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Simpson Thacher & Bartlett has been on the hunt for a UK qualified partner for almost a year, but as Catrin Griffiths reports, the hiked-up salaries of US firms are not enough to recruit from the magic circle.
On the face of it, it seems ludicrous. Here is a prestigious, fabulously profitable, classic Wall Street partnership in the old sense, with none of that eat-what-you-kill mentality that bedevils so many of its rivals, and it cannot recruit a UK partner.
After almost a year of looking, Simpson Thacher & Bartlett has still not managed to hire anyone to build up its UK acquisition finance capability.
What is it doing wrong? After all, this is a firm many should be willing to gnaw off their arm to work for. Or is Simpson Thacher just being too choosy?
Make no mistake, it needs to fill a gap.
Its most active bank client is Chase, the biggest European debt provider by some margin.
Chase led the senior debt on many of the biggest deals last year, such as Zeneca and Hillsdown.
And the firm has other clients that demand acquisition finance expertise, being the preferred counsel to those deal-hungry funds, KKR and Blackstone.
Walt Looney, Simpson Thacher's London managing partner, says: "When you put the [private equity and lending] sides together, it's a no-brainer - it's a natural expansion."
Simpson Thacher's relationship with the likes of Chase and KKR should not be underestimated.
It lives and breathes those clients as much as Sullivan & Cromwell does Goldman Sachs.
However, Simpson Thacher is not a laid-back, old school partnership.
It has had to hustle for its work. It originally acted for Chemical, so when Chemical merged with Chase, Simpson Thacher could have been edged out by the likes of Milbank Tweed Hadley & McCloy and Cravath Swaine & Moore.
Instead it worked itself into Chase's affections and is now key adviser to the merged bank.
The same thing can be seen in Europe, where Simpson Thacher acts as transaction counsel to many of Chase's and KKR's deals.
"They really keep a tight rein on their clients," says one City lawyer.
However, it was becoming increasingly clear that the firm was losing out on big ticket transactions because of its lack of UK capability.
For instance, Simpson Thacher was hired by Chase, Lehman Brothers and DLJ, financial advisers on the Olivetti deal. But Looney admits: "We couldn't do any more. That was a classic moment."
And so the hunt for a UK partner began.
Looney asserts that the search only began in earnest on 1 January this year, when the firm hired headhunter Heidrick & Struggles to persuade suitable candidates to jump ship.
However, it was certainly talking to key partners as far back as last summer - several prominent acquisition finance lawyers maintain they were approached for quiet chats long before this year.
There is certainly a consensus emerging in legal acquisition finance circles. The general perception among leading lawyers is that, yes, Simpson Thacher is a marvellous firm, but it wants just the one UK lawyer (a la Jamie Logie at Sullivan & Cromwell) and, are you mad?
The resource issue in London is a potential nightmare and no amount of money can compensate.
"They just want to plug a gap," says one partner who has considered the firm, echoing a number of others.
But this is rather at odds with Simpson Thacher's avowed aim to build up an entire department based on UK capability.
Never forget, this is a firm that is aiming to fill another 24,000sq ft in the near future - and not all of it with US lawyers.
Looney asserts: "If we want to do the whole thing on the finance side, the decision to go into that area is a decision to have a substantial core of people in corporate finance, M&A and capital market tax. Then we have to sort out what we do with real estate and employee benefits too."
But another source who has talked to the firm says: "They're obsessed with only looking at the magic circle firms."
If that is so - and Simpson Thacher is nothing if not choosy - then it is a hard nut to crack.
There have been few departures from the top five in recent times and the more likely moves are within the magic circle, rather than out of it. Securitisation partner Mark Raines' move from Allen & Overy to Shearman & Sterling is one of the very few exceptions.
A major factor militating against any departure from the magic circle firms is money.
Profitability at UK firms has leapt so much over the last few years and the gap between Wall Street and the City has narrowed to such a degree that money is no longer a motivating force.
Take Clifford Chance for example, where, pre-merger puffery taken into account, profits will be touching £800,000 at the top of the lockstep this year.
Simpson Thacher's average profits last year were $1,495,000 (£950,000), but it seems that UK lawyers simply do not want the extra hassle.
"Look, we're on good money," says one City lawyer, in a delightful outburst of Britishness. "What's the point of a couple more hundred grand when you really never have a life?"
Another says: "I don't doubt that Simpson Thacher is committed to developing a product line if it says it is. But the prospect of wanting to prove myself all over again - the upheaval involved, having to build a team - people look at the fallout with Maurice Allen [former joint managing partner at Weil Gotshal & Manges' London office] and worry."
Ah, the M-word. Maurice Allen's experience at Weil Gotshal - something most finance lawyers have views on but little direct knowledge of - has become emblematic.
His departure from Weil Gotshal was the end of a honeymoon of recruitment among US firms and has tapped into a deep vein of conservatism among even the most disillusioned of City lawyers. This is a strong contributor to Simpson Thacher's inability to hire the right partner.
