Legal Business

Comment: K&L Gates’ Tony Griffiths on profit, delusion and how Big Law became obsessed with the wrong things

Comment: K&L Gates’ Tony Griffiths on profit, delusion and how Big Law became obsessed with the wrong things

Many centuries ago while studying law as an undergraduate, a particularly inspiring corporate law lecturer suggested that I might want to read a book on management theory, as well as immersing myself in case law and precedent. I still have no idea why he suggested it and I believe I was the only one in the company law class who took him up on it.

The book was by Peter Drucker. For those of you who have not encountered his work, Drucker has been hailed as the godfather of modern business theory, influencing and mentoring the likes of Jack Welch of GE and revered by the Japanese as the man who inspired the resurgence in their technology industry in the 1960s and 1970s. None of this was clear to me when I read the book, but what became clear was that the doctrine he set out was compelling and apparently completely at odds with what was, in the early 1980s, taken as orthodoxy in UK business.

Fast forwarding 20 years to 2004, when I took over as managing partner in Nicholson Graham & Jones – we later merged in January 2005 with Kirkpatrick & Lockhart, becoming its first international office and office number 11 (K&L Gates now has 47 outposts around the world) – and for no particular reason other than the fact that at the time we were facing something of a crisis (ahem!), I decided to reread Drucker’s book. His basic assertion is still pretty shocking: there is no such thing as profit. Profit is an artifice created by accountants to make the books balance. What we call profit is actually the cost of staying in business tomorrow.

Drucker’s basic assertion is still pretty shocking: there is no such things as profit. Profit is an artifice created by accountants to make the books balance.

In today’s Big Law environment with its obsession with PEP, RPL, productivity enhancement and metric-based comparison, this sort of language comes close to heresy. However, if you strip away the startling rhetoric, the message is not so controversial. It simply means that a business’s long-term viability depends upon constant reinvention through investment in innovative and differentiated client offerings. What is startling when you think about it, is how far Big Law has moved away from what I would argue is this basic truth in its focus on short-term consumption, particularly for and by its partners.

Drucker is not saying that businesses should live in sackcloth and ashes for the sake of the next generation, but he is saying that an industry that focuses in on itself and measures itself solely by its consumption is missing the fundamental reason for its existence, which is meeting client demand. To quote Drucker again ‘there is only one valid definition of a business purpose: to create a customer’. I would say this wouldn’t I?

However, Drucker’s approach can lead to increased competitiveness, market penetration and, ironically, also increase profitability. In the case of my own office, influenced by Drucker’s approach in removing P&L barriers between groups and departments and developing a multi-disciplinary approach which involves every lawyer in the office in all of our focus areas, we have increased revenues by 60% in the last five years on a largely static headcount with an RPL increase of 62% over that period.

The last five years have seen the toughest business environment that any of us have experienced. My feeling is that the next few years will be equally tough. Perhaps it is time to challenge the orthodoxy of how we define and portray ourselves as an industry, and collectively present the message, to an increasingly sceptical client market, that Big Law is less obsessed with itself and more focused on its future through investment.

Tony Griffiths is the head of London at K&L Gates.

Legal Business

Profit, delusion and how Big Law became obsessed with the wrong things

Profit, delusion and how Big Law became obsessed with the wrong things

K&L’s Tony Griffiths says the father of business theory has lessons Big Law would do well to learn

Many centuries ago while studying law as an undergraduate, a particularly inspiring corporate law lecturer suggested that I might want to read a book on management theory, as well as immersing myself in case law and precedent. I still have no idea why he suggested it and I believe I was the only one in the company law class who took him up on it.

Legal Business

King & Wood Mallesons City departures continue as K&L Gates recruits tax partner

King & Wood Mallesons City departures continue as K&L Gates recruits tax partner

King & Wood Mallesons (KWM) continues to see partner departures from its London office as K&L Gates has recruited longstanding tax partner Giles Bavister.

Bavister leaves after more than 15 years at KWM and its legacy firm SJ Berwin. 

