Legal Business

Some joy for UK partnership as Hogan Lovells board backs City-based litigation chief as deputy CEO

Some joy for UK partnership as Hogan Lovells board backs City-based litigation chief as deputy CEO

While missing out on the firm’s top management role, Hogan Lovells’ London office is all but certain to see one of its most prominent partners appointed as deputy leader for the second time in a row.

Two weeks after the board recommended him as the firm’s next chief executive, Asia Pacific head Miguel Zaldivar nominated today (12 December) litigation head Michael Davison (pictured)  as his proposed deputy from July 2020. Both nominations are subject to a confirmatory vote by the partnership later this month.

With Zaldivar relocating to the firm’s Washington DC headquarters, today’s announcement means Hogan Lovells will once again have a US-based chief executive and a UK-based deputy, with the duo  replacing US litigator Steve Immelt and the City’s former finance head David Hudd.

Like Hudd six years ago, Davison had earlier this year put his name forward to become chief executive and was regarded as the strongest among the three London-based candidates due to his global role and profile. The other two City names in the list, UK and Africa head Susan Bright and corporate veteran Peter Watts, were by comparison little known outside the UK.

While candidates are technically not allowed to campaign, it falls to the 12 members of the firm’s board to recommend a name for approval by the partnership following soundings.

A member of the firm’s management committee since 2013, Davison joined the firm in 1986 and is one of its most influential London partners, leading what is arguably one of the most successful practices of the firm globally.

Hogan Lovells’ chair Leopold von Gerlach said the board had been ‘unanimous in supporting Miguel’s choice and is very pleased that Michael has agreed to bring his leadership experience and capabilities to the role of deputy chief executive’.

With Zaldivar having little connection to much of the UK partnership, Davison’s appointment will be welcome as a sign of support for the London office, the biggest of the firm, which since the 2010 transatlantic union of Hogan & Hartson and Lovells has never seen one of its partners take up the sole leadership role.

marco.cillario@legalease.co.uk

Legal Business

Comment: Miguel who? New Hogan Lovells chief is going to be a hard sell in Europe

Comment: Miguel who? New Hogan Lovells chief is going to be a hard sell in Europe

Canvassing ex-partners a few days after Hogan Lovells’ board recommended Miguel Zaldivar (pictured) as the firm’s next chief executive, Legal Business was in the awkward position of having to spell his surname. Even several current City partners admitted to having never met him.

Yet the Hong Kong-based, Venezuelan energy and infrastructure specialist who spent most of his career in the firm’s Miami arm is all but certain to succeed Steve Immelt at the helm of the firm next July, following a rubber-stamping vote by the partnership later this month.

Relocating to DC and starting his four-year term at the tenth anniversary of the transatlantic union of Hogan & Hartson and Lovells, it is striking that the UK partnership has for the second time in a row missed out on the top role, despite having the firm’s biggest office. Initially Warren Gorrell and Lovells’ David Harris shared the role, but a European lawyer has never taken the sole leadership brief. As the European/Asian side of the business is the same rough size as the US half – and arguably sits higher in the local legal pecking order – it is a grating choice for a self-proclaimed ‘merger-of-equals’ union.

But then the path leading to the firm’s top executive role is somewhat winding, with candidates technically not allowed to campaign, or put forward manifestos. As such it falls to the 12 board members – themselves elected by the partnership – to recommend a name after ‘soundings’. While the model has the benefit of avoiding fractious elections, it also comes with the very sizeable drawback of making it hard for clear strategies to emerge. Great for status quo and continuity but competing at this level of the legal market sometimes requires more than continuity. And, frankly, Hogan Lovells has had ten years of continuity with mixed results at best.

Likewise, three of the six ‘putting their names forward’ were London-based, which ultimately weakened the position of each of them. What mattered more, however, is that UK and Africa managing partner Susan Bright and corporate veteran Peter Watts were little known outside the UK, with litigation chief Michael Davison probably the only real contender thanks to his global role and profile.