Of course Simpson Thacher is not the only US firm that is scouting around for acquisition finance partners. Latham & Watkins is also understood to be on the hunt.
But more importantly, there just aren't enough acquisition finance lawyers to go around. Which itself begs the question of whether clients are being well served by the legal market.
Look at the likes of Citigroup, which includes Citibank and Salomon Smith Barney.
With Freshfields effectively out of the picture for the moment (The Lawyer, 13 December 1999) and with finance partner James Johnson having moved to Clifford Chance, its only serious panel choices are Allen & Overy and Clifford Chance.
Stephen Gillespie, banking partner at Allen & Overy, laments: "There is a shortage of resources in the market. There are very few people who can do the work."
Similarly, banking partner at Shearman & Sterling Stephen Mostyn-Williams - an anomaly in heading a banking and finance team which was actually prepared to move - notes: "About five years ago, there were about 50 bankers who specialised in leveraged finance. There's now probably more like 500. But they're being serviced by a smaller group of professionals."
Those City firms handling senior debt finance (the high yield element is still the preserve of US firms such as Cravath Swaine & Moore and Cahill Gordon & Reindel, to name but two) on the £100m-plus deals are the usual suspects - Allen & Overy, Clifford Chance, Lovells, Norton Rose and Shearman & Sterling.
"It is getting to be a worry for us now," admits a client at a well-known investment bank.
Yet at the same time, those bankers who would stick their necks out and go for a smaller-name firm are few and far between.
This conservatism - the need to see a familiar name on the document - has effectively stunted the entire market.
And so an impartial observer might cheer Simpson Thacher on.
Because if it manages to crack open this smallest of small markets, it may well be doing everyone a favour.
The top candidates
Stephen Gillespie, banking partner at Allen & Overy
Lively, outspoken and voluble. Gillespie made partner at Allen & Overy in 1995 and has built up a strong acquisition finance practice - much of it for Goldman Sachs - with a streak of projects to it. Recent deals include advising Salomon Smith Barney on Bosch Telecom, and Goldman Sachs on the leveraged acquisition by Morgan Grenfell Private Equity of Affichage Giraudy.
Mark Stewart, finance partner at Clifford Chance
Straightforward and down-to-earth, Stewart is the best known acquisition finance partner in the City by far, though more on public bids than leveraged buyouts, and is equally at home acting for borrower as well as lender. Relationship clients include Bankers Trust/Deutsche Bank, CSFB, Merrill Lynch and Chase.
Best of the rest
Michael Barron, corporate finance partner at Dickson Minto
Relatively unsung, but Barron is described by one client as 'a very good banking lawyer, but he has no back-up'. Given that Simpson Thacher will effectively be operating on a similar boutique level in terms of resources, Barron may have fewer difficulties adjusting.
Matthew Cottis, banking and finance partner at Lovells
Has a strong relationship with CSFB. Other recent deals include advising Deutsche Bank on the £230m debt finance of the acquisition of Pipetronix AG by PII Group. The sad death of John Penson last month leaves Cottis spearheading the Lovells charge and in the limelight for the first time. Much is expected.
David Ereira, finance partner at Freshfields
A strong choice, given that Ereira has built up a strong personal practice and is rated as a good all-rounder. Key client is Goldman Sachs.
Euan Gorrie, banking partner at Allen & Overy
More taciturn than his partner Stephen Gillespie, Gorrie is described as 'unflappable'. Has developed a strong relationship with Fuji Bank, through which he has acted on the financing of a number of Doughty Hanson deals. Fuji deals include the leveraged buyout of Target Express Group, where senior debt facilities totalled £103m.
Nigel Ward, banking partner at Ashurst Morris Crisp
Has handled plenty of borrower work servicing Ashursts' equity practice, but has been seen acting for the likes of Lehmans, Bankers Trust, Merrill Lynch and DLJ. An efficient reputation.
Philip Whale, banking partner at Norton Rose
A laid-back and well-liked Antipodean ('sensible and easy to deal with'), Whale has worked closely with Chase over the past few years on the £1.4bn debt financing of Zeneca. Other jobs include the £592m Blue Circle/Baxi deal. Has strong links to RBS.
Gideon Moore, banking partner at Linklaters & Alliance
Not one of the leading pack, but a potential bet. Trained at Clifford Chance, left for DLA and ended up at Linklaters a year or so ago. His current home at a top five firm makes him a contender. Has made some inroads into Chase in London.
Peter Kilner, finance partner at Clifford Chance
A younger partner at Clifford Chance, cerebral but engaging. Mentioned by a couple of clients, but not yet on the radar. Ruled out - moved too recently.
James Johnson, finance partner at Clifford Chance
Stephen Mostyn-Williams, banking partner at Shearman & Sterling
Impossible to prise out.
David Morley, banking partner at Allen & Overy
Mark Campbell, finance partner at Clifford Chance
Alan Inglis, finance partner at Clifford Chance
Stuart Popham, global head of banking at Clifford Chance
Tony Keal, banking partner at Allen & Overy