Just one day after TheLawyer.com reported (3 August) that Maurice Allen and Mike Goetz were leaving Freshfields Bruckhaus Derigner, a headhunter was already emailing senior City banking lawyers about a position that was available in a firm with a £1.44m average profit per equity partner (PEP) – the exact number that Freshfields posted this year.
It is unlikely that this is a real mandate. It looks very unlikely that Freshfields would really want to build a banking practice to rival Allen & Overy’s (A&O), Clifford Chance’s or Linklaters’; Freshfields insiders are now sniffing derisively at the thought of a highly leveraged transactional finance practice. What is more, it is highly unlikely that any banking lawyer would consider it a serious move.
Five years ago the firm brought in McKinsey to complete a report on the viability of building up banking. The private equity boom was beginning and A&O, Clifford Chance and Linklaters were all snapping up lucrative lender-side mandates. Freshfields even hired Chris Howard from Linklaters straight into its partnership.
But while Howard was immersed in restructuring work, the most high-profile banking lawyers were starting to depart. Both Brian Gray and David Ereira left for a resurgent Linklaters.
The opportunistic hire of Allen and Goetz from White & Case in March 2008 – proven business-builders but in no way biddable – was an expensive and declaratory move. At last, Freshfields was saying, it was going to tackle the banking market head-on. And the prime movers in hiring Allen and Goetz were Perry Noble, who is no longer at the firm, and chief executive Ted Burke, who knew Goetz well from New York. “Ted grabbed hold of that move,” says a source close to Freshfields.
After an initial honeymoon period it became clear that all was not well. Allen and Goetz were disappointed that they could not hire business-getting associates, who might have changed the cerebral culture of a department that for the most part was happy to receive internal instructions from the corporate group. Apart from tax-led finance work, Freshfields had – and still has – virtually no visibility among banks.
Goetz is understood to have got on well with Sundeep Kapila, one of the corporate partners on the Deutsche Bank account, but the Goldman Sachs lead partner is Ed Braham, who is now head of corporate and who has a correspondingly strong voice within the firm.
Given that Allen and Goetz were gunning for Goldman Sachs work, a close relationship with Braham was crucial. There is no evidence that such a relationship ever developed. “Freshfields was a bad choice for Maurice because I don’t think he could handle being just another partner,” says one of his former colleagues. “He’s not high up the food chain and the firm wasn’t following his lead. Hard for him to handle.”
The cultural mismatch was clear this year. Allen and Goetz tried to use business development tactics that had worked for them elsewhere – notably corporate entertaining. Such tactics are entirely normal in the banking market, but some corporate partners balked at the prospect of a box at Lord’s.
But transforming the banking team into one that won its own business rather than serving the network – something that Linklaters had achieved – was an impossible dream, mainly because it went against the dominant corporate culture at Freshfields.
The official line from Freshfields is that the recession has led to a change of strategy. “You have to look at it in the context of what’s happened in the past few months,” says finance head Alan Newton. “March 2008 was a very different world.”
However, when the pair were hired in spring 2008, six months before Lehman Brothers collapsed, the credit crunch had already hardened and Freshfields was acknowledging that it was in for the long haul. But now the management simply does not want to grow its practice. For Freshfields, banking will always equal commoditisation.
“We don’t feel [the banking group] has to be the size of our competitors’,” says Newton. “It’s unfortunate that they’re going, but we have a fantastic platform. That’s not going to change.”