With Madrid-based IP partner Burkhart Goebel’s position complicated by the firm’s chair, Leopold von Gerlach, also residing on the continent, the two strongest names in the fold were American. Arguably.

Leading one of the 2,922-lawyer firm’s most successful practices globally, DC-based regulatory head Alice Valder Curran was seen by some as the more obvious frontrunner. That the choice ultimately fell on the less known Zaldivar is notable. Appointed to lead the Asia Pacific and Middle East region last year, he oversees one of Hogan Lovells’ less profitable businesses, accounting for just 7% of the firm’s revenue, despite being credited with bringing China and Japan to the edge of profitability. Neither is Hogan Lovells regarded as having huge momentum in the region.

The concern is less that the snubbing of the legacy Lovells partners will cause immediate resentment than foster the sense of disconnection between the US and European businesses that has never been properly bridged a decade after the merger. Many London partners feel the US business has little to do with them, sentiments held not with rancour, just accepted as facts of professional life.

What will be more welcome by some is the appointment of a finance lawyer as a sign that the firm is still serious about investing in its transactional ranks, a supposed priority post-merger that never quite lived up to expectations. But with such a cautious investment push, the question is if the window of opportunity in building up Hogan Lovells’ deal teams in London and New York has closed. It is certainly a lot narrower at the decade’s conclusion than at its start.

The London M&A practice has been similarly underweight for years, even if Hogan Lovells remains a dependable broad-service finance team in the City. In the US its strength has traditionally been in real estate investment trusts, hardly a mainstream transactional operation. That’s not to say that no progress has been made, with global billings from M&A and PE rising 33% to $487m between 2014 and 2018 under Immelt’s watch, a respectable showing. The London office also fields a group of well-regarded young and mid-vintage partners including Ben Higson, John Connell, Dan Simons and Richard Diffenthal. The 2017 hire of a five-partner Silicon Valley team from Weil Gotshal & Manges is arguably the one unquestioned home run, with the profitable team said to have presided over $40m in billings in 2018.

The party line is that thanks to Immelt’s efforts the firm now has a well-integrated transatlantic platform on which to build the first-ever truly global mainstream M&A practice. But frankly a lot more needs to be done, most jarringly in New York where Hogan Lovells still fields only around 200 lawyers, an anorexic line-up for a firm of its ambition and heritage. The five-year 23% overall revenue growth to $2.12bn in 2018 is also pedestrian, although the pace picked up somewhat under Immelt.

It’s not as much about willingness to spend on high performers – some of its top US rainmakers are already on around $10m. But a firm that has traditionally taken pride in being a nice place to work and nurturing home-grown talent needs more readiness to target laterals and address underperformance. There has rarely been a sense of the sustained momentum in its investment that was always going to be required to make ground in its target markets.

Zaldivar will have a massive job to do in a limited space of time; as a string of recent City departures show, patience is running out. Giving some love to London when it comes to appointing Zaldivar’s deputy and key practice heads wouldn’t be a bad place to start.

Marco.cillario@legalbusiness.co.uk

Legal Business

Legacy Lovells misses out again as board recommends yet another legacy Hogan & Hartson CEO

Legacy Lovells misses out again as board recommends yet another legacy Hogan & Hartson CEO

The Hogan Lovells board has once again chosen a legacy Hogan & Hartson partner to be its next chief executive. Miguel Zaldivar is currently the regional chief executive for Asia Pacific-Middle East, based in Hong Kong, and will replace the current CEO, Steve Immelt, on a four-year term from 1 July 2020.

Although Zaldivar’s recommendation is subject to a constitutional formality vote, according to one former partner, no-one is anticipating that the partnership will vote the board’s decision down.

Based in Florida between 2002 and 2018, Zaldivar developed the Latin American practice and has experience in internal project development and finance through his role as co-leader of the firm’s infrastructure, energy, resources and projects practice.