He joins a list of partner defects from KWM’s City office, with previous exits this year including IP veteran Ray Black to Mishcon de Reya, London disputes head Alex Leitch to Covington & Burling, financial markets partner Gregg Beechey to Fried, Frank, Harris, Shriver & Jacobson and private equity partner Simon Fulbrook to Goodwin Procter.

A coup for K&L Gates, Bavister is cited as a ‘key contact’ in the corporate tax sphere by The Legal 500. He advises on a range of property matters, including the structuring and implementation of tax-efficient acquisitions and disposals; the structuring of portfolios and fund investments; commercial and residential property developments; and investment in alternative asset classes, including renewable energy and student housing.

Previous mandates include advising the Crown Estate in connection with a £1.8bn joint venture with Norges Bank Investment Management and Invesco on its purchase of 1 Finsbury Circus in London.

K&L Gates’ London administrative partner Tony Griffiths said: ‘Giles is an experienced, commercial, and well-regarded tax lawyer. He will play a particularly important role in the integrated services that we provide to our real estate and financial services clients.’

Bavister added: ‘With its strength in real estate, both in the UK and internationally, K&L Gates provides an ideal platform to further develop my practice as well as to support the firm’s existing client base.’

The tax expert is the third partner to join the K&L Gates’ London office this year, following the arrivals of Freshfields Bruckhaus Deringer IP lawyer Arthur Artinian and Berwin Leighton Paisner investment management partner Jacob Ghanty

sarah.downey@legalease.co.uk

Legal Business

Completing the set: Morgan Lewis takes another two partners from K&L Gates in City structured finance push

Completing the set: Morgan Lewis takes another two partners from K&L Gates in City structured finance push

Morgan, Lewis & Bockius has recruited two further partners from K&L Gates, adding to the three already to have made the move in July, as the US firm builds its City securitisation offering.

Structured finance partner Theresa Kradjian and corporate tax partner Paul Beausang will join the firm’s London office structured finance team as law firms position themselves ahead of an expected revival of the securitisation markets.

The duo join recently recruited finance partner trio – Matthew Duncan, Julian Goodman and Paul Matthews – also from K&L Gates, taking a five-partner team to make the move so far this summer. The expanded structured finance team will allow the firm to add to its offering in the US, Asia and Europe.

Previously, Kradjian, Duncan and Matthews joined K&L Gates in 2007 in a three-partner hire from Sidley Austin, as K&L boosted its City finance practice. The loss of the five-partner team now leaves a significant hole in the firm’s offering.

Morgan Lewis structured transactions practice leader Reed Auerbach said: ‘It has been our experience that recruiting teams who have practiced together for many years is the most successful way to assist our clients with their increasingly sophisticated global needs. Theresa Kradjian and Paul Beausang bring unique expertise and added depth to our structured transactions team in London and across the firm.’

Kradjian has experience of mortgage-backed and asset-backed securitization and structured finance deals. She also focuses on commercial paper, CLOs, and covered bond transactions.

Beausang has advised clients on corporate tax issues with a particular emphasis on structured finance transactions, big ticket indirect real estate projects, and public/private development partnerships.

In addition, last month [July] Morgan Lewis added DLA Piper’s London head of funds Gawain Hughes. 

‘London is a key area of focus for our clients and our firm,’ said Morgan Lewis Chair Jami McKeon. ‘Our new partners bring to our clients a depth of knowledge and comprehensive experience that complements our market-leading practice in the US.’

jaishree.kalia@legalease.co.uk

Legal Business

Revolving doors: Cooley, Pannone, DWF and K&L Gates all bolster UK numbers

Revolving doors: Cooley, Pannone, DWF and K&L Gates all bolster UK numbers

Last week saw a quartet of US and UK firms, namely Cooley, Pannone Corporate, DWF and K&L Gates, all make lateral hires in the areas of tax, regulatory, real estate, and finance.

