Finance: The finance kings

For UK and US firms, becoming transatlantic powerhouses is crucial to the development and success of their global networks. With firms such as White & Case using its London – New York axis to build and support its many global offices, it is clear that being successful in both financial centres is critical.

For the UK magic circle, a focus on finance rather than corporate is regarded by some as the key to success.

Clifford Chance has an undeniable strength in banking and finance. And with global investment banking clients such as Citi and Barclays on its books, the firm is more likely to break into the US market with this expertise rather than relying on corporate.

“It will open more doors for them,” says one US partner. “The issue is the complexity of US corporate work. These guys are always going to opt for the lawyer they’re positive can deal with this, not the new kid on the block.”

While some US lawyers see the magic circle as the new kids on the block, the firms’ international prowess has certainly boosted their New York presence.

Last year Linklaters advised Royal Bank of Scotland (RBS) on its proposed acquisition of ABN Amro. This high-profile M&A deal certainly paves the way for the firm to strengthen its ties with RBS in the US. After launching in New York officially in 2005, the firm’s office now houses 150 lawyers and 30 partners.

“In terms of client relationships there’s a definite difference between European and US-headquartered banks and which firms they instruct,” says a magic circle firm partner.

A long way to go
Clifford Chance’s relationship with Barclays is stronger in the US than its relationship with strong global client Citi. As one US partner puts it: “These banks already have relationships with US firms – they aren’t automatically going to use their UK advisers here.”

For the magic circle to replicate its excellent UK brands in the US, the firms have to work even harder on their UK institutional relationships.

“For a firm to be successful in the current market it has to target and win global mandates,” says Latham & Watkins co-chair of the global banking and finance practice Marc Hanrahan. “We realised this some years ago and have focused very much on building strong teams in London and New York so that we’re equipped to advise on these global deals.”

Latham’s pre-eminence in high-yield has given the firm an outstanding reputation in the US. With 38 lawyers and nine partners in banking and finance in the UK, its reputation has translated extremely well – up to a point.

While some US firms have failed to make an impact in the UK, Latham’s London finance team has quietly secured mandates with the likes of Credit Suisse, Deutsche Bank and Goldman Sachs – although it is arguably much less visible than the likes of Kirkland & Ellis and White & Case on leveraged buyout work, for example.

Latham London partner James Chesterman is currently leading the firm advising underwriting banks on the restructuring of airbag manufacturer BST. The transaction includes US, German and UK elements. The Latham team on this deal consists of lawyers in the UK and US.

“Initially we didn’t know which country the deal would be run from, so it was important for us to have capabilities to advise on this deal in number of different jurisdictions,” explains Hanrahan. “The financing was raised in the UK, so our London team dealt with it. Our global strength in finance meant we could have done this deal in any of the jurisdictions. This won the mandate for us.”

On the lender side Latham’s client base includes Barclays, Credit Suisse, Goldman Sachs and HSBC. However, it is Latham’s European high-yield practice, led by Bryant Edwards, that has unsurprisingly formed the firm’s finance platform.

But while Latham’s approach to conquering the transatlantic market is getting results, some other firms have not been so successful.

In the late 1990s Shearman & Sterling’s aggressive lateral hiring strategy saw a string of high-profile US and magic circle partners flock to the firm’s London office. It looked as though Shearman, with clients such as Citi and Merrill Lynch on its books, would take the UK market by storm, as well as having a rare bank and bond finance offering.

But a string of counsel departures in recent years and accusations of a lack of promotion opportunities has been damaging for Shearman.

“It just hasn’t happened for Shearman in London,” says one magic circle partner. “They made some amazing hires but have failed to capitalise on these and build the London office that everyone expected. It hasn’t been easy for London to gain any control over its growth, and the competitive nature between partners and offices has been very damaging.”

Shearman still has good relationships with banks such as Merrill Lynch and has strong performers such as Iain Goalen and Clifford Atkins. But the coherence of the London finance team, so evident a decade ago, is no longer there – especially after capital markets partner David Beveridge returned to New York last year.

While Shearman has suffered the blow of departures and heightened competition between offices, transatlanticcontender White & Case has certainly made the most of its opportunities in the City.

Now at Freshfields Bruckhaus Deringer, Maurice Allen and Mike Goetz were instrumental in building the transatlantic strength of White & Case’s finance team, working closely with Eric Berg in New York to ensure Deutsche became a global client.

