After Dewey, have US firms finally lost their allure?
The final demise of the once great Dewey & LeBoeuf sent shockwaves through a legal industry embattled by the ongoing recession. But for UK firms there may be an upside: an increased ability to beat the US competition in attracting top talent.
In the UK, many firms have consoled themselves with the fact that Dewey’s collapse came down to a systemic failure unique to US counterparts. No small blame has been attributed to the eat-what-you-kill remuneration model, common to US firms.
The argument goes that the system too easily allows partners to pack their bags (and their clients) when the going gets tough. Partners at Dewey fled in their droves once the firm found itself overstretched and losing profit. Their exits became mortal wounds.
On this side of the pond, the story goes that Dewey’s London office was left high and dry. Reports suggest that staff were pretty clueless as to the likely fate of the UK LLP until it officially went into administration.
The former managing partner of the City office, Peter Sharp, claims that his attempts to present a UK rescue plan to US bosses were ‘completely ignored’.
Dewey joins a long list of US failures in recent years. Talented lawyers in the UK might be forgiven for choosing the apparent security of a UK operation in these troubled times.
For their part, though, the remaining US law firms in London remain bullish. With new entrants and some notable expansions, it seems there’s still plenty to play for in the US vs.UK war for talent.
Let battle commence.
The US firms in London have always come out top in this regard. Newly qualified (NQ) lawyers joining a US firm in London can expect to receive as much as £96,000 – even a whopping £100k at Bingham McCutchen. UK magic circle firms pay considerably less, with their NQs trousering something in the region of £61,500.
But there’s a downside. US firms are known for their tough billable-hours targets, which are commonly 1,800 to 2,000 hours a year compared to an average 1,700 among UK firms. The perception prevails that lawyers joining US law firms must leave their personal lives at the door.
But some US firms in London have tempered expectations, paying lower ‘mid-Atlantic’ rates in return for billable-hour targets in line with UK norms. Such salaries are in the region of £70,000 for an NQ, still ahead of most of the magic circle.
Whether these salaries will be enough to attract talent away from the UK firms is uncertain, particularly when UK firms offer extensive additional benefits such as life assurance and pensions.
Training and career development
This is one area in which the UK firms have an advantage. Even US firms that are well established in London are considerably smaller than leading UK counterparts.
Consequently, they do not share the same level of sophistication in training and development programmes. However, it might be argued that development is simply different in US firms, and that the smaller size gives greater scope to work closely with partners and to take on broader responsibilities.
But the fact remains that the larger UK practices generally offer more comprehensive growth opportunities. Which leads us on to perhaps the biggest issue of all.
Positive environment for growth
In a recent article for Legal Week, Maurice Allen, co-managing partner of Ropes & Gray’s London office, claimed that “the real threat to the magic circle may now finally be those US firms that continue to build critical mass in a market that is starting to move in their direction.”
The argument centres on the fact that magic circle firms have been overly-reliant on banking clients, leaving space for US firms to step into core markets. Certainly, US firms in London are enjoying a peculiarly rapid spate of expansion, which is of course alluring for job candidates.
In 2011, several US firms enjoyed rising numbers in their London offices. Dechert, Kirkland & Ellis and Latham & Watkins added 33, 28 and 25 lawyers respectively. White & Case added 10 partners to its London operation.
In addition, there have been some new launches – most recently that of Locke Lord, which launched in February and plans to have 40 lawyers by the end of the year.
And far from suffering in the wake of Dewey, expansion has in some cases been due to the failing firm. US firms have been quick to scoop up those lawyers (and teams) that fell out of the crisis.
The UK firms, however, are not without a counterattack. With their own spate of transatlantic mergers in recent years, UK lawyers may find they can now have the US experience together with all the advantages of size that a UK operation can offer.
Hogan Lovells, for example, recently announced that it would be introducing a trainee secondment to New York as of August 2012.
For the time being at least, those given the option of a job with a US firm in London will face a difficult choice.
For some, a US firm in London is the ultimate opportunity to take a leading role in a small but expanding practice. But for others, the fear of ending up in an overlooked and vulnerable ‘outpost’ will make even the huge salary unpalatable.
For the firms concerned, the real battle for talent may have only just begun. CP