Düsseldorf was long regarded by international firms coming into Germany as the second most important office location in the federal German market. But it was a very bad second. Nobody doubted they had to be in Frankfurt, and if time, resources and geographical wit allowed, a London managing partner hoped that they might be able to persuade some poor sod to decamp to the chic but soulless Rhineland state capital. At least it was only 20 miles from the bright lights of Cologne.
The peripatetics were rescued from a residential fate worse than the local Düsseldorf Altbier – sickly-sweet, drably coloured and enjoyed only by the locals – by the rocketing venture capital market in Munich. As many clients (especially the larger private equity houses) are all too ready to admit, however, the city itself is primarily attractive for other reasons: skiing, good climate, Hausmannesque boulevards and the quart-sized beer glasses filled with a frothier, more lively brew. Lawyers needed no persuading either. Baker & McKenzie made the first significant move, picking some laterals from small Munich offices, but beefing it up with a sizeable group from Frankfurt. The office ended up dominating the local venture capital scene along with homegrown Haarmann Hemmelrath & Partner. Since then, Bruckhaus opened with a bang last year. Shearman & Sterling, Gleiss Lutz and Brobeck Phleger & Harrison have made it clear that it intends to follow suit, and SJ Berwin announced last month that it has taken a team from Baker & McKenzie itself.
However, the development of the Munich market is highly significant, not so much for the manner in which it was able to import lawyers, but rather for the fact that it had to. Munich has a strong tradition in Mittelstand advice, but the major corporates (Siemens, Allianz, Munich Re) look for big-ticket advice elsewhere, drawing in lawyers from outside. Other German markets such as Hamburg, Stuttgart and Düsseldorf have proved to be far less penetrable. This has led to an important shift in the German market over the past year. Until recently, Düsseldorf corporate lawyers had been dismissed as a parochial bunch, especially the core breed of rocket scientist stock-corporation lawyers. It was Frankfurt that the sexy M&A rainmakers chose, flitting between Manhattan and their brand new copycat skyscrapers back in Germany.
The explosion of the German capital markets, the huge capital inflows into the country post-unification, and now the slow breakup of the intricate cross-holdings of the huge publicly-quoted concerns – commonly referred to as Deutschland AG – has changed that. When private equity funds or aggressive corporates come in, they also need stock corporation lawyers, and there is a concentration of them in Düsseldorf, the Heimat of German heavy industry.
Goldman Sachs, KKR and Hicks Muse Tate & Furst have entered the market with a bang over the past year, and each of them have sought the expertise away from Frankfurt. The reaction of the international firms has been clear: set up in Düsseldorf. Not for the direct access to blue-chip German clients – they are in good hands – but for the lawyers. Few corporate lawyers in Düsseldorf are prepared to move to Frankfurt, as the high-spending US firms are finding to their disappointment. They choose instead to remain on the Rhine, surrounded by likeminded peers when in the office, and just as quickly scoot to the desks of transaction managers in London or New York if needs must.
Law firms might then go to Munich for venture capital or new economy clients and to Berlin for access to government, and of course they blindly follow everyone else to Frankfurt. But nobody should be surprised when the more far-sighted law firms start popping up in other places. Shearman & Sterling is already in Mannheim, maybe Latham & Watkins or Ashurst Morris Crisp will open in Düsseldorf – and who will be in Hamburg?
Aled Griffiths is editor of German law magazine Juve.