With the CEO wielding the most executive power at the firm, Zaldivar will be the third legacy Hogan & Hartson partner to occupy the top role since the merger of the UK and US firms in 2010, and the second to be appointed sole CEO. Immelt took up the role of the firm’s first sole chief executive from joint heads Warren Gorrell and legacy Lovells’ David Harris in 2014, with legacy Lovells partner David Hudd as his deputy (pictured together, above). Both Immelt and Hudd’s terms were extended to the end of June next year by the board in 2017 and the firm has not yet made an announcement on who will replace Hudd as deputy CEO, saying the role ‘is subject to separate consideration’.

While the chair of the board, currently held by Leopold von Gerlach, has been occupied by legacy Lovells partners since 2012, Zaldivar’s elevation reflects the fact that the US business dominates key appointments, including head of corporate David Gibbons and head of the global regulatory practice group, Alice Valder Curran. Appointing another CEO from the US side will do little to dispel the idea that the UK side of the business is playing second fiddle. Although Zaldivar has wide support in the US and Asia, according to one ex-partner, he is not as well known in Europe.

The firm’s London presence certainly requires some focus following a number of senior departures. Last month, the firm lost global private equity head Tom Whelan to McDermott Will & Emery and disputes partner Julianne Hughes-Jennett moved to Quinn Emanuel Urquhart & Sullivan after 20 years at the firm.

According to the firm, Zaldivar will focus on client service, investment in key markets and managing the firm’s profitability. While the firm has largely been viewed as being run competently and in an understated manner under Immelt, performance has been solid rather than spectacular. Zaldivar may well be charged with injecting more impetus and ambition into the Hogan Lovells project, including establishing greater strength in corporate on both sides of the Atlantic.

The firm’s current business model has been described as being ‘all things to all people in all places’ and the key question is whether Hogan Lovells will continue with this steady model or focus on becoming more profitable in critical jurisdictions.

muna.abdi@legalbusiness.co.uk

For more on Hogan Lovells, read ‘A meeting of minds – Hogan Lovells’

Legal Business

Revolving doors: McDermott hires Hogan Lovells private equity head as Dechert loses partners in London and Paris

Revolving doors: McDermott hires Hogan Lovells private equity head as Dechert loses partners in London and Paris

The lateral market maintained momentum last week as McDermott Will & Emery hired from Hogan Lovells with both Addleshaw Goddard and Paul Hastings targeting Dechert.

McDermott added Hogan Lovells’ global private equity head Tom Whelan. Whelan, who is experienced in private equity life cycle, has worked with private equity sponsors, multi strategy funds and corporates. His work includes advising on buyouts, M&A, bolt-ons, restructurings and refinancings through to exits.

Hamid Yunis, McDermott’s London managing partner told Legal Business: ‘We are always looking to build upon the strong practices which we have in London and to add top quality lawyers who are equally focused on providing world class client service.’

Addleshaws has hired restructuring partner Paul Fleming who joins the London business support and restructuring insolvency practice from Dechert.

Fleming has been involved in cross-border work, both in restructuring and contentious insolvency matters and advises creditors including institutional lenders and bondholders, stakeholders, insolvency practitioners and directors.

Partner and head of business support and restructuring, Ged Barnes commented: ‘This is the start of an ambitious strategy for the team which will help us to capitalise on our international offices.  Paul’s expertise in cross border insolvencies, funds recovery work and complex, high value insolvency litigation is a great fit with our existing practice.’

Meanwhile, Burges Salmon hired partner Stuart McMillan to its banking team from DLA Piper. He has worked in energy and infrastructure finance and advised banks and borrowers on project finance, acquisition finance and real estate finance deals involving cross-border financing. He will help develop the general Scottish banking practice as well as the firm’s infrastructure, real estate and energy offering.

Burges Salmon managing partner, Roger Bull told Legal Business: ‘Stuart is extremely high quality with a great reputation in the market. From our perspective, he’s got great experience in relation to finance and projects along with some of the other sectors that we’ve been focusing on like energy and renewables. He has those particular skills that will assist and drive our client offer forward in Edinburgh.

