Moving on up

Linklaters is finally breaking into the German big league. But it’ll be a while before it catches Hengeler and Freshfields. By Aled Griffiths

Linklaters.jpg” alt=”Moving on up” />The rainmakers at Hengeler Mueller and Freshfields Bruckhaus Deringer should start looking over their shoulders. Against all the odds, Linklaters Oppenhoff & Rädler has started to make strides in Germany.

The difference is in the energy levels – and German corporates are starting to notice it.

“They came to us to pitch for our corporate work,” says one general counsel of a major multinational. “We were surprised just how hungry the Germans were.”

Linklaters’ past has almost worked against it. In the days when German firms were only allowed one office, the Cologne firm of Boden Oppenhoff Schneider was long regarded as one of the leading corporate practices in Germany. After the war it had become the number one address for inward investors into the country, but its domestic client base remained negligible. “While Hengeler and Bruckhaus were making inroads into the boards of the leading German industrial corporations, we were buying up the Mittelstand,” admits a Cologne Linklaters partner.

Oppenhoff’s merger with Linklaters underlined its strength in cross-border M&A. Just last year, it advised Sanofi on the German aspects of the Aventis takeover, as well as ITT, Hewlett-Packard and Dutch energy corporate Essent on major transactions.

Referrals from within the firm have reached a constant stream as well. Linklaters’ German lawyers have for the first time received work from the likes of BP, Johnson Control, Royal Bank of Scotland and Interbrew in the recent past. Michael Lappe (also senior partner in Germany), Wolfgang Sturm and Peter Erbacher are regarded as among the heavyweights.

Cross-border work is all very well, but the domestic market counts for a lot in Germany. Hengeler and Freshfields are still the leading corporate firms, and the reason for that is simple. Traditionally they have always had the partners with strong contacts with the boards of the leading blue-chips, and would always be brought in for the important restructurings or deals. Both firms have had several generations of outstanding partners. Notably, both Hengeler and Freshfields have a serious number of top lawyers in their prime, between the ages of 45 and 55.

By contrast, Linklaters has a generational gap, especially in its non-transactional cor-porate advisory practice. The firm’s restructuring has left it with a younger group of lawyers having to make up for the strategic oversight and lack of management rigour in the past.

It also has to do with the size of the team. After all the departures of the last few years since the merger with Linklaters, the practice has just under 100 lawyers, of which 30 are partners – roughly the same as Clifford Chance’s corporate practice in Germany. By comparison, Freshfields has well over twice that number of lawyers and Hengeler, so often regarded as being dwarfed by the international firms, has fully 50 per cent more corporate partners than Linklaters in Germany.

Despite all this, Linklaters is now taking the battle to Hengeler and Freshfields with its push into the leading German corporations, led by the affable and ambitious Hans-Ulrich Wilsing.

If Linklaters is to succeed in this most traditional of markets, it seems to have understood that a fresher attitude is needed. One German client even comments on the fact that Cologne-based Klaus-Marinus Hoenig rolls his own cigarettes – a leftover habit from his student days. “You can’t imagine someone at Hengeler or Freshfields doing that,” he says. “The whole atmosphere is far less stuffy.”

One of Linklaters’ secret weapons is its rapidly growing and voracious finance practice in Frankfurt. While the Freshfields practice has – at least until recently – been corporate-dominated and the Hengeler finance practice too small, and possibly too domestic, to cover all the bases, the past year has seen both Linklaters and Clifford Chance becoming involved in innovative hybrid financings for major corporates. Linklaters’ Peter Waltz is one of the new stars here, while the firm also has Eva Reudelhuber, who is one of the queens of acquisition finance in Frankfurt.

By contrast, other strong corporate firms such as Gleiss Lutz and Shearman & Sterling have small finance teams in Germany and little by way of capital markets capabilities that they can call on in London.
The emphasis at Linklaters is still on advising the banks, but Allen & Overy, and increasingly Cleary Gottlieb Steen & Hamilton, have demonstrated that it is possible to open doors to blue-chip clients by leveraging off a lender-driven finance practice.

According to research undertaken by Juve, a cross-section of clients – German blue-chips, multinationals and investment banks – have commented on the integration through the network. The international structures seem to have the major benefit, according to these clients, of importing know-how into the German practice.

The result has been a good year – possibly a breakthrough in the domestic corporate deal market. Linklaters advised on three of the biggest deals of the year: the Berlin state government on the sale of real estate portfolio GWS; the cable network of the state of Nordrhein-Westfalen on the sale of ish to Kabel Deutschland; and HVB on the sale of its stake in Bankhaus BethmannMaffei. Just a few years ago, Linklaters’ competitors would have been surprised to see the firm handling that calibre of work.

But there is a downside to the internationalisation of the German practice. The head of legal of a large international industrial corporate is particularly blunt. “There’s a strong upward pressure on fees in such a huge organisation,” he says. “You sometimes get the impression that partners can’t keep track of where the fees have been generated. That seems to be a consequence of the merger, that German lawyers are trying to push through far higher hourly rates.”

To hear this from a Mittelstand client would not be surprising, but to hear it from a key corporate client of the firm should ring warning bells. It goes to show that Linklaters will have to tread carefully in how it presents itself to new clients in Germany.

The firm is banking on a new, younger group of partners building up relationships to the next generation of corporate decision-makers, in the belief that the status as trusted adviser will allow strong profitability, through healthy fees, to emerge.

Both of these aspects – the new internationalism and the young partnership – are key selling points for Linklaters. But it has a long slog yet.

Aled Griffiths is editor of German legal magazine Juve