White & Case offered Linklaters private equity (PE) associates up to £40,000 in ’golden hellos’ to join star PE partners Richard Youle and Ian Bagshaw when they quit the magic circle firm.
The US firm attempted to lure away up to 10 associates with hefty sign-up fees in a bid to build up its London PE practice around Youle and Bagshaw, who joined last October (17 October 2013).
White & Case managed to recruit more than four associates, short of the total that is understood to have been on Youle and Bagshaw’s wishlist.
The pair of partners caused ructions with their exit from Linklaters six months ago, which followed three years of manoeuvring. The partners had been in talks with Ropes & Gray in 2010 and then Fried Frank in 2013 before settling on White & Case.
Sources said that Youle and Bagshaw’s final resignation kick-started intense negotiations over private equity associates. With a reputed aim of a five-partner PE team at White & Case within 18 months, the partners are said to have been keen to extract lawyers from their former firm.
Linklaters is understood to have asked Youle and Bagshaw to draw up associate wish lists. Those lawyers were invited to speak to Youle, Bagshaw and other partners at Linklaters about whether they wanted to leave the firm.
A source said: “Richard and Ian needed to get people over the uncertainty of moving to that firm [White & Case] and make them believe the firm was backing the practice.”
However the sign up fees are said to have been aimed at compensating associates for lost bonuses in moving early. Linklaters bonuses are not calculated on an calendar year unlike White & Case.
Sources said missing out on a Linklaters bonus would not be appealing. One said that bonuses at Linklaters often extended beyond £40,000, with guarantees sometimes far exceeding that figure.
A three-year PQE lawyer at Linklaters could sometimes expect to take home a combined £129,000 pay cheque at the end of the year on a salary of £89,000. Sources said a White & Case golden hello of £40,000 added to a three-year PQE salary of £97,000 plus bonus could be more appealing.
The US firm is said to offer lower associate salaries than several of its US rivals, though it far exceeds Linklaters associate pay. Sources pointed to the benefit in trumping the associate annual take home from other US firms as well as magic circle rates.
Its NQ rate of £72,000, compares to around £97,500 at firms like Latham and Kirkland & Ellis and £64,000 at Linklaters.
A source said: “If you compare White & Case to other US firms they are not as punchy as Kirkland & Ellis and others”, while another added: “To get the best people from Linklaters you need to prize them out. It’s not surprising the firm would offer a premium to get them on the team.”
However sources said the decision was not always about the cash and not all associates were won over by the pitch. Some were understood to have been nervous about “going to an eat-what-you-kill remuneration system and were worried about whether the next generation of partners would be made up”.
Heavy-hitting partners Youle and Bagshaw brought stellar reputations with them to the firm and an impressive client list. Bagshaw is close to Carlyle, having won the mandate to advise the PE house on its £450m acquisition of Integrated Dental Holdings (IDH) from Bank of America Merrill Lynch (BoAML) (31 January 2011) and was the firm’s relationship partner for Macquarie.
Meanwhile Youle acted for a slew of midmarket private equity houses and has been particularly close to HgCapital (22 August 2012), Montagu Private Equity and Hermes.
Since joining White & Case Youle has added HgCapital to the firm’s client roster. It is thought that the company initiated the review in response to Youle’s move (18 March 2014).