Hot air from the Windy City?

It was somewhere between the Rat Pack and Reservoir Dogs.

Last week's front page of The Lawyer carried a photo of four men in suits striding purposefully down a City street.

The image, and other publicity shots from the men's PR agency, heralded

the arrival of yet another US firm in London, this time Chicago's Altheimer

& Gray, as revealed in The Lawyer (5 April).

The firm intends to attract as much comment on its work as its publicity

shots, by building a London office of up to 100 lawyers in two to three

years and expanding into Paris, Frankfurt and Milan.

We have heard this kind of talk before from US firms keen to make an

impression in the crowded London market. So is there really anything

different about Altheimers?

For most US firms, London is the first port of call in forays into Europe.

The popularity of English law for major transactions and London's place at

the centre of Europe's financial markets mean a UK outpost is often

sufficient to serve clients with a continental presence.

Other firms establish themselves in the City and then decide to expand

into other European centres.

But Altheimers is unusual for two reasons. First, it already has six

offices in central and eastern Europe (see box). Second, observers say, the

270-lawyer firm's international operations are out of proportion with its

relatively modest presence in Chicago and its standing in the US as a whole

(its only other US office is a one-man operation in Washington DC).

The driving force behind the firm's expansion is Louis Goldman, chairman

of the international practice group based in Chicago.

In 1989, Goldman was looking at China as an emerging market that the firm

could tap into, but after the violent crushing of protests in Tianaman

Square the uncertain political and business climate meant that China would

have to wait.

The firm eventually got a licence to practise in Shanghai in 1996, beating

stiff opposition from the likes of Sullivan & Cromwell and White & Case.

Although protest failed in China, it succeeded in eastern Europe.

And when the Berlin Wall came down in 1989, Goldman smelled his chance and

was “one of the first off the plane”.

Also touching down behind the former Iron Curtain that year was Robert

Bata, managing partner of the firm's new London office.

Bata has worked in eastern Europe since 1989 and founded the Budapest

office of US firm Stroock & Stroock & Lavan before joining Altheimers in


In 1990 Altheimers became the first western law firm to open an office in

Warsaw. This move, and the firm's later European expansion, took other

Chicago firms by surprise.

“It's a good firm, but not a nationally recognised firm by any means in

the States,” says a rival's partner.

Joel Henning, a director of legal consultants Hildebrandt International's

Chicago office, says: “It is a highly unusual situation.

“Altheimer & Gray, it's fair to say, was very much a local Chicago firm

with a local middle-market client base.

“Unlike most US firms that establish themselves in the UK and then

cautiously move into western Europe, they did it the other way round.

“What is truly extraordinary about them is that you have this local law

firm that has found enormous success in relatively exotic places abroad.”

So why has the firm decided to open a base in London? Goldman and Bata say

the main reason is to support the firm's eastern European network.

Markets such as Prague and Warsaw are now relatively mature, and clients

are looking to raise money in the west. But they will also compete for UK


“We expect to see the regional representation of clients grow as well as

significant local deals, which we will get as the result of the

confidence-building exercise that the last 10 years in eastern Europe has

been,” says Goldman.

Bata explains the importance of London for the firm's existing network. We

wanted to be in the place where clients could most easily tap into capital

markets,” he says.

“More often than not, the relevant capital market for work outside the US

is done out of London and we see that as a key source.

“When you are very close to institutions, many of whom often make

decisions about which lawyers will be selected for a transaction, you are

in a better position to compete with those that are perceived as being

longer-term players in that area.”

The firm advises a number of clients in eastern Europe, including BP, the

European Bank for Reconstruction and Development, Gillette, insurance giant

CGU, and Fiat.

“We were in the right place at the right time with the right idea, and we

picked up an enormous number of top-tier clients,” says Goldman.

But competition in eastern Europe has increased enormously since

Altheimers made its first moves, with big UK and US firms like Clifford

Chance and White & Case moving in.

A Prague source believes Altheimers is finding the competition tough.

“They came to the region early and they have got a good market share in

Poland and the Czech Republic, but I think they're slowly losing business,”

says the source.

“I think they realise they need to have offices in the big financial


Goldman rejects the charge that the firm's success is beginning to wane.

“I don't think that is true,” he says.

“I think in Poland we continue to have the dominant position we have

always had.

