Shearman defends US figures as London outshines New York

Is the US firm pushing overseas offices at the expense of the home team? asks Caroline Butcher

Anthony Ward
Anthony Ward

Shearman & Sterling’s 2010 revenue figures show its London office outperforming its US parent practice in terms of turnover growth.

Although the firm’s regional office heads claim that it has ­experienced strong firmwide growth, sources close to the firm point to its lacklustre performance on US turf, with its European offices consistently outshining the US practice.

Shearman London managing partner Anthony Ward is dismissive of his office’s recent spike in income, despite the fact that a rise of 4.5 per cent, from $99.7m (£62.27m) in 2009 to $104.2m in 2010, allowed the office to break through the $100m turnover ­barrier for the first time.The finance lawyer is far keener to point out that Shearman as a whole is doing better than the global revenue figure, which fell by 8 per cent, from $801m to $737m, would suggest.

“I’d love to say the London ­revenue was fantastically significant, but to be honest I don’t think about it in those terms,” he says. “For me, the important thing for last year was the strength of all our practices. All areas performed strongly and we continue to be a beneficiary of the boom in the high financing area and leverage work. The $100m is just a nominal ­figure.”

Ward suggests that US accounting conventions, which cannot include income in the ­revenue totals until it is billed, collected and banked, means the ­disappointing US figures have distorted what would otherwise be a relatively healthy second half of the year.

“If you have one strong year and then in the next year the ­beginning’s a little weak, it can have a ­disproportionate effect on the ­figures,” he explains. “For us, between 2009 and 2010 we had a very strong end of the year, and then the first six months of 2010 were relatively weak from an M&A ­perspective, and so you have to catch up in terms of billing and collecting revenue.”

Ward says the tail end of 2010 saw the M&A market begin to recover and he insists that morale is buoyant.

“Generally around the firm ­people are feeling extremely ­positive,” he says. “The M&A ­market’s picked up significantly, the financing market continues to be strong and these are very important drivers for us.”

Ward points to high-yield as an area of pronounced growth for the firm, adding that Shearman’s involvement in a string of high-yield transactions – including advising on Lion Capital’s e1.6bn (£1.41bn) acquisition of French frozen food company Picard and its e300m offering of high-yield bonds – have boosted its fortunes in Europe.

“We also had a number of ­significant transactions on the M&A side,” he adds. “We advised on the acquisition of Cadbury by Kraft, and another standout ­transaction was the acquisition of Liverpool Football Club by New England Sports Ventures.”

While the firm’s corporate and leveraged finance practices have emerged as growth areas for ­London, Shearman’s recent hire of 17 lawyers, including five ­partners, for its Brussels office from collapsed firm Howrey has beefed up its antitrust capabilities across Europe.

Ward is also bullish about Shearman’s long-term presence in Abu Dhabi and key project finance work across the Gulf region.

“The Far East is also an ­important growth area for us,” he says. “The most significant recent development was adding a Hong Kong capability. From our ­perspective that’s been even more successful than we thought it would be.”

But when it comes to ­Shearman’s performance on home soil, sources outside the firm believe its US operations have been neglected in favour of ­boosting offices in Europe, the Middle East and Asia. Although the firm has focused on building its litigation team across the US, there is a perception that it is faltering on M&A.

One New York-based legal recruiter says the slump in US ­revenue paints a fairly accurate picture of the firm’s current ­position.

“They’ve lost a lot of people and it’s a firm that’s been in transition for a number of years,” she says. “There are a lot of people ­questioning the leadership, and that’s caused a lot of concern among partners.

“In order to be responsive to international client business Shearman’s been right in trying to shore up ­London and Europe, but instead of doing it in addition to their US business they’ve done it
in lieu of US ­business.

“Even in London they need stronger capital and M&A ­markets. M&A used to be a strength of the firm, but now they’re losing ground.

“They’ve had a lot of people go, and at the moment they’re lacking star players in the US. I also think they’re moving very slowly to address these issues. They need to do more.”

Over the past few years the firm has been hit by the departures of top corporate partners such as London-based Peter King, who joined US rival Weil Gotshal & Manges, and Germany-based Rolf Koerfer, who defected to Allen & Overy before moving to German independent Oppenhoff & ­Partner. In the US private equity ­partner John Herbert left for King & Spalding.

Despite this, a former lawyer from Shearman’s London office points to the positive impact that American M&A partner Creighton Condon has made since ­relocating to the UK in 2009 to lead the European practice. Since making the move he has been active in building links between the firm’s European operations and its US and London businesses.

But the former lawyer does agree that the firm’s US offices are lagging behind the rest of its ­global footprint.

“The US M&A practice isn’t as strong,” he says. “While there are some very good people there, they’re not sufficiently numerous for them to generate a significant amount of transatlantic work. And the firm has no position ­whatsoever in the private equity market.

“A lot of stars have aligned for London, whereas some other parts of the firm aren’t ­performing as well. Its international practice is better than its US practice, and yet its US practice is bigger. Offices like London and Abu Dhabi are performing very well, but the home ship’s still ­trying to find its way.”

But Condon rejects criticisms of the US operations, stressing that the firm is investing in its ­corporate practice and pointing out that it recently added a three-partner M&A team from O’Melveny & Myers in San Francisco.

“We’re doing very well in the US,” he states. “People are making investments in the US as well as elsewhere.

“Globally M&A’s taken a ­significant drop as a market over the past few years and we’re not immune from that. So a lot of the M&A work we’ve done over the past few years has been restructuring work, but things are now getting back to normal. M&A’s ­certainly a focus of ours and we’re investing.”