The State of US Firms in London

In the current issue of Legal Week, you can find both a breathless and statistics-distorting lead editorial, which I commend immediately to your e-dustbin (71% is "almost three-quarters," while 61% is "well under two-thirds"—how about the simpler truth that they're 10 percentage points, or about one part in seven, apart?), but you can also find the illuminating and well-reported underlying piece that portrays the state of US firms in the UK (read: London) ca. 2006.

I bring it to your attention primarily for the time-honored truths the story embodies, albeit unarticulated as such. 

Over 60 US firms have set up a meaningful shop in London, and according to the Legal Week survey, two-thirds report that more than half their work there comes from UK clients, as opposed to servicing US clients on transatlantic issues.  The real question is whether this is true (Legal Week, not shockingly, contends it's not), and the strategic issue is nicely summarized in this anonymous quote:

"There is a real danger for firms that follow the argument that ‘if we build it, they will come’," warns the London managing partner of one leading US firm. "You have to think very carefully about how you can fulfil an area not already being filled by a UK firm and [identify] where there is a real need for people to come in.

"I am sure every firm has thought through its own strategy very thoroughly, but I am in no doubt that targeting your practice is the way to go. You move outside the areas for which there is real demand among clients at your peril."

Need I add that I agree?

Aside from the obligatory excursion into lateral movements, and who scored which marquee name—Lovells to Weil-Gotshal, Lovells to Dechert, Lovells to Latham & Watkins, Linklaters to Kirkland & Ellis, Allen & Overy to Kirkland & Ellis, Allen & Overy to Simpson-Thacher, Allen & Overy to Skadden, Allen & Overy to Sullivan & Cromwell, Shearman & Sterling to Hogan & Hartson, Shearman & Sterling to Skadden, etc. (think of Legal Week, in this regard, as a mongrel cross between Fortune and People)—we actually have an interesting picture drawn of one of the most competitive legal marketplaces, for both talent and clients, on the globe. 

I glean these highlights from the piece:

• Far more partners are moving laterally from London/City firms to US-based firms than vice versa.  Legal Week posits that this is partly the result of "continued managerial ruthlessness on display at some traditional City leaders," but I'm skeptical that that thesis explains very much.  Why?  The implication is that the weaker partners are being culled by the City firms, but why then would US firms want them?  As a default assumption—meaning until presented with evidence to the contrary—I would imagine it's the stronger, not the weaker, partners who are both in a position to move and who the US firms would welcome.
• Essentially all the US firms anticipate further substantial growth in London—and soon.  80% predict double-digit percentage growth this year, and an amazing one in eight predicts expanding by 50% or more.
• Despite those ambitions, the growth plans are targeted, focused on growing existing practice areas (which means, almost across the board, corporate, finance, and M&A—not litigation or other areas).  In other words, or so we may at least hope, the expansion plans are grounded in a strategic rationale, not a blunt-instrument "bigger is better" approach.
• In one of the surest signs of an enduring commitment to a serious London presence, half the US firms now hire trainees there.  As one unnamed US firm partner puts it, "cherry-picking a few stars to get you going" can only take you so far.  Indeed.

The acid test of success will come, I believe, when US firms start growing, and making, their own partners in London.  At that point we'll be able to say the firms have truly taken root there.

The first half of the report (Akin Gump through Morrison & Foerster) is here.  Bizarrely, the second half is nowhere to be found.