Continuing on its upward trajectory since its January launch in the City was Cooley which, on Friday (15 May), announced it will enhance its London business and finance practice with the hire of London-based tax partner Natasha Kaye from Olswang.

Kaye advises on both domestic and international tax issues for corporate, real estate, outsourcing and IP transactions and planning. She has a particular focus on private equity deals advising both institutions and management teams, as well as advising more generally on M&A, reorganizations, joint ventures and corporate restructurings.

Cooley’s London managing partner Justin Stock said: ‘Natasha is a highly-respected tax lawyer with a broad skillset across all areas of complex corporate tax work who will prove incredibly valuable to our corporate client base active in the UK.’

It follows a flurry of partner hires by the US firm which recently recruited Olswang’s longstanding corporate partner Stephen Rosen, as well as Reed Smith life sciences partner duo John Wilkinson and Nicola Maguire in March.

Just over a year after deciding against joining Slater & Gordon following its acquisition of Pannone’s consumer law business, Manchester-based Pannone Corporate is in expansion mode and has appointed two partners, Tristan Meears-White and Dermot Preston, from DWF and Gateley respectively.

Meears-White has joined as head of regulatory compliance. He advises on regulatory and compliance issues including anti-trust, competition, bribery and corruption, and health and safety law. Preston has joined the insolvency and corporate recovery team and advises on non-contentious insolvency issues including advising banks, asset based lenders, companies and directors.

Commenting on the partner hires, Pannone Corporate managing partner Paul Jonson said: ‘This investment in our regulatory and compliance, and insolvency and corporate restructuring practices further enhances our offering to the firm’s growing client base of corporate and commercial clients who want a quality service delivered in a clear, unstuffy way at sensible rates.’

Meanwhile, DWF invested in its Scottish team with the appointment of real estate partner Moray Thomson in Glasgow. Joining from MacRoberts, where he served as head of planning, Thomson is tasked with increasing the ‘scale and visibility of DWF’s planning capability in Scotland and nationally’. Thomson is specialised in onshore wind and grid connections and reinforcements, which DWF hopes will increase its contentious planning and consenting capability. His recent work in this area includes the consent for the various parts of the South West Scotland Renewables Connection project and the re-powering of the Cockenzie Power Station.

Lastly, K&L Gates enhanced its City investment management practice with the recruit of Berwin Leighton Paisner partner Jacob Ghanty. Ghanty advises asset managers, insurers, banks, payment institutions, and intermediaries about financial regulation, investment funds, insurance/reinsurance, and structured debt and capital markets.

Tony Griffiths, administrative partner of K&L Gates’ London office said: ‘Jacob joins a growing UK investment management team. His arrival further strengthens the advisory side of our practice, where we have seen significant client demand from alternative capital providers for guidance on the myriad of existing and new financial services regulations.’

Ghanty constitutes the second new partner addition to K&L Gates in London this year, following the March arrival of intellectual property partner Arthur Artinian from Freshfields Bruckhaus Deringer.

sarah.downey@legalease.co.uk

Legal Business

Listing in London – King & Spalding carries US biotech to AIM listing

Listing in London – King & Spalding carries US biotech to AIM listing

King & Spalding’s recent recruits in the City have helped handle Californian biotech company Verseon £300m stock market listing in London while Covington & Burling advised from San Francisco.

London corporate partners William Charnley and Tom O’Neill handled the listing on the Alternative Investment Market for the Californian company with support from partners in the US while Covington & Burling advised from San Francisco. K&L Gates’ London corporate chief Paul Tetlow advised Cenkos Securities, the nominated adviser and broker to Verseon. The move marked a turnaround from the stream of European drugs companies listing in the US to raise money for expansion.

US securities specialist O’Neill joined King & Spalding in November from Linklaters last year as part of the firm’s recent expansion in the City, which has continued into 2015 with the hire of Latham & Watkins’ former European vice chair of tax Daniel Friel in March and Fried Frank Harris Shriver & Jacobson’s London disputes head Nick Cherryman last month.

