Grabbing headlines in recent weeks, Paul Weiss has pursued an English law offering at breakneck speed, hiring some of the City’s biggest hitters. Here LB canvasses the reactions of industry peers to the Wall Street giant’s bold play.
‘The firm was keen to do something for a while and spoke to a lot of people in the market. But it needed a big name to lead it,’ commented one source with knowledge of the matter. And it is fair to say that Paul Weiss’ hire of debt superstar Neel Sachdev from Kirkland & Ellis has arguably been the most groundbreaking move the City has seen since buyout star David Higgins left Freshfields for Kirkland in 2017.
Over the course of three months this summer, Paul Weiss witnessed the departure of influential partners from its London office, prompting many in the market to question the firm’s future in the City.
The firm’s deputy London head, Ramy Wahbeh and corporate partner Kaisa Kuusk both made the move to Sidley in June, losses which were added to when London managing partner Alvaro Membrillera left for Kirkland in early August.
A clean slate
‘What shifted the kaleidoscope was partners in London leaving, as it provided a clean slate for fresh people to go in,’ said one legal recruiter. Several partners at US peers in London agree, with many pointing to the main drivers behind Paul Weiss’ recent investment spree.
Paul Weiss had been looking to shore up its relationship with private equity giant Apollo Global Management, a strategy which would have become all the more urgent with the loss of relationship partner Wahbeh and for which Sachdev fitted the bill. Also adding to the imperative was the loss of the firm’s prominent London heads, while the push factor for Sachdev, the political upheaval around Membrillera’s hire (reportedly led from the US with negligible consultation with London partners), made him open to the move.
Sachdev is widely recognised as a key proponent of Kirkland’s early London growth, having been instrumental in bringing in marquee hires and establishing solid relationships with major clients.
One market commentator notes that the investments have been opportunistic. ‘The reality is that Paul Weiss was probably looking for the right people and opportunities but wanted to do it in a way that enhanced its brand and reputation. Now is a good time to buy, since the corporate market has slowed down in the last year.’
Sachdev, along with private equity star Roger Johnson who defected from Kirkland around the same time, will co-lead Paul Weiss’ London office. Sachdev will co-chair the firm’s global finance and capital markets practice while Johnson will co-chair its global M&A practice.
Brad Karp (pictured), chair of Paul Weiss, commented: ‘These recent hires are consistent with our long-term strategy of investing in our private equity practice with the most talented lawyers in the world. We will continue to be opportunistic in this space going forward.’
Sachdev is widely recognised as a key proponent of Kirkland’s early London growth, having been instrumental in bringing in marquee hires, including Stephen Lucas, and establishing solid relationships with major clients. He brings with him to his new shop a Kirkland team including debt finance partner Kanesh Balasubramaniam and capital markets partners Matthew Merkle and Deirdre Jones.
In response to Paul Weiss’ decision to bring Sachdev on board, one partner at a US firm in London remarked: ‘If you’ve got the money to build out a financial sponsor practice, he is the guy to do it as he’s done it before,’ acknowledging that Kirkland started its London build out 20 years ago, also with a focus on finance.
A big bet
Another commentator adds: ‘Hiring Neel and Roger was a big bet. If it works well then it repositions the firm. The advantage of hiring big names is that hopefully they have good reason to make it work as well. There is mutuality about ambition, as the firms and the individuals don’t want to fail.’
Rumours have inevitably been circulating around the potential salaries of top partners at Paul Weiss in London, with some sources mentioning packages as high as $20m. However, Kirkland boasts a higher average profit per equity partner (PEP) than Paul Weiss, with PEP standing at $7.5m and $5.7m respectively, suggesting that money isn’t the sole factor behind the decision to make the move. One legal recruiter said: ‘Clearly this move is not all about money, but money is always important. The move is more about the quality of client relationships that Paul Weiss has, the freedom to operate in the way they [the partners] want and the ability to build out the practice.’
For Paul Weiss to succeed in London, it will be essential for the firm to establish a reputable corporate practice. Currently, the firm has assembled a finance practice with Sachdev’s team, an M&A team consisting of Johnson, former Linklaters partner Will Aitken-Davies, and former Kirkland partner Andreas Philipson, as well as a tax practice featuring former Kirkland partners Timothy Lowe and Cian O’Connor, who were also previously at Linklaters.
Merkle will lead the European capital markets group, Aitken-Davies will take on the role of head of the London M&A group, and Lowe, global co-head of tax and head of European tax.
‘We’ve seized upon a unique opportunity to expand a key area of our business, private equity, by hiring London’s leading finance, M&A and tax PE teams, who share our vision and approach,’ said Karp.
He continued: ‘Our ability to attract the leading PE teams in London validates both our long-term core investment strategy as well as the strength and quality of our global private equity practice. From our US, London and Asia offices, we offer top asset managers across the globe the leading PE platform to meet their business needs and strategies.’
There is also much speculation around the firm’s ambitions over the coming months. ‘It won’t stop yet,’ remarked one senior source. Expectations that the firm will expand its presence in areas such as antitrust, litigation, competition, and restructuring have emerged as a recurring theme, and the market is watching intently how these developments will unfold.
Noted one commentator: ‘There is more cannibalism in the US firms, one raiding another as we have seen. But I’m not surprised a large amount of the new hires are Linklaters alumni,’ acknowledging that the Magic Circle remains the go-to talent pool.
Euro lottery
Some take the view that there are still missing pieces to the strategy. One partner at a US firm in London asserted: ‘As far as I know, Paul Weiss doesn’t have any immediate plans to open additional offices, and you can’t establish a strong presence in private equity without having offices in key locations such as Paris, Frankfurt, and Munich.’
‘We’ve seized upon a unique opportunity to expand a key area of our business, private equity, by hiring London’s leading finance, M&A and tax PE teams, who share our vision and approach.’ Brad Karp, Paul Weiss
While many in the market doubt that the high-profile departures are the death-knell for Kirkland’s London ambitions, there is little denying the Chicago giant will still require a sturdy umbrella to weather the storm of losing both Sachdev and Johnson.
‘Roger has good client work like EQT, but he won’t be as missed, as the other lawyers can step up. But there is difficulty replacing Neel. Although there are fantastic people left behind at Kirkland, he will be very hard to replicate and I’m sure he will be missed,’ commented one legal recruiter.
Slaughter and May, as well as Macfarlanes, may also find themselves at a disadvantage as their referral work from Paul Weiss faces an inevitable dip, the nearer it gets to a full-service offering.
However, this may take time to make itself felt. ‘There is no way Paul Weiss can suddenly build out an office where there is no referral work straight away, but that might change gradually,’ said one former Kirkland partner.
When Cravath started its own English law practice in March with the additions of partners Philip Stopford and Korey Fevzi from Shearman & Sterling, Paul Weiss was left as the only remaining US firm in the City without English law capabilities. What a difference a few short months make. Nevertheless, with the bar having now been set almost impossibly high by Paul Weiss, all eyes will be on whether Cravath attempts to level the playing field. LB