Consulting. “They had to have savvy managers to get where they are. They all have a strong balance between corporate and litigation and great reputations among the top clients.”

Even the financial crisis has not changed that reality. Although the firms in this group have hardly been immune to the pressures created by the crisis and others such as Paul Weiss Rifkind Wharton & Garrison, Shearman & Sterling and Dewey & LeBoeuf have capitalised on the opportunities the downturn has created, no firm outside our inaugural group has played a higher-profile role than some of those on the inside.

However, although all of the firms have justified their inclusion in the sixteen in one way or another, a clear hierarchy emerges if their performances during crisis is considered. As Peter Zeughauser of the Zeughauser Group puts it: “The impact isn’t the same for them all.”

Sullivan & Cromwell and Weil Gotshal & Manges are the stand-out performers in the group. Sullivan, headed by the ubiquitous Rodge Cohen, was simply everywhere during the downturn’s darkest days (see the individual boxes on each firm).

Weil, meanwhile, could justifiably argue a leading position on its representation of Lehman Brothers in its bankruptcy proceedings alone.

Davis Polk & Wardwell, Cravath Swaine & Moore, Simpson Thacher & Bartlett and – perhaps most clearly – Wachtell Lipton Rosen & Katz also stand out for the firefighting roles they have won in the US.

“I think Sullivan, Wachtell and Weil are doing better than the balance of the Sweet Sixteen,” argues Zeughauser. “Weil because of the bankruptcy practice; Sullivan because of its banking practice; and Wachtell, well, because they are Wachtell. Nothing like being the market leader in a rich niche.”

Elsewhere, the past few months have thrown out one or two signposts as to the ongoing fortunes of the world’s leading firms.

Such as the monumental layoffs that have rocked the US and UK legal markets. Could there be more of a red flag indicating that something is wrong with the global law firm model than the hundreds of lawyers and support staff who have lost their jobs recently?

Arguably, the greater the number of layoffs, the greater the number of financial institution clients a firm has (or had) and thus the greater the exposure to the downturn.

The majority of the US elite appear to have so far escaped the worst of the layoffs, although rumours of stealth redundancies persist at virtually all of the firms.

There is more clarity when it comes to the UK members of the group. Three of the four UK magic circle firms – Allen & Overy, Clifford Chance and Linklaters – are working their way through their own versions of a size and shape review, each of which has been covered widely in The Lawyer.

“It’s clear to those of us that watch this industry closely that the British-led firms, in particular the magic circle firms, are working hard to reshape their businesses to make themselves more competitive,” says Paul Hastings chairman Seth Zachary.

The fourth, Freshfields Bruckhaus Deringer, went through its own blood-letting ahead of the downturn and has so far not needed to kick off another wave.

Rolling with the punches

Arguably the hardest hit firm in the Sweet Sixteen is Latham & Watkins. In last year’s Transatlantic Elite, Latham was still riding high on record profitability and unbridled confidence, the latter illustrated by its unprecedented simultaneous opening of three offices in the Middle East, a move that stunned the legal market.

One year on Latham stunned the market again, this time reporting a 21 per cent drop in average profit per equity partner to $1.8m (£1.23m) followed by the announcement it was laying off 440 employees across its global network, including 12 per cent of its associates.

“It’s a very, very serious management mistake which has to affect them adversely,” argues one legal market consultant of the layoffs, particularly those affecting first-year associates. “They’re taking the cynical view that culturally it doesn’t matter. But if you are one of the top law students at Oxbridge or Harvard now and you have offers from Latham and Slaughter and May, you’d be nuts to take Latham’s offer.”

Latham has also come in for criticism in some sections of the market for failing to hedge the practice well enough.

“Why didn’t Latham hire a major bankruptcy player over the past few years when times were good?” asks one consultant. “My guess is that it was delusional about how long this market would last. Okay, that delusion was shared by millions, but it wasn’t shared by everybody.”

If there was an award for Smuggest Firm of the Year then at this point it would be given to Dewey & LeBoeuf for its prescient hire of restructuring partner Martin Bienenstock from Weil Gotshal in November 2007.

While Latham has been visibly rocked by the financial crisis, the elite firms that may have escaped such widespread layoffs have also been hit.

“All of the firms in this group are going to be weakened,” insists Bobbie McMorrow of US recruitment consultancy McMorrow Savarese. “There’s no firm that’s not going to be weakened as a result of the downturn.”

