Growing a law firm is as much an art as a science.
Having the right people, of course, is key to a firm’s success. But employing the right talent is expensive and complicated. Firms can grow organically through partner promotions. They also can grow by bringing on lateral partners. Hiring associates and molding them into partnership material is a long-term investment. Taking on partners from other firms is an expensive proposition and risky, but one that can produce quick results.
So which is better?
Most firms do both. A number of international firms, including Dentons; Clyde & Co; Freshfields Bruckhaus Deringer; Herbert Smith Freehills; Allen & Overy; Shearman & Sterling; Skadden, Arps, Slate, Meagher & Flom; Linklaters and Slaughter and May, have over past few weeks announced their latest round of partner promotions.
But we’ve also seen firms increasingly focus on lateral hiring. Whereas 15 years ago it was rare to see the world’s most profitable firms make lateral partner acquisitions, it is commonplace today. And some of this is happening at the top echelons of the industry, with firms poaching rainmakers from rivals, hoping to boost their position in the market.
That’s what we’ve seen lately in the U.K., where Paul Weiss Rifkind Wharton & Garrison last summer poached private equity heavyweight Neel Sachdev and three other prominent partners from Kirkland & Ellis in London. Paul Weiss, which reportedly wants its London lawyer head count to reach 200 by the end of the year, has since hired more than 20 London-based partners from other firms, including Kirkland, Clifford Chance and Linklaters.
Kirkland has moved quickly to rebuild in London, hiring top-rated partners from Simpson Thacher & Bartlett and Allen & Overy. But as Kasvi Sehgal writes, all this movement of big-name lawyers, which centers on debt finance specialists, appears to be altering the pecking order of leading law firms in the U.K.—leaning in Paul Weiss’s favor. It’s too early to tell whether this newly established order will last or whether Paul Weiss’s strategy will continue to be effective. But the firm does not appear to be slowing down.
In the U.S., Freshfields has also invested heavily in lateral hires bringing on teams from top Am Law firms as well as big-name partners like Ethan Klingsberg from Cleary Gottlieb Steen & Hamilton, and Jenny Hochenberg and Damien Zoubek from Cravath, Swaine & Moore. The firm has set its sites on being a major player in the U.S. market, and its lateral hiring strategy might prove successful. But the firm could be sitting on a ticking time bomb. As my colleague Paul Hodkinson has reported, Freshfields has taken on increased debt and its cash reserves have decreased substantially during this period of aggressive U.S. expansion. How much time does it have before it has to show that its heavy investment is turning a profit—before its partners in the U.K., Asia and Europe get fed up and leave?
Strategic lateral hiring is not limited to the U.S. and the U.K. Firms are betting on practice areas and location. Last week, Allen & Overy, a firm that is about to see huge expansion through its merger with Shearman & Sterling, hired two technology and telecommunications partners from Australian firm Johnson Winter & Slattery to strengthen its Asia Pacific technology transactions practice—a fast-growing sector in Australia and across the Asia Pacific region.
Canadian national firm Miller Thomson poached the head of Dentons Canada’s corporate commercial law practice in Montreal—a partner who had been at Dentons and its predecessor firm for more than 20 years. Also in Canada, Littler Mendelson, which has stated its intent to expand its footprint and bolster its capabilities in Canada, hired an experienced partner from Ogletree Deakins in Toronto.
In Singapore, hybrid virtual firm Rimon Law hired veteran restructuring partner Troy Doyle, who was Gibson Dunn & Crutcher’s global co-chair of restructuring and insolvency, to head its restructuring practice and lead its operations in the Asia Pacific. Doyle’s arrival also enabled the non-traditional firm to establish a base in Singapore—its third office in Asia.
But lateral hiring is a risky business. Many partner lateral hires fail...
