As international practices in London perform strongly, UK firms face stiff challenge to retain top talent
US firms in London are set to cash in on their markedly improved financial results by throwing their weight behind a renewed push in the lateral recruitment market.
The increased purchasing power of overseas firms, together with better financial inducements and a deals market that continues to favour inbound work from the US, is likely to put yet more pressure on UK firms struggling to retain top talent.
Latham & Watkins partner Bill Voge confirmed that his firm is one of several whose London expansion plans have ratcheted up recently.
“We’re aggressively hiring in at least six or seven practice areas,” said Voge, a member of the firm’s executive committee. “I believe that we’ve had greater success [in attracting laterals] in the past two or three years than in the [previous] 10.”
Globally, 15 of the leading US firms with the best-established City presences are set to outperform their UK rivals.
Of The Lawyer’s 15, only three saw a decline in profit per equity partner (PEP) in 2010, while seven posted double-digit hikes. With the exception of a few outliers, including one City firm that expects a 30 per cent increase in profit, most UK firms anticipate PEP to rise by no more than 5 per cent when the 2010-11 figures emerge.
Among US firms, Kirkland & Ellis was the stand-out performer, upping its PEP by an estimated 23 per cent and smashing through the magic $3m (£1.8m) barrier in the process.
Kirkland provided a timely demonstration of its firepower last week when it entered the lateral market once again, scooping Shearman & Sterling high-yield finance partner Ward McKimm (TheLawyer.com, 13 April).
The hire follows those of competition partner Shaun Goodman from Howrey earlier this year and last year’s double swoop for Ashurst private equity partners Gavin Gordon and David Arnold.
One managing partner at a US firm commented: “I think there’s a threat, given the way US firms’ pay structures have been designed to pay according to ability and contribution.
“That makes it tough for domestic firms and could drive more evolution of partnership structures in
Despite a series of high-profile UK-to-US partner moves in the past 12 months – including Clifford Chance funds partner Jason Glover to Simpson Thacher & Bartlett and Freshfields Bruckhaus Deringer finance partner Presley Warner to Sullivan & Cromwell – the real aggression could be yet to come.
Mayer Brown, Milbank Tweed Hadley & McCloy and White & Case are all understood to have searches out in a number of areas, and all have the profit figures to make them attractive prospects. But it remains a tough market to recruit into.
One senior partner at a US firm said: “If compensation was the main criterion that top UK partners focused on we’d have seen a lot more movement a lot sooner. They could have moved for an astonishing amount more money.”
Another City managing partner at a US firm pointed out that although transactional practices could offer laterals far better remuneration packages, an eat-what-you-kill structure does not suit hiring in all areas.
“On the US way of paying partners, litigators are massively overpaid at UK firms,” he said, adding that partners only tend to move when they feel they have the support platform on which to build a profitable practice quickly.
“The competition is clustered in areas where there’s the ability to build a practice. That’s why you tend to get the more self-reliant lawyers who feel confident in their own practices.”