Although, as Savarese admits, some firms are going to do better than others in the current climate – in particular those with large bankruptcy, litigation
or regulatory practices – the corporate and finance-dominated firms in the Sweet Sixteen are likely to find the months ahead among the toughest in their history.

“The big US corporate law firm players roared into 2007 and 2008 with huge associate classes and were essentially blindsided by a cement truck when Lehman went under,” argues Zeughauser. “This year will likely be worse than 2008. The bloodletting isn’t over.”

 

Allen & Overy

Allen & Overy’s (A&O) revenue was up by 11 per cent at its half-year mark, with the firm’s finances buoyed by a flurry of clients wanting advice post the Lehman collapse.

Almost as soon as these healthy results were announced, a fall in deal volume led the firm to put ­together a contingency plan for the coming months.

This involved cutting 9 per cent of the firm’s global headcount, from partners down to junior staff. Once voluntary redundancies were ­factored in, A&O ended up shaving off 10 per cent of its employees. Payouts will leave profit for the 2008-09 financial year dented by £44m.

Although A&O has not enjoyed the same prominence in restructuring and insolvency as Freshfields Bruckhaus Deringer and Linklaters, senior partner David Morley ­maintains that restructuring has been invaluable to the firm’s ability to adapt to the ­demands of the ­financial crisis.

Headline deals include advising HBOS on its takeover by Lloyds TSB, together with the troubled bank’s £4bn rights issue – partners Alistair Asher and David Broadley hold the relationship.

Elsewhere, A&O’s market-leading building societies practice has benefited from the consolidation in the market, with partner Richard Slynn advising Britannia on its merger with the Co-operative and Skipton on its acquisition of Scarborough.

The recession has also seen the firm reshape its practice focus. ­Following the departure of a seven-partner team to Latham & Watkins from the Hong Kong office and a drop-off in listings, the firm decided to emphasise M&A work in Asia. High-level recruitment in this ­specialism is not off the agenda, ­despite cuts at the office.

Other items on the firm’s global shopping list include a Washington DC office, which the firm sees as the missing part of its US jigsaw.

The firm’s New York office was hit in March by the exit of structured ­finance expert Dan Cunningham for litigation boutique Quinn Emmanuel Urquhart Oliver & Hedges. It is thought that the relationship ­Cunningham personally forged with ISDA and which he brought with him to A&O in 2001 has been sufficiently institutionalised to allow the firm to withstand this exit.

In the Middle East it seems ­partners were more enamoured with the firm’s magnetism. Pervez Akhtar, who left his role as head of corporate in the Dubai office last September for private equity house Abraaj Capital, decided that the transactional world was for him ­after all and returned in March.

But most hopes are on Saudi ­Arabia – the region’s largest ­economy. Abundant hydrocarbons wealth, demand for infrastructure development and relative insulation from the global banking crisis means there are plenty of opportunities for the few international firms that are licensed to work there.

Julian Johansen, who runs A&O’s ­relatively new Riyadh office, is well-respected in the local market, ­picking up a key role advising HSBC, financial adviser to Emaar, the ­developer of the £8.5bn King ­Abdullah Economic City.

 

Clifford Chance

As soon as the economic crisis kicked in, Clifford Chance claimed prominent roles on a range of deals. Corporate partner Guy Norman worked alongside a team from Cleary Gottlieb Steen & Hamilton ­advising Barclays on its acquisition of parts of Lehman’s US ­business.

Since then the firm has advised General Motors on the restructuring of its European arm, alongside Weil Gotshal & Manges and Dewey & LeBoeuf, which handled the restructuring in the US.

Deals aside, it has been a turbulent year for the firm. The downturn sparked a size and shape restructuring of the partnership and a cut of 130 jobs in London. Managing partner David Childs is being ruthless. Reshaping the global network resulted in three rounds of US layoffs, with six structured finance associates cut in 2007, 20 ­litigation associates dropped in October, and 24 associates cut from the New York transactional practice groups in March this year.

Like its magic circle rivals, Clifford Chance is striving to create a leaner partnership equipped to survive the downturn and maintain profit. But even within this subset of the Sweet Sixteen there are likely to be divisions.

