US firms promote as laterals prove elusive
18 April 2011 | By Gavriel Hollander, Caroline Butcher
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Despite the strong buying position of a number of US firms, as we report on the front page, several London offices are taking a longer term view towards organic growth.
That is good news for associates, who have often been overlooked in the past by their US employers in favour of the diversity of experience and quick fixes offered by lateral hires.
One firm showing a preference for partner promotions is Shearman & Sterling. Despite a spate of partner defections on the other side of the Pond, its London office, which posted its highest-ever revenue at $104.2m (£63.8m) in 2010, has not made a single lateral partner hire since 2008, preferring to nurture talent under its own roof.
Shearman London managing partner Anthony Ward says: “We now have a whole generation of lawyers who made partner at Shearman, which has strengthened and reinforced collaboration across our offices and practices.”
McDermott Will & Emery is also beginning to witness a sea-change at its London office. Still regarding itself as a relative newcomer to the London scene, until recently the firm has opted mainly for lateral hires, bulking up key practice areas including corporate, private client and energy.
McDermott European head Hugh Nineham, himself a lateral hire from legacy Hogan Lovells firm Lovells in 2008, believes it is the logical way to kickstart an office.
“We think that to build a strong and enduring practice you need a combination of internal and external recruitment,” he says. “We’ve only been here for 13 years and if you want to build from a standing start you need to use both methods.”
“A good lateral partner brings with them a range of experience, a certain market standing and a set of relationships - or some part of these three.
“Even magic circle firms are hiring laterally, such as Linklaters and Freshfields [Bruckhaus Deringer]. When a firm finds it has a gap in its portfolio a lateral hire seems to be the quickest way to fill it.”
Nineham also appreciates the value of rewarding talent within the ranks. He has recently seen McDermott energy specialist Rashpaul Bahia become the firm’s first London lawyer to progress from trainee to partner, and predicts Bahia will be the first of many ’born and bred’ partners.
“Internal promotion is not just about morale - it’s also a cultural thing,” he says. “We want to be breathing [the firm’s] culture into a person from the moment they arrive. Clients get used to dealing with certain individuals and expect to see them progress and thrive in the firm.”
Latham & Watkins has also come round to the benefits of partner promotion. While the firm is keen to bolster its ranks with high-level appointments, the capture of a six-lawyer White & Case finance team in 2010 being a case in point, it is increasingly favouring organic growth, and its corporate practice has emerged as a hotbed for promotion.
“We continue to see a number of associates promoted to the partnership and this is indicative of the high calibre of associates and the good opportunities for progression in our growing platform,” managing partner Nick Cline says.
Meanwhile, White & Case has recovered from the 2010 exodus of a large chunk of its finance team primarily by promotions. The firm has consistently promoted more partners than it has hired, with the emphasis on finance promotions - six in 2008, two in 2009, six in 2010 and six this year.
Managing partner Oliver Brettle says it is part of a deliberate push for organic growth in London.
“The strategy of White & Case in London over the past 10 or so years has been to build real strength in our core practice areas, with a strong team of associates and a significant trainee programme,” he says.
In contrast, Brettle sees laterals mainly as a way of plugging gaps in experience.
He adds: “I expect lateral partner hires to continue where we have a need for senior individuals with particular capabilities and experience.”
Kirkland & Ellis, which has long had a tradition of making eye-catching laterals in the City, is also committed to organic growth, with six partner promotions compared with two laterals in 2008, three promotions compared with one lateral in 2009 and nine promotions against two laterals in 2010.
London managing partner Jim Learner says: “We established a training programme a few years ago and it’s been successful, so we’re looking to increase the size of the intake.”
While firms are keen to display their commitment to organic growth, the fact remains that growth through lateral hiring is not an easy trick to pull off.
The more firms that crowd the market, the thinner the talent is spread. It is a case of demand outstripping supply and it applies as much at partner level as further down the food chain, as the struggles of some US firms to fill particular holes has proved.
Simpson Thacher & Bartlett scoured the market to find the right partner to kick-start its English law capability before landing Clifford Chance rainmaker Adam Signy, while Ropes & Gray’s search for a top private equity partner lasted a year, ending in last month’s hire of DLA Piper private equity chief Will Rosen.
The problem, according to some, is that it is not enough to show people the money - you have to show them a pipeline of deals too.
“It’s still a challenge to recruit the right people,” says one corporate partner at a US firm, talking about hiring at associate level. “Most US firms make more [money] and might be able to pay more, but that won’t attract people. Firms such as Skadden [Arps, Slate, Meagher & Flom] and Weil [Gotshal & Manges] can show [a good] record and that’s more important.”
The same goes for newcomers looking at growing their London teams by lateral hiring.
“Recent arrivals have recognised that lateral hiring isn’t as easy as it seems,” says one senior partner at a US firm. “You’re all in the same boat when you try to become global: you have markets where you’re mature and others where you’re less known and you have to work harder to grow.