US lawyers take Latin lessons
9 June 2008
The news that Simpson Thacher & Bartlett and Chadbourne & Parke will soon be joining Allen & Overy as the latest international law firms to open in Brazil is confirmation that, in legal market terms, Latin America is fast becoming the new Middle East.
In little more than a year, a procession of firms have either opened or declared their intention to open offices in Brazil. For firms such as Simpson Thacher, that have been ramping up the level of Latin American work in recent years, building a home from home has become an inevitability.
As one of the firm's partners puts it: "The lawyers in that area took around 250 round-trip plane journeys in the past year. It's quite arduous and not sustainable for the people doing it. We need somewhere for them to hang their hats."
The signs are that there is a growing list of other firms looking for a hat peg to join those firms that have opened in recent years - a roster that includes Proskauer Rose, Mayer Brown and Shearman & Sterling.
"In the past two years there has been considerably more movement into Latin America from US and UK firms," says Pedro Amaral Dinkhuysen, recruitment consultant and Brazilian specialist at Michael Page. "The market is booming." The last major wave of foreign law firms entering Brazil was caused primarily by the privatisation boom in the late 1990s. Now the work enticing them to São Paulo and beyond is broader, encompassing infrastructure projects, M&A and capital markets.
In the past three years alone there have been some 200 IPOs and at least $50bn (£25.7bn) has been injected into the Brazilian market.
"Brazil is truly becoming the regional hub for capital markets," says former Cleary Gottlieb Steen & Hamilton lawyer and name partner at Siqueira Castro Advogados Carlos Fernando Siqueira Castro.
"The Brazilian stock exchange is now the third largest in the world. This is proof of the liquidity and size of the Brazilian market," he adds.
Another very attractive area for US and UK firms is infrastructure. The Brazilian government's announcement last year that it was launching a five-year plan of investment worth in excess of $200bn (£102.7bn) - the so-called Program for the Acceleration of Growth - will have interested projects-focused firms such as Chadbourne. However, this boom is not all about marauding foreign firms.
"We've a very good relationship with Chadbourne," says Siqueira Castro - a comment that illustrates the likely benefits of advising on the local aspects of cross-border deals awaiting Brazilian lawyers as a result of the current boom.
In recent years the average size of local Brazilian law firms has grown exponentially.
Of the 10 largest Latin American law firms, eight are Brazilian (the two others are Mexican and Argentinian). Siqueira Castro is the fourth-largest with 370 associates and around 1,100 staff.
"In the late 1980s and early 1990s, to have Brazilian law firms of this size would have been unthinkable," says Siqueira Castro. "The foreign law firms are more than welcome to come. Brazilian companies are clearly becoming more international and this will result in more business."
Paulo Sehn, a partner in Baker & McKenzie's associated law firm Trench Rossi e Watanabe and member of the local law firm association Centro de Estudos das Sociedades de Advogados, agrees. "There's already a very relevant number of foreign law firms in Brazil and while the bar association is closely monitoring the situation, it doesn't oppose it as long as they continue to be structured as consultancies in foreign law," he said.
As of now this influx shows no sign of slowing down. The news today (9 June) that DLA Piper has hired a partner from McDermott Will & Emery to spearhead its Latin American strategy is a clear sign that the firm is considering jumping on the bandwagon. It is unlikely to be the last.
A new route for US companies looking to list in Europe has opened up recently, with current takeover target Anheuser-Busch among the first to take advantage of the new transatlantic flexibility. Fresh successWhat do Wachtell, Cravath and Sullivan & Cromwell have in common?
Until late April, Budweiser brewer Anheuser's primary listing was in New York, with a secondary listing on the London Stock Exchange. Prompted by the relatively low trading volumes of the company's shares, coupled with the comparatively high cost of its London listing, Anheuser began to look around at its options.
With the help of Bryan Cave's London office, Anheuser discovered that, following last year's merger of the New York Stock Exchange and Euronext (to form NYSE Euronext), there was a new equivalency procedure by which a company listed in New York could move its listing to the European exchange without having to issue a full form prospectus.
"We're now promoting this to our US corporate partners to raise awareness of this development," said Bryan Cave associate Andrew Hart, who led the deal for the US beverage company.
The added attractiveness of Europe as a destination for foreign issuers, which underscores the new equivalency rules, is the result of the combined efforts of the four regulators behind NYSE
Euronext - Paris, Amsterdam, Brussels and Lisbon.
The latest development is the creation of a so-called Fast Path, by which non-EU issuers benefit from the recognition by European regulators of US Securities and Exchange Commission (SEC) listings standards.
Companies reporting to the SEC are now free to use their own existing disclosure information filed in English for the majority of their EU prospectus requirements.
"This alone is likely to result in a considerable cost saving in terms of translation services for any US company looking to list in Europe," added Hart.the email
If you answered 'they're the only three remaining top 50 US firms with higher average profits per partner than Freshfields Bruckhaus Deringer', you win a free bagel.
Last month, in The Lawyer Transatlantic Elite, we hinted at the UK firm's astonishing 2007-08 performance. The results, published on 2 June, confirm it.
With its 39 per cent increase to £1.44m, Freshfields' average profitability has leapfrogged Kirkland, Cleary, Paul Weiss, Milbank, Willkie and even Cadwalader. It has even squeezed ahead of Simpson Thacher & Bartlett.
Freshfields has a lot going for it. Chief executive Ted Burke points out that the firm's wide international coverage (in Asia in particular) has been a boon over the past year or so.
The firm's new profit peak puts its US merger ambitions squarely back on to the agenda.
It was a little more than two years ago that Freshfields' senior partner Guy Morton put a tie-up with a US firm at the top of his personal to-do list, saying, in his first interview since taking the post: "I think the partners are ready mentally for a merger."
Comparative financial performance has long been the barrier to a top-tier, US-UK tie up. Not now.
Now the most pertinent question might be, would a potentially dilutive merger with a Wall Street titan be in Freshfields' best interests?