“Clifford Chance and A&O will probably fare worse than the other magic circle firms,” says Alan Hodgart at UK-based legal market consultancy H4. “Their bank-lending position has kept them out of much of the restructuring work around.”

Despite this, Clifford Chance has secured a number of major ­instructions throughout the economic crisis. Abu Dhabi-based partners Simon Sinclair and Chris Walsh led a team advising the Abu Dhabi government on its AED16bn (£2.98bn) bailout of local banks in February. Allen & Overy partners Anzal Mohammed and London-based partner Roger Wedderburn-Day advised the emirate banks on their tier 1 capital injection from the government.

Childs is adamant that the US remains a critical part of the firm’s network. Childs told The Lawyer earlier this year that building up the firm’s antitrust capabilities in the US is part of the firm’s plan for its Americas practice. “We’re still in growth mode,” insisted Childs earlier this year. “We will of course be looking at the ­structure of the Americas over the next few months, but… we’re hoping to expand in certain areas.” The juggernaut rolls on.

Cleary Gottlieb Steen & Hamilton

Cleary Gottlieb Steen & Hamilton might not have scaled the heights of Sullivan & Cromwell but the New York firm has made regular ­appearances on financial crisis deals.

Earlier this year partners David Lopez, Neil Whoriskey and Jeff Karpf led a team advising Citigroup on its recapitalisation. The firm worked alongside Davis Polk & Wardwell advising on a deal that saw the US ­government take ownership of 36 per cent of the ailing ­financial ­institution.

The firm was also US bankruptcy counsel to Nortel Networks in ­connection with its worldwide insolvency proceedings, while Cleary’s previous international investment has helped it secure roles around its network. In March, for example, Cleary was ­instructed in the UK by HSBC to advise on its £12.5bn rights issue alongside Norton Rose.

In fact, European instructions have been high-profile for Cleary in recent months. Highlights among the standout transactions include Paris-based partner Pierre-Yves Chabert advising BNP Paribas on its €14.5bn (£11.55bn) offer for ailing Benelux bank Fortis, and the €6.4bn (£5.1bn) recapitalisation of Dexia, a deal led by Laurent Legein in Brussels, Michael Mazzuchi in Washington DC and Neil Whoriskey in New York.

Overall, though, the market’s perception is that Cleary has taken up residence in the second tier of the New York elite firms based on the roles it has won during the crisis. Verdict: Neutral.

Cravath Swaine & Moore

Cravath can take the credit for highlighting the ­impact of the ­financial crisis on US law firms when, in November 2008, it ­announced significantly reduced year-end payments to ­associates.

The cut in the firm’s bonus pot rapidly became emblematic of how the downturn had hit the legal market. Incidentally, it was matched rapidly by many of Cravath’s rivals, unlike Skadden’s more generous bonus, ­announced a day earlier, which mysteriously found fewer copy cats.

The bonus reduction sent an early warning that all was not well at Cravath. Three months later the firm’s financial results for 2008 ­confirmed that the blue blood powerhouse had been chronically ­affected by the collapse in the locomotive of its practice: big-ticket M&A.

Total revenue was down 13 per cent to $532.5m (£363.91m) while average profits fell 24 per cent to $2.5m (£1.71m).

“If you live by the sword you die by the sword,” says US legal ­market consultant Bruce MacEwen of Adam Smith Esq. “Cravath is one of the firms that has been in the heart of the financial services sector and therefore in the eye of the storm.”

And yet, even though the firm warned last November that there may also be no bonus in 2009, it would be rash to write off a firm with Cravath’s pedigree. So far during the financial crisis ­Cravath has won a series of roles advising the independent directors of failing companies, with former presiding partner Bob Joffe’s ­advice to ­Fannie Mae, Merrill Lynch, Citigroup and General Motors leaping out.

Meanwhile Cravath’s litigation department has helped take up some of the slack left by the dearth of transactions, with several ­major cross-border matters stretching back years. These include three cases for AWB relating to events in Iraq, an arbitration for Grupo Modelo against Anheuser-Busch relating to the latter’s July 2008 merger with Inbev, and a shareholder class action for Vivendi dating back to July 2002.

Debevoise & Plimpton

The public perception of Debevoise’s 2008 can be summed up in one word: Siemens.

The mammoth 40-country probe into alleged corrupt payments to government officials is the largest of its kind to date. It represented a ­titan of a case and resulted in one whopping pay day for the firm and lead partner Bruce Yannett.