The listing gives Verseon a market capitalisation of £303m with it planning to use £61m to advance its current drug programmes, expand its drug pipeline into additional disease indications and develop its drug discovery platform.

The deal follows the work done by Markus Bauman, a US securities specialist who also arrived last November from Latham & Watkins, on mobile food ordering company Delivery Hero’s $589m purchase of Turkish peer Yemeksepeti which completed on Friday (8 May 2015). Bauman worked alongside Elisabeth Baltay who was brought in from Bingham McCutchen in October 2014.

tom.moore@legalease.co.uk

Legal Business

Targeting London: Ropes launches City commercial litigation practice with K&L Gates hire

Targeting London: Ropes launches City commercial litigation practice with K&L Gates hire

Five years after setting up in London, Ropes & Gray has launched a City-based commercial litigation practice with the hire of K&L Gates disputes partner Thomas Ross.

The move is just the latest in a series of hires for Ropes which has been pushing to expand its City finance and private equity practice for the past year. But this move will see Ross join the firm’s business and securities litigation practice, as the firm looks to Ross to advise clients on dispute-related issues in its transactions, government enforcement and business restructuring practices.

Ross is an English-qualified lawyer with experience of multi-party and multi-jurisdictional disputes, particularly domestic and international banking litigation. He has advised financial institutions on defensive strategies in default scenarios; regulatory and compliance issues; internal investigations and white collar crime; fund, asset management and pensions litigation; and contractual and professional negligence disputes.

He joins from K&L Gates, where he was a partner in the disputes team since 2011, with a focus in banking and finance, asset management and pensions-related disputes. Before this, he was a partner at Lawrence Graham from 2008 to 2011, and special counsel at Dorsey & Whitney from 2005 to 2008. Prior to this, he spent almost ten years at Slaughter & May as a trainee/assistant solicitor.

Ropes London managing partner Mike Goetz said: ‘This is a significant appointment for the London office. As our practice has grown over the past five years, we have recognised a need to provide litigation support to the practice and clients. Tom will work closely with the government enforcement and business restructuring teams, and directly support our transactional practices as it is not uncommon for litigation related issues to arise from transactions.’

Other goals for the US firm include growing its real estate practice and expanding its securitisation offering in the City. At present, the firm’s City team has 14 partners in corporate/finance; three in restructuring; two each in real estate, investment management, private investment funds, and government enforcement; one in tax; and one now in business securities litigation – taking City-partner headcount to 27 including Ross’ arrival. Ross is the first to focus on commercial litigation and supporting transactions.

The firm hired 40 London lawyers in 2013, almost doubling the size of the office, and last year added another 15. Underlining the firm’s ambitions, Ropes last year signed a deal to move to larger offices in September 2015 at 60 Ludgate Hill, nearly doubling its current space. The 45,000 sq ft site can hold as many as 180 lawyers and is targeting between 120 and 150 lawyers in the UK by 2017.

jaishree.kalia@legalease.co.uk

Legal Business

Revolving doors: CC loses another German partner as Ashurst hires from Reed Smith and HFW turns to Orrick

Revolving doors: CC loses another German partner as Ashurst hires from Reed Smith and HFW turns to Orrick

Last week saw K&L Gates become the latest firm to pick up a partner from Clifford Chance’s (CC) Germany practice, hiring an intellectual property (IP) partner into its Frankfurt office. Meanwhile, Ashurst turn to Reed smith to hire a global head for its pro bono practice, Holman Fenwick Willan (HFW) boosted it Paris finance team with a high-profile higher from Orrick and in-house saw Publicis Groupe appoint a new general counsel (GC).

IP partner Thorsten Vormann joined K&L Gates after having spent 23 years at CC and its predecessor firm, including 18 as partner. His tenure at the Magic Circle firm included heading CC’s German IP and trademark department since 2006 and has seen him work for clients including Fabergé, Hyundai and Siemens. He focuses on patent infringement disputes but has also done non-contentious work.

