Cravath Swaine & Moore
How much longer can Cravath ignore China?
Chances are, if you’re reading this on the way home in London, the regular Monday lunchtime meeting of Cravath Swaine & Moore’s entire partnership will be just about to start in New York.
It’s a tradition that stretches back to the 1920s. And it goes to the heart of what makes Cravath tick. It’s not for everyone, but for Cravath it seems to work.
“The way we govern and compensate ourselves, that we’re all equity partners and genuinely one partnership, and the fact that we’re a true lockstep firm is all of enormous value to our clients. It’s critical,” says Cravath’s presiding partner Evan Chesler.
He continues: “The traditional Monday meeting is the most tangible and symbolic indicator of Cravath’s partnership cohesion and its continued commitment to a genuine lockstep culture.
“You have two choices in a law firm: either you have a true partnership or you shape the firm along the lines of a corporation. If it’s the latter you have to become hierarchical. The effect can be that partners lose a sense of ownership of their business and interest in a collaborative partnership.”
This is, of course, a philosophical argument that’s at least as old as the modern law firm. But for firms such as Cravath, which are wrestling with the effects of a globalising legal market as much as any more ‘corporate’ law firm, arguably the pressure is even greater.
Cravath is greatly helped in its efforts to remain one partnership by the fact that it operates in only two locations, New York and London. How long it can remain so geographically small in today’s legal market is an issue with which Chesler is all too familiar.
“We certainly think about China, but I’m not persuaded the case can be made for Cravath to go back,” argues Chesler. Cravath previously had an office in Hong Kong, but closed it in 2003 after eight years. Now, the advance of technology, coupled with Cravath’s rare partnership model, is apparently weighing against the firm making a return trip to the Far East.
“We very rarely take laterals, so right out of the gate you’re facing a different issue at Cravath than many other firms,” adds Chesler. “Our issue is, is it worth the lost opportunity cost of sending a Cravath partner who is very busy in New York, plus their family, to start up a practice in Hong Kong or China?”The convergence of the global market and the advance of technology may affect that decision. It may make it less advantageous for us to be there.”
Cravath certainly hasn’t appeared to have suffered greatly as a result of its disappearance from China four years ago. It continues to act for multinationals with business in the country (see for example its representation of IBM on 2005’s $1.25bn (£686.81m) sale of its personal computing division to Lenovo), while its reputation regularly attracts Asian clients to its London or New York partners.
But how long it can continue to do this without a physical presence in China as its economy gathers serious momentum is an issue to which Chesler is currently giving serious thought. The radical move of Wachtell Lipton Rosen & Katz to start exploring opportunities in London (The Lawyer, 22 October) may help focus that thinking.
In the meantime, next Monday (26 November) at 1pm in New York Cravath’s partners will troop upstairs to the main conference room as usual, to say “hi”, check financials and eat lunch. It’s old-fashioned, but for now it works.
Allen & Overy
A&O digs its heels into New York marketAs reported recently (www.thelawyer. com, 2 November), Allen & Overy (A&O) posted a 16 per cent revenue rise in its half-year results this month. The firm’s 170-lawyer New York office is officially keeping shtoom about what its contribution to the six-month’s £456m is, but it is likely that it is better than last year’s.
According to A&O New York M&A head Eric Shube, over the past few years the firm has “really got a tail wind”.
Still, no one would call A&O’s rise to prominence in New York ‘meteoric’. Its growth in the city, although steady, is arguably too slow. As one insider puts it: “Between 2003 and 2007 we only grew by around 70 lawyers, adding half-a-dozen laterals and a bunch of younger associates each year. It’s a very slow and painful way to grow a business.”
But at least it appears to be gaining some, shall we say, traction. A&O’s role in both London and New York on one of the highest-profile deals of the year – the $80bn (£38.63bn) MLEC rescue fund for the structured investment vehicle market – is emblematic of how the firm’s US practice has made headway over the past few years.
Plus its success in securing top-tier panel positions was illustrated perfectly in last year’s reappointment to General Electric’s (GE) slimmed-down M&A panel, on which the firm retained its place after the group was cut to just six firms (A&O’s US team was one of only two New York-based US operations to make the cut).
The strength of the firm’s GE relationship was shown recently by its representation of the company on a brace of deals, the $3.8bn (£1.83bn) sale of GE Advanced Materials to Apollo and its $1.2bn (£579.39m) acquisition of IDX Systems.
But, of course, this is not enough. As the insider admits, if a sensible merger partner were to appear that would “get us more quickly from A to B”, the firm would go down that route.
And he’s not talking about bolt-ons. “There are plenty of interesting options out there that aren’t going to be the end game,” he says. “But if you’re going to go through the pain of doing a merger, you want it to be the end game.”
Chadbourne-WFW merger ends with a whimper
So the merger of Chadbourne & Parke and Watson Farley & Williams (WFW) is off. Is anybody surprised?Once the initial shock of the news passed last Wednesday (14 November), when the two firms announced that the merger talks had cratered, then probably not.
The discussions had been trundling on for a very, very long time. With most mergers, if you haven’t reached the stage of having a partner vote within three to four months then it’s probably not going to happen.
And talking of partners, it appears that even at the end of a near year-long process, still only a small amount of partners on both sides had the slightest clue as to what was going on.
WFW’s Michael Greville (right) and Chadbourne’s Charles O’Neill, the two firms’ respective managing partners, led from the front, but to all accounts without much of a team.
So put yourself in the position of an equity partner excluded from the talks. The phone is ringing off the hook with headhunters because your firm’s in play, but you don’t know enough about the deal to say with confidence what your options are: hardly conducive to a happy environment.
The contrast with the story above on Cravath could not be sharper.
Bakers’ core strategy for Big Apple
Is there no end to the litany of firms chasing ‘significant’ growth in New York? The latest culprit? Baker & McKenzie.
Last month Bakers held its annual partnership conference in London, a recognition of the fact that the city is now home to the super-global firm’s largest office.
On 13 November members of the firm’s Manhattan management, Clyde ‘Skip’ Rankin and Charles ‘Chuck’ Niemeth, told me that next year’s annual conference will be in New York.
“Yes, it’s symbolic,” Chuck told me. “It shows that the principal focus of the firm is now on New York.”
New York has never been a major outpost for Bakers, a firm originally founded and headquartered in Chicago: three years ago it only had around 50 lawyers in Manhattan.
Last year’s Coudert joiners also provided a generous helping of corporate lawyers to Bakers’ formerly weak New York offering in that area. Rankin and Niemeth say corporate will be the engine that drives Bakers’ future growth in the city.
Posted: 14 November 2007
Cads is all hired up
Any Cadwalader Wickersham & Taft associates out there can rest easy. The US firm known for having one of the largest structured finance practices in the country is not looking to lay off anybody. Not now, not later.
That, at least, is the story from management committee member and litigation chairman Greg Markel.
Last Friday (9 October), as rumours of layoffs continued to reverberate around Manhattan, he maintained that Cadwalader had made no redundancies as a result of the collapsed credit markets and had no plans for any either. In fact, according to Markel, not only is Cads not firing, it’s hiring.
So, here’s another ‘fact’ for you: there haven’t been any layoffs at Cads and there aren’t going to be any – Markel says so.
“We haven’t had any layoffs and we don’t have any plans for layoffs.”
You heard it here first.
Posted: 12 November 2007
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