With Deutsche selecting White & Case as its go-to firm in the UK, the firm has gone on to make London its most successful office.

Banking and capital markets London partner Chris Kandel says the City office was a crucial part of the firm, adding: “The growth it has experienced has been largely down to the banking and capital markets team. The development of London and New York together has been a focus for the whole firm.”

In 2007 the London office had 269 lawyers, including 47 partners, in its finance group, while New York housed 222 finance lawyers, including 54 partners. But although London has been hugely successful in building a strong office in the capital, discontent with the new management structure,
which saw former Moscow head Hugh Verrier become firm chairman, has been damaging.

The lack of London representation on the management board ultimately resulted in Allen and Goetz moving to Freshfields.

The fate of the Deutsche relationship is key to White & Case in London. Should Allen and Goetz succeed in making Deutsche a Freshfields client, the White & Case success story in London could be undermined, although White & Case’s lock on its global client looks currently unassailable in London.

“There will be more departures. But London is very strong and I can see it coming back and maintaining its strength,” says one US partner. “For years White & Case has been dedicated to building a global presence aided by its transatlantic offices. It won’t let this blip get the better of it.”

White & Case’s staggering growth in London, combined with the prevalence of UK law in worldwide jurisdictions, has made London a crucial part of the global network, with its partners and associates bolstering the UK law capabilities in other offices.

“The firm’s got the right approach to building a transatlantic giant,” says a US partner. “It realised a long time ago how important UK law is everywhere. They now have the right expertise in every office.” The White & Case approach demonstrates how a US firm has used its expertise in finance and its relationship with a major financial institution to transform itself into a global firm. Not all US firms have the same outlook and approach to global development.

Davis Polk & Wardwell and Simpson Thacher & Bartlett are two of the most prestigious US firms.

Davis Polk’s entrenched relationship with Morgan Stanley and Simpson Thacher’s historical ties with Lehman Brothers and JPMorgan Chase are clear examples of how well traditional US firms manage their growth and keep their clients close.

Simpson Thacher is well known for its relationships with private equity giants Kohlberg Kravis Roberts (KKR) and Blackstone. But it also has a stellar finance CV. Its relationship with JPMorgan dates back to the Manufacturers Hanover Corporation and Chemical Banking merger of 1993, in which Simpson Thacher displaced Cravath Swaine & Moore.

The firm then went on to advise Chemical Banking on its 1995 merger with Chase Manhattan Corporation and has since managed to muscle in on Davis Polk’s relationship with JPMorgan, with New York partner Frank Huck occupying the driving seat in this relationship.

Manhattan transfers
In the UK, Simpson Thacher’s London office is the result of KKR’s and Blackstone’s ventures into the European private equity market. Keen to keep hold of its best clients, launching a City office was crucial.

Undoubtedly the star of the London office is veteran acquisition finance lawyer Tony Keal, who moved from Allen & Overy (A&O) in 2005. Keal, who had an existing relationship with KKR, has been instrumental in driving forward the firm’s London office.

But Keal’s fame has overshadowed two of his more lender – focused partners: Euan Gorrie, also formerly of A&O, and Stephen Short (ex-Ashurst), who has a strong relationship with the firm’s institutional client JPMorgan.

Like Simpson Thacher, Davis Polk traditionally dedicated its time to a core client base. The firm’s co-head of capital markets Rich Sandler has himself worked with Morgan Stanley and Credit Suisse for more than 20 years, and Citi for 10.

“These are large organisations and therefore we need teams of people dedicated to different types of work for them” Sandler explains. “These relationships are longstanding, but you do have to work at them to make sure you maintain them.”

While Davis Polk has a successful UK office, it does not practise UK law. It serves its existing client base generated by its US offices.

“There clearly has been discussion about hiring UK lawyers, but the fact is the timing hasn’t been right, and in order to do that you’ve got to be able to do it properly,” explains Sandler. “We want to have a first-class top brand everywhere we’re based. To do this you have to hire the best of the best. I’m sure the debate will continue and you can never rule anything out.”

While the majority of international law firms regard London and New York as crucial to global dominance, all have different perspectives on achieving this.

While some firms, such as Simpson Thacher, focus on private equity to launch into the UK market, others such as Latham and White & Case have made banking and finance the driving force behind their growth plans.

With the credit crunch advancing and US and UK markets feeling more extreme pressure every day, all firms are turning their attention to restructuring capabilities on both sides of the Atlantic. But that is another story.