But the Siemens deal was not one of the landmarks of the financial ­crisis that characterised the latter half of 2008. In this respect, ­Debevoise verged on the invisible.

The firm did play a key role on one of the pre-Lehman matters in the early days of the crisis. The July ­collapse of US mortgage lender ­IndyMac was a red flag to the future extent of the market’s woes and also provided now-collapsed New York firm Thacher Proffitt & Wood with one of its final major mandates.

And in an uncharacteristically ­immodest moment – for Debevoise at least – corporate chair Michael Blair emailed the entire firm in ­September to boast about its ­financial crisis successes, a note that highlighted its roles on the sale of Merrill Lynch to Bank of America as well as those in relation to AIG, Lehman and the US Treasury.

So although you might not be aware of it, Debevoise was there ­during the downturn. The problem is that its low-key approach to publicity means that while it undeniably has a good brand in New York, its name recognition internationally is not as strong as most of the Sweet Sixteen.

Long term it could find itself ­under pressure. Short term, in 2009 it could do with ­another Siemens.

Davis Polk & Wardwell

Any firm that has a practice so heavily into investment banking as Davis Polk is going to find the ­current market tough going.

Harsh. But probably true. The bright side for Davis Polk is that in financial crisis terms, only Sullivan & Cromwell and Wachtell could claim to have had a higher profile.

In March Davis Polk partners John Amorosi and John Knight were appointed to advise the US Treasury on the restructuring of AIG.

In the same month partners Donald Bernstein, Michael Kaplan and Larry Wieman stepped up for Ford to advise the ailing motor manufacturer on its debt restructuring.

Davis Polk’s high profile on ­financial crisis matters stretches back to the darkest days of the downturn. In September last year a team led by partner George Bason began work as lead counsel to Citi on all of its financial crisis matters.

On the other side of the Atlantic, partners Jeffrey Oakes, Arthur Long, Richard Sandler and Randy Guynn were appointed by the UK Government to advise on the US bank regulatory aspects of its banks bailout.

And back in the US, restructuring co-head Marshall Huebner played a similar role for the US government on the $152.5bn (£104.22bn) bailout of AIG.
This list goes on. Clearly, so does Davis Polk.

Freshfields Bruckhaus Deringer

Freshfields has had arguably the strongest showing of any magic ­circle firm during the recession.

If net profit does rise 5 per cent, as forecast, to a record £630m this year, it will be an impressive ­achievement in what looks likely to be a grim results season for global firms.

Freshfields’ performance is all the more striking given that it has avoided the painful restructurings seen at other leading UK and US firms. Freshfields claims to have made only four lawyers redundant, in its real estate group in September 2008. True, it was the first magic circle firm to cut lawyers but this was soon dwarfed by redundancies at Allen & Overy, Clifford Chance and ­Linklaters.

To be fair, though, the firm went through a massive cull in 2006-07 when around 100 partners were cut from the equity. Freshfields now looks slim enough to emerge from the recession relatively unscathed.

This year’s growth has been led by a barnstorming few months for the corporate and restructuring teams. Freshfields has targeted the glut of rights issues carried out by cash-strapped PLCs and has been ­rewarded with roles on some of the biggest mandates around.

Corporate head Mark Rawlinson advised Wolseley on its £1bn cash call while corporate partner Julien Long acted for British Land when it asked shareholders for £740m.

The firm was also adviser of choice for the Bank of England throughout the financial crisis. ­Financial services partner Michael Raffan has taken a key role, acting on the Government’s bailout ­package.

The restructuring group made strides with the administration of Woolworths. The firm was also tasked with winding up the UK ­businesses of collapsed Icelandic banks Kaupthing and Landsbanki. “I’ve never felt so popular,” jokes ­restructuring partner Richard Tett.

The US practice is tiny by comparison but growing. The firm launched a New York litigation practice in ­January this year led by a trio of partners poached from US firms, Aaron Marcu and Adam Siegel from Covington & Burling and Benito Romano from Willkie Farr & Gallagher.

Chief executive Ted Burke called this a major step forward for the practice and is positive about the firm’s prospects for the year ahead.

“We’re very much taking the long view and are not letting short-term pressures distract us from our goal of being recognised as the best international firm in the world,” he said.

