States in the City
11 April 2010 | By Andrew Pugh
1 April 2014
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26 June 2014
14 January 2014
With the global economy showing signs of recovery, The Lawyer takes the temperature of US firms in London.
The full impact of the financial crisis on US firms and their UK operations has been revealed. The Lawyer’s annual survey of US firms in London shows that lawyer numbers have significantly reduced on the year before.
Around two-thirds of the top 30 US firms in the capital saw a reduction in the number of fee-earners, with numbers falling by as much as 33 per cent in extreme cases.Only a handful of firms, including WilmerHale and Covington & Burling, saw an increase in head count; the majority were instead hit by restructuring and redundancies, mostly at associate level.
Partner numbers were also badly affected, and this shrank at least half of the top 30 firms in 2009.
Despite the gloomy figures, the good news is that - if recruiters and senior partners are to believed - the worst appears to be over. Most observers contacted by The Lawyer predicted a steady recovery in 2010 and a re-emergence of the kind of high-end corporate work that ground to a halt last year. But few would disagree that the latter half of 2008 and the first half of 2009 were among the most dismal periods in recent memory.
“Associate recruitment in the first half of last year was somewhere between severely depressed and non-existent,” says one director of a legal recruitment consultancy.
However, activity in the recruitment market has seen a marked increase since September 2009. “The lateral market, as far as US firms is concerned, has been very active for us because we were involved in setting up Greenberg Traurig Maher’s office in London and also worked with Reed Smith - firms that were voracious in their appetite for investment,” adds the source. “For those firms open to recruitment, there were rich pickings, but some US firms had a pretty torrid time.”
Many in legal recruitment are optimistic about 2010 and believe US firms will step up recruitment in advance of the expected upturn in the economy.
“Looking ahead, the picture is very encouraging,” the source continues. “There are lots of firms now re-entering the market, including those seeking transactional
associates, which is a good sign. Some have realised they cut too deeply and are now back recruiting; others are recruiting in anticipation of activity picking up in the coming months. Things aren’t back to where they were in the heyday of late 2007 and early 2008, but it’s looking encouraging.”
Aside from the slowdown in the corporate sector, commentators highlight a number of other reasons why head count was reduced in 2009. Some felt there was
a significant lapse between the reduction in transactional activity and the rise in restructuring and insolvency work, and also that litigation failed to reach the level many had expected.
Another factor believed to be holding back US firms is London offices’ relationships with their US headquarters and the difficulty in getting approval for lateral hires, particularly when a recruitment freeze is in place.
Another global recruitment company, which works with associates at UK and US firms, believes associate head count at US firms in 2008-09 dropped by 15-20 per cent.
“All the big names have made redundancies; there’s no one who has escaped,” says a senior recruiter at the agency.
The current optimism is founded on an increase in corporate activity in 2009.
“The first transactional activity for UK firms was probably between September and October 2009, with US firms fairly close behind,” says the source. “There’s always been a reasonably low leverage with US firms and perhaps they didn’t lose as many key people. Firms are certainly now recruiting, and those like Latham & Watkins have been active across the board. Gibson Dunn & Crutcher is also busy now, while Shearman & Sterling, which did not do much in 2009, is also active again.”
According to recruiters at the sharp end of the market, new kids on the block such as Greenberg Traurig Maher and Reed Smith focused closely on lateral partner hires
in 2009, but 2010 could be a year to strengthen at associate level.
“We’re expecting activity to increase generally in 2010,” adds the source. “Things have picked up massively in the first quarter of the year and we expect that to continue over the next three quarters. The one area that hasn’t is real estate, although many US firms have real estate more as a corporate support function. Litigation and restructuring have kept us alive; there’s a lot of activity in niche areas of litigation, such as financial services regulation, as people look to unravel the deals that went wrong.”
A senior recruiter at another agency reports a similar situation in relation to lateral hires. “It’s been slow,” he says, “with very few firms making any kind of investment decisions over the past 24 months; they’ll want to get their profits up first.
“Once the election is out of the way, if we get a decisive result, there’ll be more confidence in the market. We expect a number of US firms will get to a point where they’ll start looking to grow particular practice areas. In a few months, people will have the confidence to begin making decisions.”
This optimism is echoed by senior partners at US firms in London. Last week (5 April), The Lawyer reported Cleary Gottlieb Steen & Hamilton’s plans to grow its UK litigation department. Another firm looking to strengthen in London is Weil Gotshal & Manges.
London office managing partner Mike Francies says Weil is eager to build up its offering in London, known traditionally for its corporate emphasis, to bring it more in line with the firm’s other practices.
Weil fared relatively well last year, with global revenue holding steady at $1.23bn (£810m), although its London office suffered a considerable drop from $103m to $85m.
“We’d look to see growth in some areas to make it more balanced,” says Francies. “Historically, we’ve been focused on private equity, which has been strong, but did not have as big a finance and litigation group. That side of things needs to catch up so we can achieve that balance.”
While firms such as Weil and Cleary intend to strengthen their London offering, the extent of US firms’ investment in London will become clear in the coming months. Many of those same firms are also looking closely at emerging markets such as Asia.
It remains to seen whether this will weaken their interest in the City.
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