[ad_1]
On a balmy Friday evening in the middle of August, senior partners from two of America’s most powerful law firms were among the thousands packed into Chicago’s Wrigley Field as Bruce Springsteen and the E Street Band blasted out classics including “Born to Run” and “Wrecking Ball”.
Jon Ballis, the chair of Kirkland & Ellis, mingled with other Springsteen fans including a top lawyer from Paul, Weiss, Rifkind, Wharton & Garrison in a rare social gathering between rivals.
But the relaxed atmosphere masked deeper tensions between the firms that would erupt within days, as Paul Weiss began poaching Kirkland lawyers in an audacious attempt to rapidly build a private equity practice in London.
Founded in Chicago at the turn of the 20th century, Kirkland has relied on an entrepreneurial drive to challenge the hierarchy of law firms on Wall Street. Over the past decade, its strong ties to the private equity industry has turned it into the world’s highest-grossing law firm. New York-based Paul Weiss has long been an establishment firm but one lacking a significant presence in London.
A month on from the Springsteen concert, Paul Weiss has recruited 12 partners from Kirkland, a raid whose speed and scale has stunned an industry long accustomed to firms fighting tooth and nail for the most valuable lawyers.
“This is huge and creates a very significant player in the London private equity market,” said Siobhán Lewington, a managing director at legal recruiter Fox Rodney. “Paul Weiss is the last of the big New York private equity practices to launch an English law practice in London. Putting a team together is the ultimate fantasy football.”
The episode also illustrates how the industry-wide war for prized lawyers, who can now command salaries of more than $20mn, shows little sign of slowing. Those who are trusted advisers to private equity firms remain among the most sought after.
The Financial Times has spoken to multiple partners from both firms about the raid, the first seeds of which were sown in late July, when Kirkland’s Ballis called Roger Johnson, one of the firm’s highest-billing lawyers in its London office.
Ballis told Johnson that Alvaro Membrillera, then Paul Weiss’s most senior lawyer in London, would be joining Kirkland along with some junior colleagues.
The news surprised Johnson and a group of other London-based partners, who expected that they would have been consulted about such a heavyweight hire, according to people familiar with the matter. Law firms often need to tread a fine line between keeping new hires under wraps and letting other partners know in advance.
Ballis and Andrew Calder, a Houston-based energy lawyer who had worked with Membrillera earlier in his career, had been heavily involved in the hiring decision, some people said. Johnson responded angrily to Ballis, voicing concerns about the hiring process.
Ballis was furious at how Johnson reacted, according to colleagues, and the situation quickly escalated. On August 1, Johnson received another call from Ballis, who told him he was fired. Ballis accused Johnson of trying to orchestrate a move of some Kirkland lawyers to another firm — something he denied.
Dismissing Johnson was a big call. He had continued to bring in work this year, including advising buyout group EQT on its £4.5bn acquisition of London-listed veterinary company Dechra, even as some other partners struggled amid a slowdown in dealmaking. The next day, Membrillera’s arrival at Kirkland was announced.
According to people familiar with the matter, Johnson’s exit — and the decision by US-based executives to bypass London partners when hiring Membrillera — left Kirkland more exposed to a raid from a deep-pocketed competitor.
The vulnerability was unusual for Kirkland. Last year its 505 equity partners, who share in the profits, took home $7.5mn on average and the firm has built out its ranks by luring lawyers with pay deals rivals could not match. Paul Weiss’s equity partners made an average of $5.7mn last year, according to an annual ranking by The American Lawyer.
Alongside concerns over the hiring process, the loyalty of some, including leading debt finance lawyer Neel Sachdev, a more than 20-year Kirkland veteran, had been chipped away at by concerns that the firm had lost its entrepreneurial spirit.
In early August, Sachdev was one of several senior Kirkland lawyers who began talking to counterparts at Paul Weiss including chair Brad Karp, people familiar with the matter said.
Within days, the discussions produced a plan for Paul Weiss to hire a team of lawyers capable of advising buyout firms on dealmaking, financing, tax, antitrust, litigation and restructuring.
The firm’s long-term aim is to recruit up to 200 lawyers in London and replicate with clients in Europe the deep relationship it has with US buyout giant Apollo. Paul Weiss currently employs just over 30 lawyers in London, according to its website.
But the plan, known as “Project Springsteen” within Paul Weiss, was laden with risks. The talks were conducted in secret, made easier as most lawyers were on holiday.
Paul Weiss would also have to contend with Kirkland’s deep pockets. It was not unheard of for Kirkland to offer more than $2mn to retain partners who were thinking of leaving, according to people familiar with the matter. Kirkland could also fire them.
By August 11, when Ballis attended the Springsteen concert, the plans were in place. A Kirkland team of eight lawyers including Sachdev resigned on August 13. Paul Weiss immediately mounted a second push that by early September had added three more Kirkland partners, a lawyer from Linklaters and Johnson too.
Forced on to the back foot, Kirkland — a firm more accustomed to orchestrating raids than trying to foil them — started contacting clients to reassure them the departures would not compromise the quality of their service.
The firm also began promoting people internally in London, particularly those judged to be at risk of leaving, people familiar with the matter said.
One-off cash bonuses were offered to lawyers who were thinking of leaving, including those who had had talks with Paul Weiss. In at least one instance, Kirkland prevented a partner leaving to Paul Weiss.
“Short term this may work but it’s incredibly expensive,” one person involved added.
Kirkland and Paul Weiss declined to comment.
Paul Weiss is also betting on private equity just as a golden era of low interest rates for the industry ends, leaving firms facing higher financing costs and a tougher environment in which to generate returns.
Despite the defections, challenging Kirkland’s position in London will be far from easy. The recent hire of Membrillera in London should also boost Kirkland’s relationship with US investment giant KKR.
Over the past decade, deep-pocketed US firms have already shaken up London’s legal market, driving up salaries and forcing some so-called “Magic Circle” firms to rip up historic pay structures. Headhunters and other lawyers say Paul Weiss’s opening salvo is also likely to unleash a wave of moves between top firms in the capital.
“It’s going to mean a lot of disruption,” Fox Rodney’s Lewington said.
[ad_2]
Source link