The move won’t have gone down as well with former disputes referral buddy Paul Weiss Rifkind Wharton & Garrison, but ruffling a few feathers appears unlikely to hinder Freshfields’ international expansion plans.

Kirkland & Ellis

Kirkland & Ellis was conspicuous by its absence from many of the most significant financial crisis matters.

That’s not to say Kirkland had no major deals to keep it busy. It ­advised Constellation Energy on its credit crunch-hit $4.5bn (£3.08bn) joint venture with EDF, for example.

But the firm has long been ­dedicated to building an international bankruptcy and restructuring practice to rival Weil Gotshal & Manges and Skadden Arps Slate Meagher & Flom.

Once Weil had secured the Lehman instruction last year, Kirkland was always going to be playing second fiddle in bankrupty circles.

Kirkland did succeed in winning a number of mandates, such as ­Palamon’s debt restructuring, with London-based partner John ­Markland leading a team for the firm. It also saw longstanding client Sea Containers exit Chapter 11 ­bankruptcy protection, appropriately enough on 11 February 2009. And partner Rick Cieri stands out for his roles on the bankruptcies of US companies Calpine and Solutia.

Kirkland also played a leading role on several debt buyback deals last year, including Bain Capital’s buy back of bonds in its South African retailer Edcon last summer.

Kirkland’s other strong suit ­historically has been private equity, for years a lucrative aspect of its US and London practices. A string of smaller deals for clients such as KPS Capital Partners, Golden Gate Capital and Madison Dearborn kept the tills ringing during the year.

But the disappearance of big-ticket private equity deals generally, plus the defection of star Raymond McKeeve last summer, hit the ­London practice hard.

Overall then, work has been won, but Kirkland has been surprisingly low key during the year. And most of the highly coveted credit crisis workouts or US Treasury deals that have dominated the international markets in recent months have not come its way.

The absence of these instructions raises questions about Kirkland’s ongoing inclusion in a group of firms that is by definition elite and by extension where the clients – ­inluding the world’s governments – go when the going gets tough.

Latham & Watkins

”If Latham has another bad year it could drop out of the Sweet ­Sixteen.” So says one legal market consultant.

Latham chairman Bob Dell might not agree, but even he is unlikely to argue that his firm had a shocker in 2008 and the first quarter of 2009.

“Latham has fallen off a cliff, along with Orrick and a few others,” says the consultant. “I think this reflects the reduced volume of upper end work. It tends to stay with the top group and dry up more in the next tier down.”

Latham remains in the Sweet Sixteen. But any firm that lays off as many lawyers and staff as Latham did this year and posts such a sharp fall in its finances can hardly expect the market’s ­perception to remain unchanged.

In particular, Latham – and Dell – have come in for criticism that the firm expanded too rapidly when times were good, without much thought for a potential and ­inevitable downturn.

As one comment on TheLawyer. com put it, in response to Dell ­admitting Latham was “in a ­position of over-capacity”: “In other words, things were going
well so they expanded as rapidly as ­possible to capitalise on that ­without considering long term staffing requirements and ­workloads.”

Latham’s much-vaunted Middle East adventure did bear some fruit. The firm advised on a ­series of credit-crisis deals that show-cased its transactional and regulatory know-how, most notably the sovereign wealth fund ­investments made by Qatar ­Investment Authority (QIA), a Latham client since it was created in 2005.

The firm also advised on a ­number of restructurings, workouts and bankruptcy ­proceedings, ­including the ­Investment Dar, Kuwait’s biggest ­Islamic investment company. ­Partners Bryant Edwards and Tim Ross in Dubai led on this deal, the largest in the Middle East, which ­involved restructuring ­approximately $3bn (£2.05bn) in ­Islamic financial obligations ­represented by more than 150 ­different facilities.

But these deals cannot deflect one of the key criticisms levelled at Latham and its management, namely that it failed abjectly to build a credible bankruptcy and ­restructuring practice during the boom years in preparation for the inevitable downturn.

That, plus the layoffs and reduced profit, suggest a significantly weaker firm than the world knew 12 months ago.

Linklaters

Until September 2008, Linklaters was having a rather average ­recession.

In June the firm lost one of its key global clients when it was kicked off JPMorgan’s panel for continuing to advise Barclays in litigation against collapsed bank Bear Stearns, which was taken over by ­JPMorgan.

