With the focus on cost, single- jurisdiction firms are losing out. By Gavriel Hollander
When Travers Smith shut its relatively short-lived German operation in 2007 to concentrate on building its best friends network, it seemed like a return to the firm’s tried and tested domestic-focused model.
So dipping its toe into the US securities space for the first time with last week’s hire of Clifford Chance partner Charles Casassa could be seen as an admission that Travers can no longer operate in glorious isolation.
The firm concedes that it has recently missed out on mandates it may have won had it possessed an in-house US capability, but the move is actually a sign of a more interesting development with regard to what some clients are demanding of their firms.
While capital markets are still struggling to recover from their recessionary slump, flotations and secondary issues increasingly contain a US element.
Along with this, clients - especially on the sponsor side – want to cut down on legal spend, so firms that can offer advice in only one jurisdiction are getting squeezed out of deals.
This has put a premium on the clutch of US securities partners operating in the City. Last month, CMS Cameron McKenna snapped up Simmons & Simmons partner Daniel Winterfeldt to lead its international capital markets group, citing his US capability as a vital part of its thinking. With Travers now also acknowledging that market conditions have created the need for firms to become one-stop shops, it could be that the days of cosy best friend arrangements with firms across the Atlantic are over, at least in the corporate finance world.
“Rightly or wrongly, a number of financial intermediaries have reached the conclusion that they don’t want that double act any more,” says Travers corporate finance head Spencer Summerfield. “The other element of this is that IPOs tend to be a lot bigger than they used to be. With the ones we’ve been working on, the appetite is much wider than it used to be.”
In simple terms, nervous issuers are hedging their bets by offering private placements in overseas jurisdictions, particularly the US, and Travers’ move suggests that sponsors now want their advisers to handle the whole piece in-house.
Not so, according to that bastion of English law exclusivity Slaughter and May. The blue-blooded firm has a longstanding relationship with Davis Polk & Wardwell for transatlantic work and there are few signs that the informal arrangement will not continue.
“Our model is different from other firms’,” says Slaughters practice partner Paul Olney. “Do we see a need to change that? No. There’s a compelling proposition when someone can offer a combined service, so we have to work hard to remain competitive. You can never say never but we’ve been pretty successful with our approach.”
Not all UK firms share Slaughters’ insouciance over what is perceived to be a subtly shifting market. Herbert Smith, the firm outside the magic circle with arguably the strongest US securities offering, last year boosted that practice further with the addition of Linklaters partner Steve Thierbach.
The former doyen of Linklaters’ US securities practice believes there is space for more than one approach for firms on this side of the pond.
“People get caught up in the one-stop shop versus best friend issue, but if firms can deliver a quality service across a range of jurisdictions it doesn’t matter how they do it,” says Thierbach.
“Anyone with a significant finance or corporate practice is going to have to look at how the US piece fits. How they do that will be a strategic decision, hopefully one driven by demand from clients.”
Client demand is certainly what Travers highlights as the main catalyst for hiring Casassa. And although Thierbach insists that the sea change happened back in the mid-1990s when he launched the Linklaters practice, others believe there has been a second shift more recently.
“Market practice is different now,” insists Winterfeldt. “US institutional investors are more active and issuers are tacking on a US offering to make sure they’re successful.”
Nevertheless, multijurisdictional placements are nothing new, even if they are becoming more prevalent, so what has brought about the sudden rush for US expertise?
Clearly, a tighter market means there is more pressure on legal spend, which gives full-service firms a distinct advantage. But that is not the only reason.
“Yes, it’s about pricing but it’s also about accountability,” says Winterfeldt. “If there’s a difficult deal or any problems, clients don’t want there to be any conflicts [between their advisers].”
Travers’ move – “both defensive and opportunistic”, according to Summerfield – is intended to propel the firm into the league operating just below the magic circle; a group that includes the likes of Ashurst, Herbert Smith and, especially since last year’s game-changing merger, Hogan Lovells.
But with that trio already boasting relatively sizeable and experienced US securities practices in the City, there is some scepticism in the market as to whether Travers will be able to compete.
he firm intends to add at least one US-qualified associate to the group but insists that it will remain a small operation.
Casassa is not a name that many in the City are overly familiar with and, even if Travers can leverage off his magic circle credentials, the road to recognition as a serious international player could be a long one.
“You need credibility,” one City-based US securities partner points out, highlighting that success for Travers’ nascent team will not come overnight. “Otherwise banks will just dismiss you.
“You need to have a team and partners with the right kind of credentials and experience. You can’t just take a lawyer from the States and put them here.”
Travers is keen to emphasise that the recruitment of Casassa is not a precursor to further expansion into international law, nor is it a rejection of the best friends system that has served it well in the past.
Thierbach, for one, backs his rivals across the City.
“I welcome the competition,” he says. “It’s a good move and hopefully they’ll be successful.”
But it is ultimately the firm’s clients, rather than its competitors, that need Travers to prove that its first foray into US law is more than an act of tokenism.