6 February 2006
Not much ruffles the feathers of Munich lawyers. Working in the fastest-changing legal market in Germany, they are used to comings and goings as international firms move into the city and teams of lawyers hop from one firm to another.
However, The Lawyer's revelation last week that corporate heavyweight Hans-Jörg Ziegenhain was moving from Freshfields Bruckhaus Deringer to Hengeler Mueller caused a collective intake of breath among the Munich legal fraternity.
First there was the shock that the famously conservative Hengeler had made a lateral hire. Few lawyers in the market can remember the last time that happened, or indeed if it ever has before. (It has, but only on two previous occasions.)
For some, it was Ziegenhain's jump from a firm with an international outlook to one with a more domestic client base that was the shock. Jan Wrede, a corporate partner at Clifford Chance's Munich office, says: "From that perspective it was surprising. He was well established at Freshfields and the firm has an excellent platform for international deals."
Ziegenhain's client base is very much concentrated on German companies and includes Degussa, Deutsche Bahn, HypoVereinsbank, Hypo Real Estate Bank and Siemens. He has also established a good reputation in the non-performing loan market.
The significance of Ziegenhain's move should be put against the backdrop of Hengeler's culture. The firm is one of the few traditional German partnerships left in the country and is recognised for its conservative attitude to everything from expansion to internal promotions. Although it is a full-service firm, the corporate practice is the jewel in the crown, and the high quality of its work ensures it rarely loses a client and does not have to compete on price.
Hengeler's move into Munich was a logical step, but it came rather late in the day. The office - the firm's sixth - opened its doors for business in January. In marked contrast to other firms that have opened offices in the city, Hengeler launched with three of its own partners from other parts of its network: Wolfgang Grobecker, Achim Herfs and Gerhard Lang. Other firms have raided practices already based in Munich to start up in a city that is known to be hard to crack.
So why has Hengeler broken from its strategy of organic growth to poach Ziegenhain? "Ziegenhain's appointment so soon after we opened in Munich was an opportune move," says Hengeler Frankfurt partner Oleg de Lousanoff. "The possibility came up to attract a renowned corporate lawyer - and we took it."
De Lousanoff will not be drawn on Ziegenhain's reason for moving, but he is clearly aware of the political repercussions of the move. Freshfields and Hengeler consistently claim the top two spots in the German M&A league tables and, until this point, no lawyer had moved from one to the other.
De Lousanoff admits: "There was an issue with the fact that Freshfields is our traditional direct counterpart in the German market. We have a very friendly relationship and were concerned that this could negatively affect that. But competition has never been stronger in the legal market and, following associate hires, there's now a lateral partner hire." However, there are no plans to make this a regular exercise.
Apart from the shock locally at Hengeler's bold move, Munich lawyers are speculating on what is going on at Freshfields. Just 20 months ago, the firm lost the high-powered corporate team of Rolph Fuger, Peter Nussbaum and Norbert Rieger when they left to set up the very successful Munich office of Milbank Tweed Hadley & McCloy. It is understood that Ziegenhain was more than a little miffed at their departures, as he had been headhunted from Baker & McKenzie by Fuger and Rieger just three years previously.
As a private equity partner at a US firm claims: "They brought him into the firm saying, 'We want to build something special together', and then they left."
These exits, as well as restructuring, at Freshfields have both been mooted as possible reasons for Ziegenhain's decision. Local lawyers point out that remuneration packages at both firms are likely to be at the same level, which rules out money as a motivating factor.
Ziegenhain's departure leaves a hole in Freshfields' Munich office, which is now without any recognised rainmakers, although partners Ferdinand Fromholzer and Barbara Keil are both well-regarded corporate lawyers. Fromholzer and Keil aside, Freshfields has a further five partners: IP specialist Michael Knospe, finance partner Tobias Müller-Deku, tax expert Stephan Salzmann, Michael Schwartz, who runs the Russian desk, and Eberhard Seydel, who divides his time between Munich and Düsseldorf.
Perhaps battle-hardened by the earlier departures, Freshfields lawyers are in no doubt about their future. Keil told The Lawyer: "We feel very comfortable that we can maintain our position. It's unfortunate that we've had more departures, but the firm has said it knows Munich is an important region."
Ziegenhain's move is one of the speedy changes that have come to characterise Munich. The legal landscape in the city has changed beyond recognition over the past five to 10 years as international firms have poured into the region thanks to a liberalisation of the market. In 2005 alone, Osborne Clarke, Latham & Watkins and White & Case launched new offices, while the previous year Kirkland & Ellis and Milbank moved in.
Private equity and IP are the two drivers of the legal market, but not all reasons for moving to the city are professional. With its close proximity to the Bavarian Alps and lakes, and a slightly more relaxed attitude, Munich is as much a lifestyle choice as a commercial one. The fact that Ziegenhain himself transferred from the Düsseldorf office of Baker & McKenzie into Freshfields' Munich team was telling. As one lawyer put it: "He could run his business anywhere - he chose to run it in Munich."
De Lousanoff admits that having a Munich office helps with recruitment. "Munich is one of the most sought-after places to live in Germany. We've lost some candidates because we had no office there, but that's a hole we've now closed."
Surprisingly, the large increase in law firms in Munich has not led to a corresponding rise in lawyers. Instead, a constant game of musical chairs is taking place in the city. White & Case launched with a team from Haarmann Hemmelrath, Latham swooped on Ashurst for its start-up, and now there is Ziegenhain's move.
"The main players haven't changed much. There's lots of movement, but it's the same people in the market," says Christoph Hiltl, managing partner of Lovells in Munich.
Ziegenhain's move may be the current topic of conversation, but no one is under any illusions. With a slew of US and UK firms sniffing around the Munich market, it is just a matter of time before another major lateral hire hits the headlines.