Title: The Battle for London: Paul Weiss Challenges Kirkland & Ellis in the Legal Market
Introduction:
On a warm Friday evening in August, senior partners from two of America’s most powerful law firms found themselves in an unlikely gathering at Chicago’s Wrigley Field. Surrounded by thousands of fans, they enjoyed a Bruce Springsteen concert, with his classics “Born to Run” and “Wrecking Ball” filling the air. Little did they know that this relaxed atmosphere would soon be shattered, as tensions between their firms erupted in a bold recruitment battle for London’s private equity market.
The Rise of Kirkland & Ellis:
Kirkland & Ellis, founded in Chicago in the early 20th century, has steadily challenged the hierarchy of Wall Street law firms with its entrepreneurial drive. Their strong ties to the private equity industry have propelled them to become the highest-grossing law firm in the world. With 505 equity partners earning an average of $7.5 million last year, Kirkland has built its reputation through lucrative compensation deals that rival firms couldn’t match.
Paul Weiss Enters the Fray:
Meanwhile, Paul Weiss, an established firm based in New York, sought to establish a significant presence in London, a key hub for global finance. In a stunning move, they recruited 12 partners from Kirkland, shaking the industry with the speed and scope of their raid. This strategic play aimed to quickly build a private equity firm in London, creating a formidable player in the capital market.
The Fantasy Football of Hiring:
The recruitment of high-value lawyers, who can command salaries of over $20 million, remains fiercely competitive in the legal industry. Paul Weiss’ bold move to build their London team is part of an industry-wide battle to secure these trusted advisors to private equity firms, making them one of the latest big New York firms to establish an English law practice.
The Turmoil Unveiled:
Behind the scenes, tensions were simmering. The unexpected departure of senior Kirkland lawyers, orchestrated by Paul Weiss, caught their London-based partners off guard. The hiring process bypassed those partners who had assumed they would be consulted on such major moves. This breakdown in communication increased Kirkland’s vulnerability to further incursions by their deep-pocketed competitor.
Paul Weiss’ Ambitious Plans:
Paul Weiss didn’t stop at recruiting 12 partners from Kirkland. Their master plan, named “Project Springsteen,” aimed to hire up to 200 lawyers in London and capitalize on their strong relationship with American giant Apollo to expand their client base in Europe. While this ambitious move was risky and relied on secretive talks that took place while most lawyers were on vacation, Paul Weiss saw a unique opportunity to challenge Kirkland’s position in London.
Kirkland Strikes Back:
Faced with their vulnerability, Kirkland took swift action to mitigate the impact of the departures. They contacted clients to assure them that the quality of their service would not falter and offered one-time cash bonuses to lawyers considering leaving. They even managed to prevent a partner from defecting to Paul Weiss, albeit at a significant cost.
Conclusion:
The recruitment battle between Paul Weiss and Kirkland & Ellis highlights the fierce competition for high-value lawyers in the legal industry. As firms vie for top talent and attempt to expand their global footprint, London’s legal market is set to experience significant upheaval. With the rise of wealthy US firms disrupting traditional pay structures, this raid by Paul Weiss is likely to spark a series of moves among the capital’s top firms, reshaping the landscape of the legal industry in London.
Summary:
In a surprising turn of events, Paul Weiss launched a raid on Kirkland & Ellis, recruiting 12 partners and making a bold statement in the London private equity market. This move, codenamed “Project Springsteen,” aims to build a significant presence in London and replicate the firm’s strong relationship with Apollo in Europe. The recruitment battle between these two powerhouse law firms reflects the ongoing war for high-value lawyers and promises to reshape the legal landscape in London.
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On a balmy Friday evening in mid-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 classics including “Born to Run” and “Wrecking Ball”.
Jon Ballis, the president of Kirkland & Ellis, mingled with other Springsteen fans including a celebrity 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 explode within days, when Paul Weiss began recruiting Kirkland lawyers in a bold attempt to quickly build a private equity firm in London.
Founded in Chicago in the early 20th century, Kirkland he relied on an entrepreneurial drive to challenge the hierarchy of Wall Street law firms. Over the past decade, its strong ties to the private equity industry have transformed it into the highest-grossing law firm in the world. Paul Weiss, based in New York, has long been an established company, but without a significant presence in London.
A month after the Springsteen concert, Paolo Weiss recruited 12 partners from Kirkland, a raid whose speed and scope 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 London private capital market.” said Siobhán Lewington, managing director of legal recruiter Fox Rodney. “Paul Weiss is the latest of the big New York private equity firms to set up an English law practice in London. Putting together a team is the ultimate fantasy football ”.
