SJB and the problem with private equity

When a firm shouts loudly about a landmark merger, as SJ Berwin did when it joined forces with King & Wood Mallesons, departures are always likely to come under the spotlight.

The exits of corporate partner Ed Harris and associate Leanne Moezi to Hogan Lovells at the end of last year kicked up a storm (23 October 2013). But the pair aren’t the only KWMSJB lawyers who focus on corporate or private equity to have headed for the door recently. In fact, it’s thought that 11 associates have thrown in the towel over the past year, including three since January.

First, a spot of structure. KWMSJB operates separate corporate and funds practices, with the former breaking down into teams A and B. On top of that the firm also has a private equity sector group, one of its seven sectors made up of lawyers from most practice areas in the firm, including corporate and funds.

Insiders suggest that a particular cohort that focuses primarily on M&A and private equity matters, thought to be team B members, are the ones most at risk of jumping ship.

“More than a third of associates have left team B over the past year,” says one source close to the group, adding that the firm’s funds team has also been under assault over the last eight years or so.

“The best associates and partners have tended to leave,” the source adds.

Departing associates have gone to a host of destinations including in-house and to work overseas, but the most marked trend is their defection to US firms. The likes of Kirkland & Ellis and Vinson & Elkins have scooped up KWMSJB associates over the past year.

The firm claims that the number of departures is nothing of the ordinary, with managing partner Rob Day saying, “we’re seeing an uptick in corporate activity and we’re growing our corporate practice across all levels. We’re focusing on a whole host of initiatives focused on the retention of our best people”.

But the volume of exits certainly appears to have turned heads within the group.

While KWMSJB’s potentially game-changing Asian merger would be an easy scapegoat for the departures, it’s thought that the wave of discontent among associates in the firm’s corporate practice runs deeper than the recent tie-up.

“The issue is that SJB was a great training ground,” one source notes. ”The team attracted a lot of very ambitious, talented people but ultimately it doesn’t necessarily meet their ambitions.”

It doesn’t help that KWMSJB is thought to staff deals relatively lightly, and also that the number of heads in the team is said to have diminished.

The generosity of US outfits also poses a particular problem, as these firms seem more than willing to approach lawyers in the team and splash the cash to beef up their own private equity talent pool.

Of course KWMSJB is hardly the only firm currently wrangling with this issue. And at least, so far, it has managed to hold onto two of the group’s key partners, Steven Davis and Tim Wright.

Other firms haven’t been so lucky. Just this week it emerged that Clifford Chance corporate partner Kem Ihenaco is to ditch the magic circle firm for Latham & Watkins (18 February 2014). He’ll follow in the footsteps of Clifford Chance’s former private equity head David Walker and hotly tipped young partner Tom Evans, both of whom switched to the firm last year (8 April 2013, 9 October 2013).

Linklaters private equity partners Ian Bagshawe and Richard Youle reportedly held talks with a number of US firms including Ropes & Gray and Fried Frank before jumping ship to White & Case last year (17 October 2013), while BLP private equity big hitter Raymond McKeeve was tempted by Jones Day earlier last year (20 August 2013).

KWMSJB is approaching its annual associate salary review in March, and all eyes are on the firm to see whether it will bump up its remuneration in a bid to keep hold of its top talent.

Perhaps it’s coming to crunch time. The top firms in the UK, whatever their heritage, are going to have to face up to the issue and take action if they’re to keep hold of their brightest sparks.