Texas energy giant’s transactional team has been called ’dead in the water’, reports Andrew Pugh
Half of the London-based transactional team at Texan energy specialist Fulbright & Jaworski has left in the space of just three months.
One partner and six associates have resigned from the London office since August, leaving the team with only four partners and two associates.
The exits have led to comments in the City that Fulbright’s London transactional practice is ’dead in the water’.
The most high-profile departure is partner Christopher Clement-Davies, who arrived at the firm from Texan rival Vinson & Elkins in 2006. He was brought on board to develop the firm’s transactional and project finance practice. It is not known whether he has joined another firm.
The six associates that have left all joined the firm around three years ago, before the financial crisis hit and when Fulbright was in the middle of a major recruitment drive in the City.
The US firm opened its City base in 1972 but only began hiring UK-qualified lawyers in 2004, bringing in the likes of current London managing partner Lista Cannon from Richards Butler, litigation partner Chris Warren-Smith from Barlow Lyde & Gilbert and Freshfields Bruckhaus Deringer corporate partner Andrew Hart, who now heads the depleted transactional team.
The six associates were brought in from leading City firms including Allen & Overy, Ashurst, Clifford Chance and Slaughter and May, but have since left for rivals Baker Botts, DLA Piper and Shearman & Sterling.
One former associate highlights the reason for the exits. The lawyer claims they were promised “big salaries and big cases”. Instead, their pay was frozen and some were billing as little as three hours a month.
“We were all attracted by the firm’s status as the go-to firm for energy matters,” says the source. “We were promised they would be growing in London and that this would be a team that would make its mark in the City.”
So where did it go wrong? The answer seems simple: after the economic crash there wasn’t enough work to go round.
“There were some months when I was billing three hours a month and some when I was billing nothing at all,” adds the source. “There were weeks of doing nothing – it was soul-destroying.
“By the end I was looking at the partners and wondering who was going to bring the work in. We stuck it out but they just weren’t doing anything different to pull in the work, and they didn’t have much of a following.”
The firm, which last year saw firmwide revenue drop 8 per cent to $642.3m (£410.0m), now has 21 lawyers in London including 10 partners, 10 associates and one special consultant. The majority – five partners and seven associates – work in the litigation team.
The remaining transactional partners are Hart, Susan Farmer, Jeremy Sheldon and David Moroney. One City-based partner at a US rival claims that, while Clement-Davies’ departure might not be a huge blow, the partner-to-associate ratio should be a serious concern.
“US firms come over and start building up but they aren’t discerning enough,” the partner claims. “Then it’s a bit like being at university; you spend the first week trying to make friends and the next three years trying to get rid of them.
“The problem for them now is that having four partners and two associates isn’t a good balance. At the high end of the market you need a leverage of around 3:1; a leverage of 1:2 means they could be dead in the water.”
Others point to the firm’s lack of depth in the Middle East where it is a relative newcomer to the market. In 2005 Fulbright established an association in Dubai with Al-Mehairi Legal Consultants and in Ryadh with Kadasa Law Firm. It now has 23 lawyers in the region, including 11 partners.
Compare that with Latham & Watkins, which has four offices and more than 40 lawyers in the Middle East.
“Before the credit crunch there was a big demand for energy infrastructure projects and there was a demand for firms in the Middle East,” says a senior partner at one of Fulbright’s energy rivals. “After the credit crunch you still had a lot of firms in the region and not enough work to go around. To be successful you need to be strong on the ground in the Middle East and London; very few firms are able to offer that.”
Transactional team head Hart, however, remains defiant.
“The associates have left for different reasons, including a number relocating to other markets or changing careers,” he claims. “We’re continuing to recruit replacements. Our London team is a key strategic focus of our global energy and projects practice, which draws on lawyers across the world to staff transactions.”
Hart denies that associate salaries had been frozen since 2008 and says pay went up in 2009. The firm did freeze salaries in 2010, although these will soon be reviewed.
“We’ve recently hired two associates for the group, and are continuing to look for other quality associates to replenish the ranks,” adds Hart. “Over time, as the market for transactional work continues to recover, our strategy involves continuing our investment in expansion.”
Responding to claims about the lack of work in London, he points to the office’s work advising two financial institutions on a debt restructuring in Pakistan, a new international oil company client’s involvement in Iraq’s second oil licensing round and a new European client’s greenfield PPP project in the US.
“Significantly, we’re now leading and executing these sorts of transactions from London, whereas previously we may have provided an English law overview, with the deals being run from elsewhere,” says Hart. “Like all transactional practices operating in the London market, our business levels were affected by the economic downturn.
“This resulted in some of our associates being less utilised than they would have liked. However, unlike many transactional practices, we did not instigate any redundancies amongst our associates. We stood by our people.”
Whether Hart’s people stand by him is another thing.