Also on the Continent, HFW hired Jean-Marc Zampa from Orrick, Herrington & Sutcliffe where he was the local head of banking and finance. Having spent 12 years at Orrick, Zampa started his career at Arthur Andersen, before joining HSBC as in-house counsel and then Watson Farley & Williams for just over a year.

Zampa has covered a range of finance structures but has a particular expertise in ship finance having worked with ship owners, banks and corporate borrowers. Robert Follie, managing partner of the HFW’s Paris office said: ‘[Zampa’s] expertise extends the capabilities we can provide to clients in our sectors of focus and will be particularly valued by clients who operate in the shipping, aviation and energy sectors.’

Meanwhile, Ashurst also made a senior hire from a US firm, bringing in Sarah Morton-Ramwell as global head of pro bono from Reed Smith. At Reed Smith, Morton-Ramwell was responsible for the firm’s pro bono and corporate responsibility projects in Europe, the Middle East and Asia. Sarah focused on improving access to justice for the disadvantaged and those in need, which included working and partnering with clients to develop their in-house pro bono programmes as well as their involvement in pro bono matters and clinics.

James Collis, managing partner, said: ‘Having a world-class pro bono programme of sufficient scale is a clear priority for the firm. Pro bono is an integral part of Ashurst and appointing someone who is so highly regarded internationally and understands the differing needs of pro bono around the world will be a significant boost for our practice.’

Morton-Ramwell added: ‘Having a globally renowned practice can also support the firm’s strategy and ability to successfully attract and retain the best talent. I am delighted to have joined the firm and to have the opportunity to help to further develop a programme of the highest quality and integrity.’

Finally, Publicis Groupe, one of the ‘Big Four’ advertising and public relations companies, appointed Joe LaSala as GC replacing Eric-Antoine Fredette, who had been in the position for three years. LaSala was previously senior vice president and general counsel at Sapient but has held numerous senior in-house roles in media, technology and the oil and gas industries.

michael.west@legalease.co.uk

Legal Business

Revolving Doors: Management hires for K&L Gates and Eversheds plus a high-profile GC appointment

Revolving Doors: Management hires for K&L Gates and Eversheds plus a high-profile GC appointment

Last week’s laterals saw a focus on hiring management with K&L Gates bringing in a new finance head in Sydney, Eversheds hiring in London for a head of strategy for Hungary, and, in the US, General Motors (GM) appointing a new general counsel (GC).

Firstly, in London, Seddons announced the hire of prominent libel and defamation lawyer Mark Lewis, who joins the firm from Taylor Hampton. Lewis – who has 25 years of experience in libel, privacy, confidentiality, reputation management and intellectual property matters – has worked with clients on the phone hacking scandals, including representing the Dowler family against News International, and since bringing the first case against the company in 2007, he has represented over 120 victims.

Lewis commented: ‘As the landscape for press regulation and complexity of modern reputation management continues to evolve, I’m confident that I can make a significant contribution to the firm and support its clients in protecting and defending their reputations in the UK and around the globe.’

Meanwhile, Richárd Eördögh, managing partner of Bird & Bird’s Hungarian offering, is set to join Eversheds as partner and Head of Strategy in its Budapest office. Eördögh joined Bird & Bird in 2011 after relocating from his position in London as chief legal counsel of Chayton Capital and its private equity real estate funds

Another in-house move, this time in the US, saw GM hire Craig Glidden as its new GC replacing long-time incumbent Michael Millikin on 1 March. Milliken, who has faced questioning from Congress in relation to the carmaker’s response to its faulty ignition switches, announced his retirement last year. Glidden joins from plastics, chemical and refining company LyondellBasell Industries and will take over responsibility for GM’s legal team in more than 30 countries worldwide.

Further afield, in Sydney, international law firm K&L Gates hired Jason Opperman as a partner in the firm’s finance practice. Opperman, who has more than 17 years of experience acting for banks and financial institutions, joins from Henry Davis York, where he led the banking, restructuring and insolvency practice.

