Linklaters: Forging new Links
15 October 2007
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3 October 2007
Linklaters.jpg" alt="Linklaters: Forging new Links" />It was a clear February day and crammed into the Cologne Museum of Applied Art was a Who's Who of lawyers, local politicians and art lovers. Seating had run out and many of the hundreds present paid tribute standing.
Walter Oppenhoff had died 11 days earlier on Sunday 4 February 2001 aged 95. He had spent part of the last week of his life in his Cologne office. Just three weeks earlier his firm Oppenhoff & Rädler had agreed to merge with Linklaters and its alliance.
Six years on and Linklaters is shutting up shop in Cologne - the historic German home of the firm - and as many as 11 of the office's 25 partners are expected to leave the firm. In the deathless Linklaters phrase, these 11 partners have 'strategic differences' with the management.
The drama on the Rhine will likely continue as Linklaters is about to open a new office 25 miles upriver in Düsseldorf under the leadership of corporate advisory star Ralph Wollburg.
Wollburg and Achim Kirchfeld, another corporate and M&A rainmaker, were lured from Freshfields Bruckhaus Deringer's Düsseldorf operation late last month with the offer of a London-level plateau partnership.
With this swift move Linklaters is severing 99 years of legal history and its ties with Oppenhoff and staking the success of its new office on two lateral hires. It is in every way a radical step.
To many in Germany, Linklaters and the English 'invaders' now clearly signify different priorities and a more corporate and impersonal way of running things, which includes an ethos of maximising profit and catching up with international locksteps. As one Cologne partner puts it, the firm is creating an atmosphere of a "pool full of sharks".
Remunerations and revolutions
Trophy hires Wollburg and Kirchfeld will enter Linklaters on an off-lockstep deal that will match their remuneration with the top of Linklaters' London equity levels at £1.62m - not a bad pay rise from their plateau take of £1.1m at Freshfields.
Wollburg's and Kirchfeld's appointments are revolutionary more than anything because of their pay: all other Linklaters Germany partners are currently on an equity ladder that stops short at around 70 per cent of their English siblings'. And ever since the merger with Oppenhoff full equity has been both the prize and the bone of contention for many German partners.
It is also an open secret within the firm that senior partner David Cheyne had expressed some impatience with progress in Germany and that many of the German partners, for their part, were less than enthusiastic about his hawkish stance.
Historically, German partners' insecurities about the underperformance of their practice have been justified: it is ranked fourth in German legal magazine Juve's league tables, behind Freshfields, Clifford Chance and Hengeler Mueller, and has posted a modest increase in turnover of around 10 per cent per year since 2004. This compares unfavourably with Linklaters' global growth figure of 19.9 per cent and the German top three firms, which consolidated their leads with turnover growths of between 14.9 and 18.6 per cent.
Luckily for the remaining German partners, the move to Düsseldorf and the cutting adrift of 'strategically misaligned' partners should rectify the jurisdiction's profit - and remuneration.
"Wollburg and Kirchfeld will be the first to have the same parity as in London, and this is the start of the two remuneration structures converging," says Linklaters managing partner Simon Davies. This alignment is expected to occur within the next 18 months.
The move to Düsseldorf, then, is part of something much, much bigger: a wholesale reorganisation of Linklaters Germany around Anglo-Saxon lines.
Of Cologne's 25 Linklaters partners, 13, including respected M&A rainmakers Klaus Marinus Hoenig and Wolfgang Sturm, have agreed to the move, but 11 have not.
Between them there is a clear generational divide: the partners who want to remain in Cologne, the historic home of the firm, have been there 12 years longer on average than their younger, 'pioneering' colleagues.
Linklaters' corporate advisory and M&A practice is well respected, but is also seen as suffering from a lack of big-name clients. Since the departure of corporate finance heavyweight Jochen Winters in 2006 to Willkie Farr & Gallagher there has been a dearth of client-wooing talent, although senior partner Michael Lappe in Munich and Hoenig and Sturm in Cologne have been busy. Recently Linklaters has managed to secure new instructions from Linde and Siemens.
Wollburg and Kirchfeld will undoubtedly be cornerstones in these endeavours. Wollburg, for instance, is loved by clients and is expected to take an enviably weighty contact book of German corporates with him. But he is also regarded with a mixture of awe and ambivalence by many of his former colleagues at Freshfields. A number of Cologne partners are known to be nervous about the prospect of jumping into a freshly made Düsseldorf bed with Wollburg on top.
Meanwhile, the German legal profession is buzzing with speculation about the moves. In a typical comment, one senior regional competitor says: "[Linklaters] has a more general problem with the German partners and would like to get rid of dead weight. So [they say], 'let's close the [Cologne] office, and because many Cologne natives do not like Düsseldorf they will leave'."
Linklaters German head of corporate Götz Eilmann insists that the decision was not taken lightly. "It's a very difficult step to close an office that has 100 years of history," he says. "The Cologne office was profitable but insufficiently focused."
The Linklaters mantra of 'premium work for premium clients', means that Düsseldorf will be composed almost exclusively of corporate and M&A partners.
Leaner and meaner
The comparison with Wollburg's former firm Freshfields is instructive.
Freshfields is comfortably the largest firm in Germany and, along with Hengeler Mueller and Clifford Chance, has the top-rated M&A practice in the country. The firm has most of its reorganisations behind it and sports around 15 per cent fewer equity partners than four years ago. It is, in other words, where Linklaters wants to be.
One senior Freshfields partner claims that the Cologne practice is flourishing and that it is the most profitable in Germany.
Regional managing partner Manfred Finken adds: "We've moved beyond being location-bound in our thinking and have no intention of closing any of our six offices [in Germany]. We deem them important for market coverage as well as for recruitment."
As for the departure of his two star partners, Finken believes that Freshfields has sufficient breadth and strength to be able to absorb their loss.
However, the word on the street seems to suggest otherwise. One competitor close to the firm says: "Wollburg and Kirchfeld are not just anyone - this will have considerable repercussions for Freshfields."
The ex-Freshfields stars could take with them a virtual roll call of Germany's blue-chips, including ThyssenKrupp, Fresenius, Hypo Real Estate Bank, Mannesmann, Beiersdorf and WestLB.
For those on the ground at Linklaters Cologne, these concerns have taken on a secondary concern. Cologne is to be abandoned by February 2008 at the latest. Linklaters says that all associates have been offered positions within the firm's network and many of the non-fee-earning staff are to move to Düsseldorf. It is as yet unclear how many have accepted.
Linklaters' firmwide strategy and focus on streamlining offices in favour of 'premium work' has come at the cost of more specialised practices - such as the IP group, which left last year - and those who do not agree with the vision.
When asked by The Lawyer whether further closures or partner departures are on the agenda, Eilmann answers with an unequivocal "no" and says that Linklaters' Frankfurt, Munich and Berlin offices are already "strategically aligned".
Then again, last year Juve quoted Linklaters global head of corporate David Barnes as saying: "There are no plans for a wide-ranging review of German partners' status." Barnes was unavailable for comment.
It is not difficult to imagine what Herr Oppenhoff would have made of this. One of his oft-repeated mottos was: "When we take clients, it shouldn't depend on whether we'll make money out of them."
Nevertheless, the firm did. That approach, and the Cologne office, are now consigned to a footnote in history.
As one of the partners who will make the move to Düsseldorf succinctly puts it: "We're not the old Oppenhoff office anymore - we're Linklaters."
- The 13 partners moving from Cologne to Düsseldorf have an average of eight years' experience as partners.
- The 11 who want to stay in Cologne have an average of 19 years of partnership experience between them.