US firms struggle to hire local talent as partners resist the lure of profits
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Despite having plenty of cash, US firms in London are finding it hard to recruit local lawyers. Claire Smith reports
The us's most profitable firms are failing to attract UK lawyers in the London market, who are opting instead for the smaller pay packets of their less profitable rivals.
Figures released by American Lawyer magazine last week show that two of the US firms known to be trying to crack the UK market are in the top 10 for profitability - namely Simpson Thacher & Bartlett and Kirkland & Ellis.
Their profits per partner are $1.655m (£993,000) and $1.340m (£804,000) respectively, but despite breaking records they cannot tempt UK lawyers to join them.
Hot on their heels are Willkie Farr & Gallagher and Fried Frank Harris Shriver &Jacobson, which are trying to attract corporate finance capabilities into their London offices.
Though most of the very profitable US firms, such as Cravath Swaine & Moore and Wachtell Lipton Rosen & Katz, shy away from spending money on expensive foreign operations, those that are trying are clearly failing.
Only Milbank Tweed Hadley & McCloy finds itself in the enviable position of being a top 10 firm in the US and having any UK practice - most recently recruiting English law capital markets partner John Walker and his team from Cadwalader Wickersham & Taft. Milbank Tweed's profits per partner are up 15.3 per cent on last year, hitting the $1.275m (£765,000) mark.
So why are the firms with the most money to spend finding it so difficult, when the likes of White & Case - much further down the profits table at $725,000 (£480,000) per partner - can attract such luminaries as the Maurice Allen team?
Allen says: "In my experience the more profitable firms don't offer more money than the less profitable firms. In a sense the more profitable they are the less they seem to be inclined to invest. They are concerned with maintaining profits, and they are reluctant to make investments that may dilute that."
Because of this Simpson Thacher has put a large amount of money on the table for a few acquisition finance people, but has shied away from trying to bring in any more.
While the firm is understood to have been offering as much as £1.3m to get a top acquisition finance partner, sources say that it will fail because it does not have a convincing strategy.
London managing partner Walt Looney says that Simpson Thacher is trying to find three or four M&A partners, but it is difficult to get the top people to leave the magic circle firms.
He insists that the firm will successfully recruit soon, despite being on the lookout since at least the beginning of the year.
"A firm like ours offers a tremendous opportunity for someone to build a practice. It's a great opportunity and that's why we will do it," he says.
But one partner at a US firm in London says: "Simpson Thacher has masses of work and that's all that you would actually be doing if you went there.
"It will probably destroy any business that you have yourself because you won't be able to service that - you won't have time."
Looney says that the firm will respond to such issues when they arise.
ZMB recruitment consultant Yvonne Smyth says that the main reason even the most profitable US firms cannot recruit in London is because it is not money that attracts people but strategy.
She says: "The big-hitting US firms are going for the big name partners. Those partners in the UK are going to have fairly significant client bases, and they are not looking just at their own profitability, they are looking at their clients'.
"Unless partners are comfortable that the firm they are moving to has, or will have very soon, the breadth and depth to serve those clients, they will be reluctant to move."
Partners are not going to be tempted out of the magic circle firms unless they are convinced that the firm they are heading for is here to stay and is going to provide the back-up.
What it takes to recruit in London is plenty of money on the table, a commitment to take on plenty of lawyers and a US client base that is crying out for an English law capability.
Allen says: "You have to ask what it is that they bring to the party. Some just want you to serve their clients, and that alone is not very attractive. You are looking for flexibility in their thinking and an understanding of different markets - convincing reasons for being in Europe."
So while the recruiting US firms may have plenty of profits to boast about, they are finding that it is going to take a lot more than that to entice partners out of the big City firms.
Even harder to tempt are teams - the ideal starting point for US firms setting up finance capabilities in London. The White & Case team from Weil Gotshal &Manges and the team that headed for Shearman & Sterling from Ashurst Morris Crisp led by Stephen Mostyn-Williams, broke the mould.
Profits are now so high at the City firms that the gap between Wall Street and the magic circle is too narrow to be a motivating factor. And there are very few finance lawyers who might be tempted.
Philip Fletcher, managing partner of the London office of Milbank Tweed, says that the trick to wooing lawyers is not money but work.
He says: "We have got a strong finance and private equity business that fits into London well.
"People are comfortable with our practice and our business plan - which is focused on what Milbank Tweed is good at and what really makes sense in London. There is a difference between just using profitability and having a business plan that makes sense in London.
"You have got to combine White & Case at one extreme, which has got the right business plan but is not very profitable, and the likes of Cravath Swaine and Wachtell Lipton which have got the profits but not the plan."
It seems that striking the right balance is a very difficult feat.