Small is beautiful for Freshfields, but it isn’t enough to crack the US

The list of Freshfields’ referral firms makes for fascinating reading, says Julia Berris.

Small is beautiful for Freshfields, but it isn’t enough to crack the USFreshfields ;Bruckhaus Deringer’s New York presence is significantly smaller than those of its magic circle counterparts ­Clifford Chance and Linklaters.

With just 73 lawyers the firm’s office is virtually dwarfed by ­Clifford Chance’s lawyer count of 370 and Linklaters’ 160.

Small is beautiful, though, and the office has built a decent reputation in structured finance through office head Brian Rance and his relationship with Citibank.

That said, in the competitive and mature US legal market, size ­matters. Freshfields obviously knows this – its desire for a trans-atlantic merger is no secret and the firm has long been linked in the minds of some New York lawyers with Debevoise & Plimpton as a possible merger partner.

But with no merger on the cards, how does the firm ­handle work given its current small US presence?

One former Freshfields London partner says: “Partners from around the network would refer work for a New York aspect of ­documentation that a mid-level associate could do, and quite often they’d say they were just too busy and didn’t have enough people in the office.”

Freshfields openly admits that it operates a resource-constrained model in the US. Cautious growth may allow the firm to control its operations in the US more tightly than other magic circle firms, but it has forced Freshfields to turn to alternative counsel on various deals.

Sutherland Asbill & Brennan is often used for complex Employee Retirement Income Security Act work, as well as Washington DC firm Van Ness Feldman for a ­variety of regulatory work.

In asset finance, Freshfields calls on Vedder & Price for US aspects of asset finance work, while ­Covington & Burling and Irell & Mannella are frequently ­instructed on litigation matters.

The firm used both Covington and Irell for the US aspects of client Brunei Investment Agency’s (BIA) ongoing dispute with Prince Jefri Bolkiah of Brunei.
“This may not seem like the most efficient way to work, but it works well for us,” insists a ­Freshfields US partner.

The set-up may function well in that it allows Freshfields to get the work done, but the firm’s US practice still accounts for just 3 per cent of its £1.8bn global turnover.

“All things being equal, we’d be better off with a first-rate US ­practice, but we have to be careful about how we attempt to achieve that,” says chief executive Ted Burke. “As a firm we need to be sure about what we want out of our US practice. We want US capabilities that fit, both strategically and in terms of quality, with our ­international practices.”

In that respect the firm’s small New York corporate team is performing well, demonstrating that it can contribute to Freshfields’ international network.

This year New York partner Matthew Jacobson advised on French pharmaceutical group Ipsen’s $663m (£380.81m) acquisition of US corporate Tercica. While Jacobson led a Freshfields team on the US acquisition, the relationship is driven out of the firm’s Paris office via relationship partner Patrick Bonvarlet.

But although corporate has ­succeeded in being part of the firm’s global network, the grip that New York’s elite firms have on US clients is incredibly hard to break.

“Although the US is challenging for non-US firms because the ­traditional domestic firms have such a strong hold on the market, we believe our global client base provides us with an excellent ­platform for growth there,” says Burke.

Operating as it does under a resource-constrained model, Freshfields transfers resources to the US when the need arises. Last year The Lawyer reported (30 August) on dispute resolution partner Brian King and corporate partner ;Julian ;Pritchard ­transferring to New York from the firm’s Amsterdam and Tokyo offices respectively.

Yet while the firm’s entry into the US was seen as a major strategic push, in reality it has seen little in the way of tangible growth since.
For the time being the firm seems wedded to its resource-­constrained model, but does having to farm work out to a roster of US practices defeat the purpose of being there in the first place?

Gradual approach that reaped rewards for Ashurst

One firm to have adopted an entrepreneurial approach to the US is Ashurst. While magic circle firms have struggled to ­create successful
on-the-ground presences, Ashurst has attempted to leverage its client base and historical relationships with US firms to carve a niche in the lucrative and challenging US market.

The firm has shied away from launching a full-blown presence in the US, choosing instead to service the country via a representative office in New York. Under the leadership of corporate and commercial partner Duncan Stiles, Ashurst claims to have seen growth in revenues from its clients in the country.

Charged with coordinating firmwide US client contacts, Stiles makes regular visits to the US. Existing clients such as Motorola and Thomson Reuters have been crucial to the firm’s success there.

“I contact the partners and try to get a list of contacts that would be worth visiting in the US,” says Stiles. “These can be existing European clients with operations in the US or potential new clients.”

Stiles, who took over the US role from partner Giles Boothman last year, was well known for establishing Ashurst’s successful Madrid office, where he gained experience of selling Ashurst in a market where it was not well known.

In the US the strategy is having some success, with the firm working alongside a number of US firms on key global deals.

In 2006 the firm worked with Ropes & Gray on the US aspects of the formation of a Cinven fund.

Last year The Lawyer reported (22 June) on Ashurst and Schulte Roth & Zabel working together on Cerberus’s acquisition of software retailer Torex.

With the magic circle still struggling to make it big in the US, perhaps Ashurst’s more gradual approach has its merits.