‘Banking is performing well. We’re having strong performance across the firm so far this financial year. The banking team are ever expanding their remit, expertise and focus which is very much aligned with Stuart’s appointment,’ added Bull.

Elsewhere, Fieldfisher has hired Paul Stockley as its new co-head of oil and gas. He joins the energy and natural resources group in London from Womble Bond Dickinson where he was head of oil and gas.

Stockley said: ‘The firm’s reputation for all forms of energy and natural resources work is already well-established across the industry and I am encouraged by its ambitious plans for future growth. I look forward to being a part of those plans, leveraging off a tremendous brand and platform.’

Paul Hastings has added to its Paris office with the hire of corporate partner Charles Cardon from Dechert. He has a focus on takeovers, M&A, private equity, and capital markets transactions.

Cardon advises public companies in their takeover bids, issuance of securities, governance matters, disclosure requirements and relationship with shareholders, as well as corporate law matters.

Meanwhile, in Brussels, Alston & Bird has added senior privacy and cybersecurity partner Wim Nauwelaerts from Sidley Austin.

Privacy and cybersecurity co-chair Jim Harvey commented: ‘Privacy and cybersecurity continue to be increasingly critical issues for CEOs and boards, especially among US-based multinationals that view data protection as a global issue.

‘Wim is an internationally recognised attorney in the EU privacy and cybersecurity arena with a well-earned reputation as a trusted voice in advising senior executives in the US, Europe, and elsewhere on strategic business decisions and initiatives involving their companies’ most valuable data assets,’ Harvey added.

muna.abdi@legalease.co.uk

Legal Business

Hogan Lovells’ International business slims down headcount amid 8% revenue growth

Hogan Lovells’ International business slims down headcount amid 8% revenue growth

Profits at Hogan Lovells’ non-US business rose 11% to £281m last year as it slimmed down lawyer headcount by 37 in 2018, the firm’s LLP accounts have shown.

The accounts published today (2 October) show revenue from the firm’s offices in 21 countries outside the States grew 8% to £860m in the year to December 2018, up from £798m the previous year.

The turnover growth came as fee-earner average headcount during the year reduced to 1,632 from 1,669, while support staff numbers were down by 12 to 1,639. Total staff was down to 3,259 from 3,308.

Despite the headcount reduction, staff costs rose 2% to £335m. The firm said in summer 2018 it would cut more than 50 City business support roles in a bid to improve efficiency.

The average number of equity partners also shrank slightly to 320 compared with 329 in 2017.

This combined with the profit increase meant average profit per equity partner (PEP) shot up 17% to £1.07m from £913,000.

UK revenue rose 8% to £324m, while in continental Europe it grew 11% to £421m, but turnover in Asia Pacific and the Middle East was down 3% to £115m.

A spokesperson for the firm said it continued to have ‘a robust balance sheet with no net debt outstanding at year end’.

The LLP books show that the non-US offices, which account for 49% of turnover, outpaced the firm’s overall revenue growth.

In February Hogan Lovells posted revenue of $2.12bn, up 4% on $2.04bn in 2017, a less pacey rate of growth than the 6% achieved in each of the previous two years. In sterling terms this translated as a 1% rise to £1.6bn.

But global PEP rose 8% to $1.38m, or 4% to £1.04m, after the firm reduced equity partner headcount 6% to 523 in 2018.

Chief executive Steve Immelt told Legal Business last February that the firm had to be ‘very careful not to be overstaffed, and we were very focused on that’. He added: ‘Notwithstanding those changes, revenue went up and revenue per lawyer is considerably up.’

marco.cillario@legalease.co.uk

Legal Business

Hogan Lovells losing bulk of South African practice as merger partner breaks away

Hogan Lovells losing bulk of South African practice as merger partner breaks away

Hogan Lovells’ South African headcount is being slashed as its merger partner splits from the firm following a troubled six-year tie-up.

The firm confirmed today (1 August) that it is undergoing a ‘restructuring’ of its South African practice that will see 71 of its lawyers set up an independent law firm, while Hogan Lovells will re-launch a 20-lawyer office in the country under its UK LLP.