“In Kiev we continue to be one of the two or three players in that market

and the same goes for Romania.

“In Prague we continue to be one of the major players.

“In the beginning there were only two or three [western firms] in each of

those markets and I don't think you could expect those markets to be

satisfied with only two or three western law firms.”

Bata points out that the firm advised aircraft manufacturer Aero Vodochody

on a $600m (u375m) bank credit facility and $200m (u125m) high-yield global

bond offering – the biggest single Czech Republic transaction in the last


US partners are often sceptical about their firm's foreign offices, and

London can be a particular drain on resources. But Bata says: “London was

one of those things where there was almost unanimous acceptance.

“The EU is looking to integrate with eastern European countries, so London

is important for that reason.

“I have had different experiences at other firms, where eastern Europe was

seen as a madcap frolic, but at Altheimer & Gray the international practice

has a very high profile.”

But will Altheimers' clients choose it to do their finance and

transactional work in London or are they more likely to be tempted by the

established expertise of the top US and UK firms?

Bata says: “I think in some cases that will be true. In other cases it

will be true that clients who have used us in eastern Europe but have

relations with City firms for UK business are going to see us as able to

provide them with additional service as well as eastern European service.

“For clients who have worked with us it will offer an opportunity to

diversify their legal representation and we don't intend to stand in the

way of that.”

Bata says all the firm's foreign offices have made money “from day one”.

This, he says, is because Altheimers hires local lawyers.

“Our view has never been to try to import American branch offices into

foreign countries,” he says.

As well as giving the firm lawyers with local reputations and expertise,

this strategy avoids high expatriate costs, Bata argues.

But a Chicago source points out that London's high costs are an immense

drain “both in terms of real estate and hiring talent”, and it can take

firms a long time to make any money.

Altheimers dismisses the idea. “We have heard those stories but frankly we

are mystified by them,” says Bata.

The firm's declared strategy is to hire rainmakers who will bring

immediate business with them and can then “double or treble their business”

by tapping into the firm's eastern European clients, according to Goldman.

The London office is to concentrate on three areas – mergers and

acquisitions, finance and capital markets, and property transactions and


It has hired Watson Farley & Williams corporate partner Nick Towle,

Eversheds property lawyer Andrew Astachnowicz and, reportedly, Nabarro

Nathanson property partner Andrew Bond as partners.

And the firm has also hired Freshfields associate Jonathan Baird who is

joining the Chicago office.

These appointments do not seem to match the profile of the initial

signings by, say, Weil Gotshal & Manges and McDermott Will & Emery, which

recruited Clifford Chance banking rainmaker Maurice Allen and Simmons &

Simmons' high-profile corporate partner William Charnley respectively.

But Bata says the firm is eschewing the big-name-as-bait strategy for a

collegial approach.

Bata will head the office and provide a link with the firm's network, but

the office's strategy will be made up by a management committee comprising

the London office's key partners.

But there is no certainty that a new arrival will bring business with

them, no matter how good their list of clients appears.

Bata concedes “you can't be 100 per cent sure”, but says the firm is not

interested in “buying business”.

Instead he is seeking people who have a proven record for building close

client relations.

“One of the people coming in has many clients and a couple of

relationships that go back to his days as a trainee. That is the sort of

person people follow,” he says.

Richard Levick, president of US legal consultancy Levick Strategic

Communications, says: “This is a firm that has been successful in

developing in eastern Europe and the Pacific Rim, and I'd bet on them.

They're smart.”

But an ex-Altheimers lawyer, now working for a rival firm, is sceptical

about the firm's grand ambitions in London.

“It sounds like a very ambitious plan. If it happens, I would say

congratulations to them,” the source says.

“In eastern Europe they are profitable because they pay substantially

lower salaries than they would in the States.

“But London is going to be different and they won't hire people if they

are not going to pay substantially the same or probably more [than London


Bata agrees that in eastern Europe the firm pays more than local rates but

below levels in Chicago.

As for the UK, he says: “We are able to pay more than UK firms do, because

we are more profitable, but we are not interested in skewing the levels in

the UK so that we create unrealistic expectations.”

Goldman has no doubts, saying the firm may even exceed its target of 25

lawyers by the end of the year, with more to come.

“We don't want to do things unless we feel we can make a big impact,” he