US firms boost outsourcing at expense of London rivals

Morrison & Foerster’s raid on Shaw Pittman, first reported in The Lawyer last week, was the third eye-catching move into outsourcing by a US firm in the space of a year.

Andrew Moyle’s departure for Latham & Watkins started the trend last year, Allen & Overy’s Lawrence Jacobs then joined Milbank Tweed Hadley & McCloy and MoFo completed the series with its capture of Alistair Maughan, David Skinner and Andrew Smith.

For those lawyers with the biggest reputations in the UK marketplace, it seems that US firms are offering them the best opportunities to develop their practices.

Latham’s Moyle said: “Most UK law firms just don’t get it [outsourcing]. They still try to pigeonhole those practising outsourcing within their IP department and still believe that the primary role of these lawyers is corporate support. Alternatively, their ‘outsourcing department’ is full of M&A lawyers who, with nothing else to do in the past few years, have spotted an opportunity.”

Firms such as Barlow Lyde & Gilbert, Bird & Bird, Field Fisher Waterhouse and Masons would dispute Moyle’s claims. All have been successful in this arena, but the US firms’ ability to attract the top talent should worry them. Maughan, for example, was courted by at least one UK firm and, despite a difficult latter period at Shaw Pittman, he still plumped for the US option.

And it is not just those leading commercial firms – all of the magic circle firms have outsourcing practices, but again the pull of Milbank was too great for Jacobs to turn down and it did not take him long to attract one of Clifford Chance’s young stars, Sean Keaton.

Jacobs explains: “To have a truly global capability you need a transatlantic capability. The UK and the US are the key markets. For it to work, you have to have a truly integrated transatlantic practice.”

Milbank is building that. Outsourcing as an industry was founded in the US and Milbank was one of the firms that pioneered the practice with partners such as John Halvey, a key figure in attracting Jacobs.

While Milbank is building that integrated transatlantic practice, rival Shaw Pittman, another outsourcing pioneer in the US, had it but has thrown it away. The rush for the door in the past 18 months raises questions over whether the UK office, a pioneer in this market, was ever truly integrated with the US.

The firm had built up an impressive UK practice of about 30 lawyers devoted to outsourcing. It was led by Maughan and Moyle and included partners such as Chris Holder – now at Barlow Lyde & Gilbert – and Jennifer Mattingly – now at Pillsbury Winthrop.

Holder is the only one to have jumped ship for a UK firm. While he appreciates the reasons why others have joined US firms, he believes that UK firms can still thrive in the outsourcing market. Holder points to UK firms’ presence on UK companies’ panels, a stronger brand in this marketplace and the fact that most UK firms are cheaper than their US counterparts. However, he admits that on global deals, which are often run out of the US, there is a danger that UK firms will miss out.

“These are not US firms per se, they’re global firms,” says Holder. “I think they’ll be successful. They’ve joined established international firms who know how to run international offices.”

And therein lies the moral of this tale. Shaw Pittman does recognise the importance of the UK marketplace and has announced its determination to rebuild despite the devastation wreaked on it in London. Integration will be the key to any second chance of success.