The episode also demonstrates that the industry-wide war for high-value lawyers, who can now command salaries of more than $20 million, shows little sign of slowing. Those who are trusted advisors to private equity firms remain among the most sought after.
The Financial Times spoke to several partners at 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 top-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 younger colleagues.
The news surprised Johnson and a group of other London-based partners, who had expected to be consulted on such a major hire, according to people familiar with the matter. Law firms often have to walk a fine line between keeping new hires under wraps and notifying other partners in advance.
Ballis and Andrew Calder, a Houston-based energy lawyer who had worked with Membrillera early in his career, were heavily involved in the hiring decision, some of the people said. Johnson responded angrily to Ballis, expressing concern about the hiring process.
Ballis was furious at Johnson’s reaction, according to colleagues, and the situation quickly escalated. On August 1, Johnson received another phone call from Ballis, who told him that he had been fired. Ballis accused Johnson of trying to orchestrate the transfer of some Kirkland lawyers to another firm, which he denied.
Firing Johnson was a big decision. It had continued to bring in work this year, including advising buyout group EQT on its £4.5bn takeover of London-listed veterinary firm Dechra, although some other partners struggled amid a slowdown in closing of the agreements. The next day Membrillera’s arrival in Kirkland was announced.
Johnson’s exit – and U.S. executives’ decision to bypass London partners when hiring Membrillera – has left Kirkland more exposed to incursions from a deep-pocketed competitor, according to people familiar with the matter.
The vulnerability was unusual for Kirkland. Its 505 equity partners, who share profits, took home an average of $7.5 million last year, and the firm has built its ranks by attracting lawyers with compensation deals that rivals couldn’t match. Paul Weiss equity partners earned an average of $5.7 million last year, according to an annual ranking by The American Lawyer.
In addition to concerns about the hiring process, the loyalty of some, including leading debt finance lawyer Neel Sachdev, a 20-plus year Kirkland veteran, had been dented by concerns that the firm had lost its entrepreneurial spirit .
In early August, Sachdev was one of several senior Kirkland lawyers who began talking with Paul Weiss counterparts, including President Brad Karp, people familiar with the matter said.
Within days, the discussions produced a plan for Paul Weiss to hire a team of lawyers who could advise buyout firms on deals, financing, tax, antitrust, litigation and restructuring.
The firm’s long-term aim is to recruit up to 200 lawyers in London and replicate the deep relationship it has with American giant Apollo with clients in Europe. Paul Weiss currently employs just over 30 lawyers in London, according to his website.
But the plan, known as “Project Springsteen” within Paul Weiss, was fraught with risk. The talks took place in secret, made easier by the fact that most of the lawyers were on holiday.
Paul Weiss would also have to deal with Kirkland’s deep pockets. It was not unheard of for Kirkland to offer more than $2 million to retain partners who were considering leaving, according to people familiar with the matter. Kirkland might as well fire them.
By August 11, when Ballis attended Springsteen’s concert, plans were in place. A team of eight Kirkland lawyers, including Sachdev, resigned on Aug. 13. Paul Weiss immediately made a second push that by early September three more Kirkland associates, a lawyer from Linklaters and also Johnson had joined.
Forced to stay behind, Kirkland – a company more accustomed to orchestrating raids than trying to foil them – began contacting customers to reassure them that the departures would not compromise the quality of their service.
The company has also started promoting people internally in London, particularly those judged to be at risk of leaving, people familiar with the matter said.
Lawyers considering leaving, including those who had had interviews with Paul Weiss, were offered one-time cash bonuses. In at least one case, Kirkland prevented a partner from leaving Paul Weiss.
“In the short term this might work, but it is incredibly expensive,” added one person involved.
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 sector ends, leaving companies facing higher financing costs and a more difficult environment in which to generate returns.
Despite the defections, challenging Kirkland’s position in London will be far from easy. Membrillera’s recent hire in London is also expected to strengthen Kirkland’s relationship with US investment giant KKR.
Over the past decade, wealthy US firms have already shaken up London’s legal market, driving up wages and forcing some so-called “Magic Circle” firms to tear up historic pay structures. Headhunters and other lawyers say Paul Weiss’ opening salvo is likely to trigger a wave of moves among the capital’s top firms.
“This will mean a lot of inconvenience,” Fox Rodney’s Lewington said.
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