Then came the big one. In September, Linklaters was instructed by the administrators of Lehman Brothers in one of the most ­complicated insolvencies ever undertaken.

The firm put a huge team from both sides of the Atlantic on the project. In London, 20 partners and 60 associates worked on the mandate. In New York, head of litigation Larry Byrne appeared for PricewaterhouseCoopers at the Lehman bankruptcy hearing. He was soon joined by insolvency boss Martin Flics, ­structured finance ­partner Adam Glass, Mary Warren in bankruptcy, litigator Paul Hessler, Joshua Berick in corporate and Sabrena Silver in banking.
The firm racked up £33m in fees in the six months following ­September, with top billers earning up to £900 an hour.

Elsewhere the London office also won the big UK bank merger that followed Lehman’s collapse. Lloyds TSB relationship partner Jeremy Parr shot to prominence advising the bank on its rescue merger with HBOS, as well as the subsequent government bailout.

Yet managing partner Simon Davies still was not satisfied. In ­January the firm embarked on a radical overhaul of the business, dubbed ‘New World’. Up to 70 partners face the axe as the firm bids to become a smaller, more profitable operation.

Where this leaves Linklaters’ transatlantic ambitions is as yet ­unclear. With a focus on servicing key global clients, there is an ­argument to be made for expanding the firm’s 33-partner New York office. Unofficially, the firm has been targeting a major US deal for years, with Sullivan & Cromwell the perennial subject of playful merger rumours.

New World could certainly turn Linklaters into a more attractive and easily digestible partner. But is Davies willing to go down that road? It would appear so, judging by the piece he wrote for The Lawyer last September.

Within 20 years, he predicted, “US-UK mergers will change the map – winning firms will truly be part of a global elite, while some firms will be relegated to a cadre of international UK firms vulnerable to fragmentation.”

Simpson Thacher & Bartlett

Unlike many of its US rivals, ­Simpson Thacher & Bartlett has not formally announced associate ­layoffs, although there’s no doubt the New York powerhouse has had its fair share of issues to face since the downturn began.

Best known for its institutional relationships with private equity houses Kohlberg Kravis Roberts and Blackstone, the firm’s traditional workflow of highly leveraged, multibillion dollar buyouts has dwindled during the financial crisis.

Nevertheless, a number of finance deals did come Simpson’s way in recent months. In March this year, for example, the firm advised insurance giant Pearl on the restructuring of £3bn of debt, funds that had been used last year for the £5bn acquisition of Resolution.

It also represented the banks on the $16.5bn (£11.28bn) debt offering for Roche earlier this year, among the largest debt offering by a corporate issuer in history, with New York partner Glenn Reiter leading.

And although Simpson did not win the same number of crisis-­related mandates as Sullivan & Cromwell, it did muscle in on some select high-profile matters.

Last year The Lawyer reported that partners Richard Beattie, James Gamble and Michael Nathan advised the independent directors of beleaguered insurance giant AIG on its global restructuring.

The firm also won instructions from the US government, including the US Treasury on its landmark $700bn (£478.39bn) bailout and the recapitalisation of Citigroup.

News that the team, which ­featured Lee Meyerson, billed the government $79 (£54) an hour had Manhattan’s legal community enthralled by the steep discount the firm had been prepared to accept.

Skadden Arps Slate Meagher & Flom

”The corporate groups at some of the transactional firms, in particular Skadden and Simpson Thacher, are in freefall. “That’s the opinion of one well-known US legal market consultant, who says this view comes ­directly from partners at the firms.

The projection for 2009 is that Skadden could see a drop in revenue of around 25 per cent in 2009.

And yet for 2008, Skadden was one of the elite US firms that posted ­relatively marginal decreases in its finances. Contrast that with the ­results of rival transactional ­powerhouse Latham.

So on the surface at least, Skadden has yet to be hit as hard as some of its rivals by the collapse in big-ticket M&A and the financial crisis generally.

The firm has certainly felt the impact of lower work levels, highlighted in March this year by the expansion of its so-called ‘sidebar’ programme, under which associates can take a year off from the firm to pursue ­personal interests with the option to return at the end of the period.

The programme, initially launched in the US, was later extended to Skadden’s European network.

Yet Skadden’s undoubted strength is likely to see it through the current crisis. As Alan Hodgart of H4 ­Partners puts it: “I think S