The move, approved by the partnership last night, brings to an end the troubled tie-up with South African firm Routledge Modise, launched in December 2013, which saw its local branch operate as a financially and operationally separate entity under the Hogan Lovells logo.

The office met several hurdles along its way, seeing its headcount shrink from 120 to 91 and recently attracting criticism for its work for the South African Revenue Service (SARS). At the beginning of last year, Labour peer and former cabinet minister Peter Hain accused the firm of being complicit with corruption and money laundering in the country and called on the Solicitors Regulation Authority (SRA) to withdraw its authorisation as a recognised body.

In summer 2018 the SRA confirmed it would not take any action against the firm, and the South African Law Society found no evidence of misconduct by the firm.

The office also saw the departure of one of its partners amid allegations of sexual misconduct between the end of 2017 and the beginning of 2018. Hogan Lovells declined to provide details of the episode, nor specify whether it had been reported to local authorities at the time.

As a result of last night’s decision, five of Hogan Lovells’ South Africa partners and 15 other lawyers will form a fully-integrated office focused on corporate, finance and natural resources work.

Meanwhile, 21 other partners – including South African chairman Nkonzo Hlatshwayo – will launch an independent firm under a different name alongside 50 other lawyers following a two-month transition period.

A spokesperson for Hogan Lovells told Legal Business that while the sexual misconduct episode was unrelated to yesterday’s decision, the issues involving the work for the SARS had been a factor, as they arose from work that the firm did not necessarily wish to continue carrying out in the country.

‘One year ago we were looking at a position where the office was coming under severe criticism,’ the spokesperson said. ‘We made sure we went through the appropriate process in terms of giving evidence to Parliament and supporting the independent investigation by the Law Society.’

They added that once all claims against the firm had been dismissed, ‘we looked at the relationship we had with Hogan Lovells South Africa: this is the only office that is not fully integrated’. After a conversation with the South African partnership the firm concluded that ‘the best way forward was to have a smaller, focused office’ while Hogan Lovells South Africa pursued its own strategy with a wider range of clients in the South African market, ‘for example the government sector which is not necessarily a sector we want to pursue in South Africa.’

Hogan Lovells’ Johannesburg-based services center, which hosts around 200 employees, is unaffected by this decision.

marco.cillario@legalease.co.uk

Legal Business

Inflection point – Ashurst steps back from the brink but can the revival last?

Inflection point – Ashurst steps back from the brink but can the revival last?

It was not all plain sailing,’ reflects Ben Tidswell, Ashurst’s chair, on the aftermath of its 2013 merger with Australia’s Blake Dawson. ‘But partners saw what we were trying to achieve and most wanted to be part of that. Now the firm is enjoying the success of that.’

Tidswell speaks with the palpable relief of one whose darkest days are behind him. The merged firm is now on the brink of revealing its best financial showing to date after years of indifferent or poor performance. Tidswell may well celebrate given the upheaval that preceded this inflection point, dwarfing any woes suffered by City rival Lovells following its 2010 union with Washington DC’s Hogan & Hartson.

Legal Business

Legal 500 Data: Behind the story

Legal 500 Data: Behind the story

The Legal 500 2019 London rankings

Ashurst and Hogan Lovells are the subject of this month’s cover feature – both firms that underwent large mergers in the last few years. Here we look at the firms’ London rankings in The Legal 500. For further information see ‘Inflection point’.

Ashurst

Legal Business

Tightening of ranks at Hogan Lovells sees PEP approach $1.4m as turnover rises 4%

Tightening of ranks at Hogan Lovells sees PEP approach $1.4m as turnover rises 4%

Hogan Lovells has posted an 8% increase in profit per equity partner (PEP) to $1.38m after reducing equity partner headcount 6% to 523 in 2018.

