Re-leveraging – the sudden rush to hire deal finance talent

Well, it's now official. Barely a year after international firms were falling over themselves to shed leveraged finance partners - most prominently with Allen & Overy's (A&O) move to drastically downsize its City LBO team - leading law firms are now executing an abrupt U-turn and are aggressively hunting for acquisition finance talent.

Any doubt over the current appetite for such lawyers will have been dispelled by Milbank Tweed Hadley & McCloy's five-partner haul from Latham & Watkins, one of biggest team hires at this level to ever hit Wall Street law.

And Milbank didn't only bring in the numbers - by any yardstick this team has a serious pedigree. Latham remains for many the US's best all-round leveraged finance practice with an unsurpassed position as underwriter counsel for high yield work.

The team is also led by a bona fide star in the shape of Marc Hanrahan (pictured), who was Latham's co-head of global finance and maintains close links to Goldman Sachs. The team regularly handles work for clients like Citibank, Barclays, Credit Suisse and Royal Bank of Scotland. Interestingly for City observers, the group have strong links to European institutions and that two of the group are also UK-qualified (one of the five, Marcus Dougherty, used to work at Norton Rose).

No wonder that Milbank, which has pursued the team for two years, believes the additions will give it a chance to materially upgrade its position in the international finance market.

And Milbank's move is only the most eye-catching of a series of appointments by international firms in recent months. Latham itself hit the headlines in January when news broke of its recruitment of a four-partner bank lending team from White & Case lead by Chris Kandel.

Similar if more modest moves have seen Freshfields Bruckhaus Derringer last month hire Simpson Thatcher & Bartlett counsel Gil Strauss as a partner to bolster its acquisition finance and high yield practice. A&O was also quick off the mark to last year hire former Milbank partner Kevin Muzilla to tactically bolster its credibility in high yield, a US product line that has so far largely frustrated the attempts of City law firms to crack.

True, these hires encompass a broad range of disciplines, covering some general bank lending, capital markets, syndicated loans, bridge financing and high yield. But they still clearly represent a collective bet that debt financing on corporate takeovers is about to take off again in a big way. Likewise, the recent run of strategic recruitment in private equity underlines expectations that sponsors have no choice but to get off the sidelines and do deals even if that means high-equity commitments and plenty of secondary buyouts.

One wrinkle of the post-crunch age is that many are still predicting that limited bank lending will have to be made up via borrowers tapping the capital markets - a contention which perhaps surprisingly appears to have survived the tremors through Europe's debt markets this year. Whether these predictions are correct or not, these are some of the most competitive and lucrative practice areas in which the world's top law firms operate. Watching these firms go head-to-head once more will be interesting.

• For more, see Milbank secures five-partner deal finance team from Latham