On paper, 2006 should have been a great year: markets booming, M&A activity up and UK firms of all sizes mostly announcing record results.
While the same was true for many US firms, with the likes of Simpson Thacher & Bartlett, Sidley Austin and Latham & Watkins all announcing solid numbers, overall, results have been mixed.
Firms with relatively small London arms, such as King & Spalding, LeBoeuf Lamb Greene & MacRae and Paul Hastings Janofsky & Walker have shown aggressive growth on the back of investment. LeBoeuf, in particular, has defied modest expectations. However, the real test for these firms will come when the investment is turned off.
And look at the more established US firms and the differences in individual performance become all the more striking.
New bellwethers needed
Weil Gotshal & Manges, Shearman & Sterling, White & Case and Mayer Brown Rowe & Maw have all been in London for years, are all in the full-service ballpark and have long-running UK trainee programmes. But while Mayer Brown and White & Case are not far from seeing their UK revenues top £100m — reporting 22% and 38% increases in turnover respectively (with partner profits jumping 67% at White & Case), Weil Gotshal and Shearman appear to be slipping. Both firms, still regarded as bellwethers for US firms in London, reported revenue increases of less than 5%.
Shearman and Weil Gotshal have both been accused of failing to build their associate ranks despite proving they can build a UK practice — the hard bit, in other words — and have sometimes struggled with the cross-border/referral part of the -equation.
White & Case, meanwhile, managed to increase the amount of business originated in London in 2006 — sourcing 68% of its work in the City, compared with 61% the previous year, and winning corporate work from a number of finance clients, including
Mayer Brown has ploughed a different furrow. Partners at the firm say last year’s growth, which came after several years of modest post-Rowe & Maw-merger expansion, owed much to an upswing in referrals from its US base.
That shift may be something of a one-off adjustment — the firm is factoring in more conservative growth this year — but it is a positive development nonetheless.
Shearman flanked
Compare that with Shearman, where even London partners have begun to concede that the lack of awareness among key US clients of the extent of its UK law capability has become a problem.
While Shearman admits 2006 was a challenging year, partners are actually surprised that City turnover did not drop, given that the firm suffered some senior M&A departures.
Part of Shearman’s fightback strategy — and let’s not forget that the firm is still home to top-notch projects and leveraged finance teams and a decent M&A practice — will be getting more cross-border referrals, particularly from the US. The firm has also recruited three partners from Freshfields Bruckhaus Deringer in recent months, including vfgLois Moore, whose hire is intended to improve relationships with US corporates.
Shearman looking for referrals?! There goes another US-firm-in-London cliche.