Editors' Blog

All over bar the moaning about the pound

Posted 21/02/2008 by Alex Novarese

The good news for Clifford Chance (CC) is that the once-ceaseless sniping it suffered in Manhattan has been reduced to a few ex-partners making bitchy comments about the exchange rate. That, at least to judge by an in-depth profile of CC’s US practice in this month’s American Lawyer, ranks as a major achievement for a firm that suffered five miserable long years after its 2000 takeover of Rogers & Wells.

Indeed, all London firms should cheer CC’s rising stock on Wall Street; the departure-strewn, strategically-challenged tie-up had become a lightning rod for US rivals that wanted to squeeze out UK firms in New York. If CC can turn the corner, the odds on its City peers making inroads with potential US recruits and clients also improve.

Still, it didn’t come easy. Despite sharply rising fees in 2006-07, the firm’s current US revenues of around $320m (£163m) are actually down on the $344m (£176m) US turnover the firm boasted back in 2001-02, the first full fiscal year after the merger. The fall is largely due to the stream of departures, including most of the legacy firm’s rainmakers; at one low point the firm’s 90-lawyer DC arm shrunk to just 34. And the less said about CC’s ill-fated entry to the West Coast the better.

With such painful history behind it, CC is once more attracting senior lawyers, having hired 14 partners in the US since 2006. It has even secured the odd heavy-hitter, like the highly-rated litigation team led by Juan Morillo from Sidley Austin. Bringing in Morillo - estimated to have annual billings of more than $12m (£6.1m) - looks to have sent out the right message, even if CC’s strategy is rightly more focused on recruiting less-established but like-minded partners that buy into the global platform.

And evidence of CC’s improved drawing power with junior recruits came in a 2007 survey of associates by AmLaw, which ranked the firm’s New York office 10th out of 81. In Manhattan, these kind of rankings matter – it was poor associate feedback in New York that led to that ultimately-disastrous leaked memo in 2002.

The biggest irony of this change in CC’s US fortunes is that it has happened without the firm creating any ‘super-point’ partners - the very issue that dogged it for years after the New York merger. Instead, it appears that the 2005 move to forge a three-level ladder, which created an additional ladder on top of its central lockstep specifically to compensate high-billing US partners, has helped win over the market, even though CC has yet to appoint anyone to it.

A related factor is obviously the firm’s sharply-rising profitability over the last two years, which has made the delights of lockstep suddenly less mysterious to American minds. On current form, CC will this year have the capacity to offer US heavyweights around $4m (£2.03m) if it decided to cut a top-end super-point deal, which is a handy tool to have in any managing partner’s back pocket.

With a decent mid-tier platform in place and an upward trajectory, the challenge now is to convince more of its core European clients - like Barclays, which this week reiterated its desire to push ahead with its own US expansion - to use the firm Stateside. That’s easier said than done but given the hurdles already surmounted it seems like small potatoes.

What will be interesting now will be to gauge the wider impact of a revived US offering from CC. There’s little doubt that CC’s prolonged problems in Manhattan came in many minds to define the supposed flaws of the global legal model, even though it was always more down to a culture clash between individual firms. It is possible that CC’s rebirth will produce a similarly substantial, albeit more positive, impact. And yes, the strong pound didn’t hurt either.

alex.novarese@legalweek.com