The firm today (25 February) posted revenue of $2.12bn, up 4% on $2.04bn in 2017, a less pacey rate of growth than the 6% achieved in each of the previous two years. Revenue per lawyer (RPL) grew at a faster 6% pace to $804,000 as the firm cut its legal workforce 2% to 2,637 while total partner headcount, including non-equity partners, was down 4% to 803.

‘In today’s market having a strong handle on capacity is critical to achieve profitable growth,’ chief executive Steve Immelt (pictured) told Legal Business. ‘We have to be lean, we have to have adequate staffing but we have to be very careful not to be overstaffed, and we were very focused on that. Notwithstanding those changes, revenue went up and RLP is considerably up.’

The numbers are less flattering in sterling teams, with revenue rising by less than 1% to £1.6bn while PEP passed the £1m mark growing 4% to £1.035m.

London revenue meanwhile broke the £300m barrier rising 3% to £301.9m.

While the firm made 31 partner promotions and 18 lateral hires, losses in 2018 included London litigation duo Jon Holland and Andrea Monks to Latham & Watkins in January and private equity partner Robert Darwin to Dechert in August, as well as a five-strong California team to Baker McKenzie.

The firm also cut 54 of its around 500 business support roles in London, moving most of them to its low cost centres in Johannesburg, Louisville and Birmingham.

The majority of revenue came once again from America, which accounted for 51% of the firm’s billings. Europe was second at 42%, with Asia Pacific and the Middle East contributing the remaining 7%.

Key mandates for the corporate practice, which accounted for 31% of turnover, included Walmart’s $16bn acquisition of a 77% stake in Flipkart. The firm’s contentious and employment practice, which was busy with key client Uber on a number of cases, brought in 28% of billings.

Immelt said that the regulatory practice, accounting for 18% of turnover, had a ‘very strong year’. ‘That’s not surprising. We have a leading trade practice and there are trade issues happening all over the place.’

The remaining turnover came from finance (14%) and intellectual property, media and technology (9%).

Looking to the future, Immelt said that work levels had been healthy at the start of 2019 and concluded: ‘Brexit is typical of the type of volatility that we see today, but that’s the benefit of being in a very well hedged firm like Hogan Lovells. We have a strong US practice, a strong practice in London and a strong practice in Europe.’

marco.cillario@legalease.co.uk

Legal Business

Hogan Lovells partner leaves firm after watching pornography at work

Hogan Lovells partner leaves firm after watching pornography at work

A Hogan Lovells partner has agreed to leave the firm after being caught viewing pornographic images on a work computer.

The firm suspended the partner in November last year and launched an investigation after the partner in question was caught by a lawyer from a window in Irwin Mitchell’s offices, which are next to Hogan Lovells’ base on Holborn Viaduct.

According to RollOnFriday, the Irwin Mitchell lawyer used a mobile phone to film the partner and sent the footage to lawyers at Hogan Lovells, who reported the incident to the firm’s HR team.

A spokesperson for the firm said:  ‘After our investigation we agreed that the partner would not return after their suspension period and they are no longer with the firm. This incident is not a reflection of who we are and the culture and inclusive values we stand for.’

Following the incident the firm has also ‘tightened’ its policy on the websites that can be accessed at work: ‘We didn’t block access to websites unless they represented a cyber security risk (e.g. they have malware on them). The nature of our work for clients sometimes means we need to carry out investigations in areas which require us to have flexible access. We have reviewed and tightened this policy.’

Law firms have in recent months been subject to increasing scrutiny on partners’ misbehaviour after several reports of sexual misconduct emerged in the wake of the #MeToo movement.

Firms to see partners leave following complaints of sexual harassment include Reed Smith, Quinn Emanuel Urquhart & Sullivan, Latham & Watkins, Herbert Smith Freehills and Dentons.

Meanwhile, the Solicitors Regulation Authority is investigating Baker McKenzie after accusations that one of its London partners sexually assaulted an associate in 2012. After news of the incident came to light in February last year, the firm announced the partner would leave and acknowledged it should have handled the incident better.

marco.cillario@legalease.co.uk