Let’s admit from the outset that launching a tax practice hardly elicits whoops of excitement. It may not be the sexiest work in the world, but at the moment a good tax partner is at the top of a lot of managing partners’ wish lists.
First there was Stephen Fiamma jumping ship to Allen & Overy from Jones Day‘s London office, then there was the head of tax from Theodore Goddard Tim Sanders moving to McDermott Will & Emery. Since the summer, Latham & Watkins has successfully nabbed Oonagh Whitty from Watson Farley & Williams, Russell Jacobs has gone to Milbank Tweed Hadley & McCloy from Cadwalader Wickersham & Taft, Buchanan Ingersoll has got ex-Rowe & Maw lawyer Jenny Cottrell and Baker & McKenzie has wooed its first US tax partner in London from Deloitte & Touche, Jeff VanderWolk.
When most partners cannot be encouraged into the US firms, why are tax partners lining up to move? With the exception of Stephen Fiamma, who was fed up of combining management and fee-earning at Jones Day and took up a good offer from A&O, the rest have hardly come from the magic circle. Russell Jacobs left Cadwalader for Milbank Tweed after his former Wilde Sapte colleague John Walker had moved there two months earlier, and both Oonagh Whitty and Tim Sanders were lured to Lathams and McDermotts respectively by the various attractions of its US practices. VanderWolk had been at Baker & McKenzie before going to Deloitte & Touche, and found that the satisfaction of working at an accountancy firm palled. Meanwhile, Jenny Cottrell at Buchanan Ingersoll is tapping US firms’ need for tax advice by billing herself as a corporate tax lawyer who will service other US law firms in London – without marching off with the clients. Shearman & Sterling is on the prowl for tax lawyers, as is Stephen Ball, the former head of legal at Nomura, now at Gibson Dunn & Crutcher. Jones Day, White & Case and Skadden Arps Slate Meagher & Flom are also trying to woo some pretty senior players.
And it’s obvious why: tax partners can structure deals, and that is where the money is. The investment banks are desperately trying to work out new financing structures which they can sell into new markets, and for that tax advice is crucial. It is also a good way of impressing the client, tax being one of the few areas where clients can really see you making a difference, which means tax partners can be charged out at a higher rate. Clients will be impressed if someone comes in and restructures a transaction to save them a fortune; but less so if a litigation partner wins a case which the client thought should have been won anyway.
In the increasingly competitive M&A market in Europe, too, where hostiles and bidding wars for companies are becoming common, if you can structure something to be more tax efficient, and thus more profitable, you can offer a higher price and win the battle.
So how will Shearman & Sterling tempt the likes of Steve Edge out of Slaughter and May? Not easily. To the US firms’ disadvantage is the comfortable lockstep at the magic circle. Tax partners rarely move with a book of business, so the eat-what-you-kill culture at some New York firms will be rather intimidating. Then there is the frightening prospect of not having enough work. You can be pretty sure that if you are at Clifford Chance, the corporate department and the finance department is going to keep you busy. Not necessarily so at a US outpost in London.
It may be that younger magic circle partners will be tempted to up sticks. They will fancy the autonomy of being in a small office which can still offer good work, and they can probably make good names for themselves if they break out of the top five. They will not do it for toffee though, they’ll want big bucks. And if US firms are prepared to offer that alongside a bucketload of reassurance – which they probably will – they might just see their wishes come true.