Clifford Chance’s US practice has taken one hell of a beating in recent months. During the past year the New York office in particular has been hit with multiple partner defections from its litigation group and layoffs that have reduced partner and associate numbers drastically.
It once looked like the land of opportunity for the magic circle firm, but in recent months the US has been a strain on Clifford Chance and doubts over the practice’s survival well and truly remain.
But amid the doom and gloom came a beacon of hope last week. The firm’s New York M&A practice scored a lead role on one of the few mega M&A deals the US market has seen since the collapse of Lehman Brothers – Kraft Food’s $16.7bn ($10.1bn) bid for UK confectionary group Cadbury.
The transatlantic deal is being led by New York partner Sarah Jones along with London partners Guy Norman and Robert Crothers.
The mandate is a glimmer of hope both for the suffering M&A market and for Clifford Chance’s troubled US practice.
For some time the Manhattan market has viewed Clifford Chance’s corporate capabilities as inferior to the New York elite’s. Could Kraft’s hostile bid for Cadbury give it a chance of changing that perception? The consensus is that it still might take more than one good instruction.
“You simply don’t see them on deals,” claims one Manhattan-based partner. “They don’t have the right relationships with a local US client base. It’s as simple as that.”
Clifford Chance’s New York management would obviously disagree and claim that, frankly, any rival is likely to say that. The firm’s co-head of the US M&A practice Brian Hoffmann is adamant that Clifford Chance is succeeding in building a local M&A and corporate practice.
“Yes, working on deals that come in from the network is a significant part of what we do,” admits Hoffmann. “But a large bulk of our M&A work is generated locally and we provide a lot of work to the rest of the network.”
Local sniping aside, Kraft’s bid is potentially a fabulous example. Helped by the presence in New York of Kraft’s core relationship partner Jones, the deal looks promising for Clifford Chance’s transatlantic offices.
But the firm’s upturn in fortune is not based on only one deal. Clifford Chance has been creative during the downturn. While pure M&A has been thin on the ground, the firm has branched out into more unusual areas.
Hoffmann and corporate finance partner Jay Bernstein have advised several special purpose acquisition companies (Spacs) on their conversions to real estate investment trust (Reit) status
In June the partner duo advised Minneapolis-based Pine River Capital Management on its conversion to Reit status.
Deals such as this show that Clifford Chance has the appetite for building a local US client base. But Manhattan’s legal community remains unconvinced.
“The thinking in New York is that they’re Nowheresville, they’re not considered to be a great firm,” says one New York-based legal recruiter. “They’re not doing well financially, they’ve been cutting and losing people and the feeling on this side of the ocean is that London couldn’t care less about New York.”
But Hoffmann does not see Clifford Chance US as dedicated to serving its UK headquarters. The firm says it has 10 M&A partners in New York, although the total number of lawyers in the corporate group is down from 70 to 40 following exits and layoffs.
Clifford Chance has made several rounds of layoffs in the US. The first came in October last year when 20 associates were cut from the litigation group; then in March this year the firm cut 24 associates from the transactional practice groups.
A string of partner departures has left Clifford Chance even thinner on the ground. In December last year TheLawyer.com reported (2 December) that litigation partner trio John Carroll, Warren Feldman and David Meister defected to Skadden Arps Slate Meagher & Flom.
In M&A the firm was hit by the departure of partner Karl Roessner, who went in-house to online trading platform E*Trade in May this year.
Hoffmann chooses a peculiarly personal way of illustrating that a slimmed-down firm is not necessarily a bad thing.
“Last year I was 215lb and this year I’m 155lb,” says Hoffmann. “I view the developments in our M&A team in the same way – we’re now in fighting form.”
In May the magic circle firm embarked on a global size-and-shape restructuring of its partnership in a bid to keep profit high and reshape the practice during the financial crisis. Like other offices in the network, New York suffered both a partner and associate reduction.
Although the firm will not give exact details of partner losses, Clifford Chance insists that its 10-partner M&A team in New York is thriving. Rivals, however, question that number.
“I can’t think of 10,” says a partner who left Clifford Chance New York recently. “They could possibly be grouping in other parts of the transactional team, but I question that they have 10 dedicated M&A partners based in New York.”
The firm’s PR officer would not comment when asked to name exactly who the 10 M&A partners are.
What is certain is that it has not been an easy road for Clifford Chance’s US M&A group. Global restructurings aside, the firm is still viewed as weak by most rivals and market commentators in the US.
“Ask any M&A lawyer in New York,” says one US partner. “These guys aren’t seen on deals. It was always going to be difficult for any UK firm to steal clients away from US firms. I can’t see how Clifford Chance is going to change that.”
The Kraft deal is certainly a boost for Clifford Chance. Although rival bidders are expected to muscle in on the deal, Kraft has nevertheless given Clifford Chance a place on a high-profile takeover.
But while the firm sees its M&A practice as fit and in good shape for when the markets recover, the majority of New York’s legal community is not so confident.
“London would be happy for it to be a small beachhead,” says a New York recruiter. “The reality may be different, but that’s the perception.”