K&L Gates boss still thinking big after all these years

K&L Gates chairman Peter Kalis is preparing to embark on his fifth four-year term at the helm, an almost unprecedented record that will ultimately see him in position for a total of 20 years. But surely, after four terms in the job, he was ready for a break?

“In my fantasy world I’d spend my fifth term in Tuscany, alone and stay there until I was mellow,” he jokes. “I suspect that would take around 48 months. Then I’d wake up.”

Forty-eight months seems a fair amount of time to unwind, given that Kalis has managed his firm since 1997. Then known as Kirkpatrick & Lockhart, the US outfit has gone through eight mergers since, including its combinations with City outfit Nicholson Graham & Jones in 2005 and US firm Preston Gates & Ellis – the firm of Microsoft founder Bill Gates’ father – in 2007. These deals were driven by Kalis.

Most of the merger deals took place prior to the financial meltdown of 2008, a fact Kalis feels helped the firm weather the storm reasonably well, with its global footprint being of particular benefit to its City base.

“It was, shall we say, lucky timing,” says Kalis of the firm’s mergers. “We didn’t know the crisis was coming, but [the mergers] helped us a lot – the global platform that we gained sustained us during the recession. That’s a great advantage of London – you can’t discount its role in the global economy.

“The world changed in 2008, so you’d expect that our office in London – one of the world’s leading financial centres – would have fallen on bad times. In fact, it was at about that time that the London office became fun for people to work in, it was exciting. People saw hardship elsewhere in the City, but they weren’t experiencing it themselves because the 2007 and 2008 expansion in Asia, Europe and the US began to kick in, resulting in a tremendous uptick in inbound work to London.”

Smoke bomb

The numbers back him up, to a point. Although the firm did see a 27 per cent increase in its global revenue during 2008, with London turnover rising from $55.8m (£34.4m) to $64.2m, a round of layoffs a year later – including six in London – suggest it was not all fun in the City office post-recession. Indeed, the picture was far from rosy during the 2010 financial year, when the firm experienced one of the biggest year-on-year drops in revenue among US firms in London, seeing turnover in the City fall by 28 per cent, to $43.4m.

Despite the strong showing in 2008 City turnover was hit by a dearth of transactional activity in the depths of the recession and consequently dropped by more than 17 per cent between 2007 and 2010, from $55.8m to $46.3m, on a relatively static headcount.

That did not stop the firm from investing though, with a move to new office space in landmark London development One New Change in May 2011 – part of what Kalis terms a bid to “minimise barriers to collaboration” – being a case in point.

“In our old office we had lawyers on 11 floors and nobody bumped into each other unless it was in a rickety old lift,” Kalis says of the rationale for taking on the premises. “Here, you get away from that isolating environment where IP lawyers are on one floor and finance lawyers on another. Now, everyone is mismatched together and bumps into each other. It engenders a collaborative environment.”

Certainly, the Deborah Lehman-Smith-designed office is bright and spacious, a theme that has been emulated in a number of the firm’s offices around the world, but can bricks and mortar, fixtures and fittings really help defy the ravages of a market that have seen many of K&L Gates’ peers fail? A partner at a rival US firm in London believes so.

“We also moved from an awful office to somewhere really nice and you can actually track it in terms of recorded hours – it just gives everyone energy,” the partner says. “I think at associate level the space you work in has a huge impact – when people turn up to a professional, clean office it’s like putting a suit on instead of wearing jeans. You see yourself in a high-quality, professional environmental and behave that way.”

Optimistic outlook

Perhaps it is more than coincidence, then, that the firm’s London turnover rose by 10 per cent to £33m in the 2011 financial year. Certainly, now the firm’s London lawyers have settled into their new home, Kalis has high hopes for growth.

“We’re going to continue building on our strengths, including in finance, EIR [energy, infrastructure, resources] and the international dimension,” he says. “We’re fortunate compared with many other US firms because we came into the market through a merger; we had all our pieces in place from the get-go. If you come into the City without those building blocks in place it must be very hard. I’m sure if an American said to a partner at a UK firm ‘come join our 15-lawyer office and we’ll pay you more’, most London partners would think ‘I don’t want to be a pioneer – get back to me when everything’s panned out’.”

Of course, building a firm through merger is not without its downsides, something that was highlighted last month when a Chicago newspaper reported that lawyers from Bell Boyd & Lloyd, which merged with K&L Gates in 2009, were heading for the exit in droves at the firm’s Chicago office. Although Kalis refutes this – he sent an email to all staff assuring them there was no truth to the story – mass departures are a risk that goes hand-in-hand with any merger deal.

“The vast majority of partners and staff have stayed with us after our mergers,” says Kalis. “Some have left, to be sure, and a few of those have been noisy departures, but that’s the cost of doing business.”

And it is a cost that Kalis is likely to continue to count, with a tie-up with Australian outfit Middletons on the cards – a deal that would create a 2,000-lawyer firm with 45 offices throughout Australia, the Americas, Europe, Asia and the Middle East.

Clearly Kalis’ Tuscan dream is a long way off, and his fifth term as chairman is unlikely to be an easy ride, but with 15 years as chairman behind him, if anyone is up to the challenge, it is Kalis.