Nick Nichola, K&L Gates’ managing partner for Australia said: ‘Jason was targeted for his outstanding leadership qualities and will assume the leadership role of our national practice group immediately upon commencement in the K&L Gates Sydney office. Jason shares the firm’s vision and believes the global platform and reach the firm delivers is critical to clients who want to stay competitive in the global marketplace.’

kathryn.mccann@legalease.co.uk

Legal Business

US financials round up: White & Case revenues increase, K&L figures are flat, while Cadwalader partner profits drop

US financials round up: White & Case revenues increase, K&L figures are flat, while Cadwalader partner profits drop

US financial results for 2014 continue to stream in with White & Case becoming the latest firm to reveal an increase in revenue while both K&L Gates and Cadwalader, Wickersham & Taft bucked the positive trend having turned in lacklustre performances.

White & Case’s revenues increase was not as dramatic as some results this season but the firm recorded a 4% bump to $1.5bn in 2014 from $1.4bn in 2013. Revenue per lawyer at the firm also grew 5% from $760,000 to $800,000 while average profits per equity partner rose more confidently at 7% to $2m from $1.9m in 2013, giving a 36% increase over three years.

London executive partner Oliver Brettle said the firm is proud of its performance, especially over the last three years. ‘While we do not publically announce individual office or regional results, I will say that the London office once again made an important contribution, which had a very positive impact on the overall results,’ Brettle said.

K&L Gates‘ figures show that performance was generally flat for 2014 with revenues declining modestly by 1.2%, and revenues per lawyer and net income per partner also being essentially flat year over year. Turnover fell from $1,158.9m in 2013 to $1,145.4m in 2014 while revenue per lawyer remained at $587,000. The firm attributed the flat figures to currency fluctuations with the US dollar strengthening in the second half of 2014.

The firm’s net income available for all equity partners as a percentage of revenues decreased from 27.6% in 2013 to 25.6% in 2014. The firm said this was due to the slight decline in revenues in 2014 combined with higher expenses for the year.

However, figures for its London office were more positive, with revenues growing 11% to £44.96m in 2014 from £40.5m in 2013 – an increase of some 60% since 2009. Tony Griffiths, administrative partner at K&L Gates’ London office said: ‘Against the backdrop of a challenging geopolitical environment, it is hugely encouraging to report a fifth consecutive year of revenue growth for the London office. Integral to our strategy has been to provide multi-disciplinary advice and solutions for our clients, avoiding rigid departmental structures.’

Griffiths added: ‘Our focus through the previous five years and going forward has been on boardroom risk solutions, advice to alternative capital providers, and international energy, infrastructure and resources. Each of these areas involves all of our London lawyers, and has been particularly important in driving the growth in our revenues.’

Meanwhile, Cadwalader figures took a more severe hit with partner profits dropping 15.3% to $2.21m from $2.61m in 2013 as gross revenue marginally fell to $481.5m compared to 2013’s level of $481.7m. On the other hand, revenue per lawyer decreased by 3.2% to $1.07m from $1.1m.

The fall in Cadwalder’s numbers follows the appointment of managing partner Patrick Quinn at the end of January after head Jim Woolery – who was poised to become chair of the firm that same month after nearly two years as chairman – announced he is leaving the firm to help start a new investment venture.

Akin Gump Strauss Hauer & Feld, on the other hand, saw positive growth with net income climbing 12.8% to $356m from $315.5m in 2013, and gross revenues increase 4.8% to $868m from $828.5m. Revenues per lawyer increased more moderately by 2.9% to $1.055m from $1.025m, as did the firm’s partner profits, which rose 2.7% to $1.885m from $1.835m. These results come after the firm pulled off one of the largest ever London acquisitions after taking nearly 30 partners from the now defunct Bingham McCutchen.

For more analysis of the surging US market see: The blessed – unheralded, Wall Street’s elite comes roaring back

jaishree.kalia@legalease.co.uk