Editors' Blog

The Freshfields project takes its toll

Posted 15/02/2007 by Deal Comment

For a firm that is doing so well, Freshfields Bruckhaus Deringer seems to have more than its fair share of internal problems at present.

The firm tops the league tables for European M&A and seems to win a role on every premium mandate going at the moment but Legal Week’s report today (15 February) on the firm’s ongoing shake-up of its finance practice suggests all is not well at Fleet Street.

For a start, the mounting tensions between the firm’s corporate department and a wounded finance practice have not been overplayed. Likewise, the recent partner departures and the fact that the five current finance sub-groups are to shrink to no more than three has been badly received.

Concerns regarding strategy - and in particular the impact on finance of the current partnership restructuring - are understood to have been a factor in the recent departure of finance heavyweight David Ereira for Linklaters (see story). Remember, culturally Freshfields partners do not lightly cross the floor for Silk Street.

In addition, the expectation that the structured finance and asset finance sub-teams will be merged does not engender confidence since the two don’t sit very naturally together. Structured finance, at least, knows that the firm is committed to the sector but the mood cannot be as confident in the firm’s project practice, which won’t even operate as a self-standing unit any more. It is not a message that has been lost on the team itself, with a substantial number of partners from the team currently looking for other career options.

Also significant is the decision to pair the firm’s respected head of projects, Nicholas Bliss, with corporate partner Ed Braham in an infrastructure sector team. Freshfields is obviously far more intent on maintaining the infra cross-over with hot areas of its corporate practice - in particular the private equity clients that Braham often acts for - than winning bread-and-butter projects work.

Freshfields will obviously still have a projects capability but for a punch-above-weight team that boasts lawyers of the calibre of Bliss, Kent Rowey and current chief executive Ted Burke, the sidelining of projects seems a highly symbolic gesture.

Officially, the firm stresses that it is shaking up all of its departments but admits that finance has been one of the areas most heavily affected. Will the firm be changing any of its corporate teams? Er, no. Apparently, they don’t need any tweaking. Likewise, senior partners privately admit that Freshfields’ ambitions in finance generally - and in projects in particular - have been scaled back to put the emphasis firmly back on corporate.

Either way, Freshfields certainly cannot be accused of half-measures and there is a strong argument to be made for exactly the kind of restructuring it is currently implementing.

Yet that still leaves the question of whether this whole process could have been more effectively communicated to the general partnership - and whether Freshfields is really ready for the wild swings in profitability its explicitly M&A-driven model will inevitably usher in.

With the kind of turbulence Freshfields is risking, the firm must be very confident that its impressive transactional success can be maintained for a good while yet.

alex.novarese@legalweek.com; paul.hodkinson@legalweek.com