If you were casting an opera about the German market (if there can be a libretto about Jerry Springer, why not an aria on leverage?), which figure would be your inspiration for Shearman? Given its propensity to ravage competitors for laterals, Don Giovanni might come to mind, but in the end you would have to plump for Siegfried, the most ur-Deutsch of heroes.
Despite the talk of takeovers of German law firms by Anglo-Saxons, it is remarkable that the most Teutonic firm at the top of the market is American. Shearman walks and talks like a conservative German firm, not like some brash New York parvenu which has touched down to plunder the transactional market. Slowly but surely, it has risen through the ranks of the corporate practices to become the most serious challenger to Freshfields Bruckhaus Deringer and Hengeler, shunning in-your-face PR and aggressive marketing (a reception for the newly-opened Munich office, for example, was seen as far too gauche).
The partners have just about managed to keep up a 1:2 leverage and publicly eschew too strong an emphasis on close contacts to investment banks, preferring to do it the classic German way – installing hotlines to the board of the conglomerates and owner-occupiers in the Mittelstand.
Shearman in Germany is a corporate machine – it is already where the London office would love to be. It has truly heavy-duty practices in Düsseldorf, Germany’s industrial heartland (highlights of the past year being a string of deals for E.ON, as well as advising Berlin publisher Axel Springer on its Kirch put-option) and an exquisite stock-corporation law team in Mannheim.
It was the latter that was the major breakthrough for Shearman. The team was the larger part of the corporate practice of Schilling Zutt & Anschütz, the jewel of the market in the late 1990s. After working together on the DaimlerChrysler merger, the wily Georg Thoma (who had headed the German offices of Shearman since the early 1990s) managed overnight to turn his firm into a heavyweight player. Despite always being praised for transactional skills, Shearman was taken less seriously by competitors when it came to pure legal acumen. The arrival of the Schilling Zutt lawyers changed all that.
The signs were there for all to see. Only a few months before, Rolf Koerfer, one of the leading M&A lawyers at Oppenhoff & Rädler, defected. Koerfer had led the negotiations with (you guessed it) Linklaters and had fallen out over the London firm’s plans for Germany. Koerfer has since become co-head of M&A worldwide at Shearman.
It is worth noting that, before the turn of the century, Shearman was compared to Cleary Gottlieb Steen & Hamilton in Germany in that, not unlike the image of its London office, it was respected and considered high-quality, albeit small. Since 2000, Shearman has grown to more than 120, while Cleary has pretty much stood still. It has taken on a constant stream of laterals – Roger Kiem came from White & Case Feddersen in Frankfurt, for example, and brought with him strong contacts to banks for corporate work – but Shearman has for the most part not needed further M&A strength.
Instead Shearman has built up intellectual property (IP), litigation and most notably tax, initially through Hanno Berger and Wolfgang Tischbirek, who came from Pünder in 1999. The real coup, however, was poaching Gottfried Breuninger, one of Germany’s up-and-coming tax stars from Cleary, in 2001, giving it not only a solid base for a Munich office, but a competitive high-end tax practice.
The move into corporate-driven full-service is a far cry from only a few years ago, when Shearman was best known for its capital markets work in Frankfurt. It was, together with Bruckhaus (as was), the firm to have ridden the Neuer Markt boom, as well as (with Hengeler) having profited most from dual-SEC listings and on Nasdaq. It was even probably the leading firm for international capital markets in Austria and Switzerland (lead partner Stephan Hutter is Austrian), having advised on numerous equity deals on the other side of the Alps.
The crash in the markets changed all that and, in the eyes of most observers, left the Frankfurt office high and dry. Hence the beefing up of classic corporate work and the move away from reliance on the approbation of investment banks. This is a highly significant move, given how Shearman made its first mark in Germany – exploiting the close links to Goldman Sachs for privatisation work and then the DaimlerChrysler deal. In-spired by the contacts of the Schilling Zutt team and partners such as Koerfer, lawyers at the firm speak openly of retaking the ground lost to investment bankers over the years. It is lawyers who should have the ear of the chief executive officer; it is they who ought to be driving the deal.
More importantly, lawyers outside Germany (notably in the New York mothership) look admiringly at the German business model and its profitability, which reputedly lies highly favourably within the Shearman network (JuVe and The Lawyer cited the revenue per equity partner in 2002 as e2m (£1.36m), the second highest in the German market). After the catastrophic results in the US last year, can the German model of premium work and low leverage turn Shearman around?
Given the behemoth that the firm has become, it would truly be a dragon-slaying deed of heroic Wagnerian proportions. But from a German perspective, the hire of King begins to look spookily familiar. If Shearman is Siegfried, then there is as yet no hint of a Götterdämmerung.