Smaller firms challenge on international projects
International project finance, for many years a market dominated by the largest US and magic circle firms, is showing signs of offering up opportunities to mid-market firms and even smaller rivals.
According to one leading projects specialist, the decreasing appetite among investment banks for lower-margin project finance mandates and the increasing influence of contractors in deals is allowing in a new breed of legal adviser. The coming years may prove that they are more nimble and profitable (relative to their other practice groups) than their global powerhouse counterparts.
The exit of former Cadwalader Wickersham & Taft projects head Paul Biggs (The Lawyer, 27 February) is illustrative of this trend. Biggs is to launch his own project finance boutique, known as Trinity International, with other members of Cadwalader’s now-dissolved projects group. Biggs tells The Lawyer that he and his team have been “inundated” with offers to join other firms, but decided to turn them down in the belief that they could run a successful independent firm. Trinity will focus on project finance and corporate work in emerging markets, with a special focus on Africa – a long-time speciality of Biggs’s.
Although Biggs’s venture may be the most radical, it is not alone in targeting international project deals in a new way. Several mid-market outfits are looking to take on the global giants in the international projects arena, among them Berwin Leighton Paisner (BLP). The firm kickstarted its international projects ambitions late last year with the hire of Dewey Ballantine partner Jonathan Simpson. Simpson’s arrival looks like heralding a period of dramatic growth in BLP’s projects team, with some 17 partners in 18 months believed to be pencilled in for a BLP business card. When The Lawyer caught up with Simpson, he was about to board a plane for Australia on a raiding mission to recruit upwards of 20 assistants. That is what you call a project.
Results increase demand for corporate lawyers
The Lawyer’s exclusive global report on the top 20 US firms’ 2005 revenue and profit figures (6 March) not only highlighted the current strength of the top firms’ financial positions but also suggested that the buoyancy in the legal recruitment market is only likely to increase.
The majority of firms reported strong revenue and profit growth, driven primarily by a return to big-ticket M&A. Consequently, the hunger among the leading firms for corporate lawyers has rarely been greater.
As Sloane Poulton, a recruitment consultant at Taylor Root, puts it: “The market is very strong at the moment. There are numerous opportunities for corporate partners with a following in established practices and now some start-ups, particularly in M&A and private equity, and there is a growing demand in AIM.”
Having ‘a following’, as Poulton puts it, is the key for the US firms in London that are in growth mode. For the leading firms, that is likely to translate into a portable book of business worth in excess of $5m (£2.9m). And the same firms are more than willing to stump up to get their lawyer. Guaranteed incomes, in a variety of forms, are currently being offered in London well in excess of $1m (£572,000) a year. One US firm, listed in The Lawyer’s top 20, is currently offering a guarantee in excess of $2m (£1.1m). However, the return of guarantees met with a degree of scepticism among several of London’s leading recruitment specialists. As Glass Consultancy’s Jonathan Glass says: “Apart from certain rare circumstances, if you’re good enough to justify a guarantee then you shouldn’t need one.”
The current health of the leading US firms was on display in the figures published by The Lawyer, with seven firms breaking the billion- dollar barrier.
Skadden Arps Slate Meagher & Flom, the number one-placed firm, went further, breaking through the $1.5bn (£858m) threshold for the first time. Its revenue hit $1.58bn (£903.7m) in 2005, up from $1.44bn (£823.7m) in 2004, while average profit per equity partner (PEP) rose by 6.5 per cent to $1.9m (£1.1m).
Greenberg Traurig posted the most impressive hike in revenue with turnover up 21 per cent to $860m (£491.9m).
O’Melveny & Myers also confirmed that it was in growth mode during 2005 with a 16 per cent revenue rise to $808m (£462.2m), while PEP rose by a staggering 23 per cent to $1.6m (£920,000). This was the highest figure of growth in profit within the top 20 during 2005.
Access to the German market helped Kirkland & Ellis, which launched in Munich at the start of 2005, to a 12 per cent rise in revenue to $935m (£534.8m). The firm also hit the $2m (£1.1m) mark for PEP for the first time, with an increase of 10 per cent to $2.2m (£1.3m).
Sullivan & Cromwell and Simpson Thacher were the only other firms within the top 20 ranked by revenue to offer PEP above $2m, with $2.6m (£1.5m) and $2.4m (£1.4m) respectively.
Weil Gotshal & Manges and White & Case joined the elite group of firms with gross revenues above the $1bn (£572m) mark for the first time, although only by the skin of their teeth after they reported $1bn and $1.05bn (£601m) respectively.
Kelley Drye and Collier join forces
February saw a significant move in the New York legal market when Kelley Drye & Warren merged with Washington DC-based Collier Shannon Scott.
The deal increased Kelley Drye’s DC office manpower from around 40 lawyers to approximately 125, boosting significantly the firm’s regulatory expertise in the process.
Kelley Drye has 300 lawyers spread across six offices in the US and three international presences, including affiliate offices in Jakarta and Mumbai. Collier has 82 lawyers, all of whom are based in its single office in DC.
Collier chairman Paul Rosenthal has become managing partner of the new firm’s DC office and two of Collier’s lawyers have joined its national management board.
Winston shrugs off exits in expansion strategy
Another US firm on the expansion trail last month, or at least laying claim to expansion as a strategy, was Winston & Strawn.
The Chicago-based firm has suffered a string of departures in recent weeks, so its ambition of growing domestically (The Lawyer, 13 February) is one tinged with irony.
Recent exits include the former head of its project practice Chris McIsaac, who joined Clifford Chance as co-head of its energy and projects group in Washington DC, and projects partner Lori Bean, who also joined Clifford Chance.
The US firm also lost banking and finance rainmaker and former New York office managing partner Robert Bostrom to mortgage lender Freddie Mac, where he becomes its new executive vice-president and general counsel.
Despite the exits, in February Winston chairman James Thompson told The Lawyer that the firm was looking to grow its New York and California presences, as well as researching new opportunities in Asia and Europe. The expansion, which Thompson said included London, could come “by way of merger or by way of hiring lateral partners”.
Thompson said the expansion strategy would be a key focus of Winston’s new managing partner, tax partner Thomas Fitzgerald, who takes over in August from incumbent James Neis, who spent 13 years in the role.