On a warm Friday night in mid-August, senior partners from two of the nation’s most influential law firms packed Chicago’s Wrigley Field, where Bruce Springsteen and E. The E Street Band performed classics including “Born to Run” and “Wrecking.” ball”.
Kirkland & Ellis LLP Chairman Jon Ballis spoke with other Springsteen fans, including top executives from law firm Paul Weiss Rifkind & Wharton Garrison Lawyers, it was a rare social gathering between rivals.
But the relaxed atmosphere belied deeper tensions between the firms that would explode within days as Paul Weiss began poaching Kirkland lawyers in a bold attempt to quickly build a private equity practice in London.
Founded in Chicago at the turn of the 20th century, Kirkland relied on entrepreneurial drive to challenge the hierarchy of Wall Street law firms. Its strong ties to the private equity industry have made it the world’s top law firm by revenue over the past decade. New York-based Paul Weiss has long been an established firm but lacked a significant presence in London.
A month after the Springsteen concert, Paul Weiss recruited 12 partners from Kirkland, a raid whose speed and scale shocked lawyers long accustomed to fighting tooth and nail for the most valuable lawyers. Law firm industry.
“This is huge and creates a very important player in the London private equity market,” said Siobhán Lewington, managing director of legal recruitment firm Fox Rodney. “Paul Weiss was the last major New York private equity firm to open a UK law practice in London. Building a team is the ultimate fantasy football.”
The incident also shows that the industry-wide battle for prestigious lawyers, whose salaries can now exceed $20 million, shows no signs of slowing down. Trusted advisors to private equity firms remain among the most popular.
The Financial Times has spoken to a number of partners at both firms about the raids, with the first seeds sown in late July, when Kirkland’s Balis gave the firm’s London office the top-earning job. Roger Johnson, one of the attorneys, called.
Balis told Johnson that Alvaro Membrillera, then Paul Weiss’s most senior lawyer in London, would join Kirkland, along with some junior colleagues.
The news surprised Johnson and a group of other London-based partners who had expected to be consulted on such a major hire, according to people familiar with the matter. Law firms often need to walk a fine line between keeping new hires secret and letting other partners know ahead of time.
Balis and Andrew Calder, a Houston energy attorney who worked with Membrillera early in his career, were actively involved in hiring decisions, some said. Johnson responded angrily to Balis, expressing concerns about the hiring process.
According to colleagues, Barris became angry at Johnson’s response and the situation quickly escalated. On August 1, Johnson received another call from Balis, who told him he was fired. Barris accused Johnson of trying to orchestrate the transfer of some of Kirkland’s attorneys to another law firm, which he denied.
Firing Johnson was a big decision. He has continued to bring in work this year, including advising buyout group EQT on its £4.5 billion acquisition of London-listed veterinary company Dechra, even as some other partners have struggled as deals have slowed. The next day the Membrillera’s arrival in Kirkland was announced.
Johnson’s exit and the decision by U.S. executives to bypass a London partner in hiring Membrillera left Kirkland more vulnerable to attacks by deeper-pocketed rivals, according to people familiar with the matter.
This vulnerability is unusual for Kirkland. Its 505 profit-sharing equity partners earned an average of $7.5 million last year, and the firm has built its ranks by attracting lawyers with compensation packages that rivals cannot match. Paul Weiss’ equity partners earned an average of $5.7 million last year, according to The American Lawyer’s annual rankings.
In addition to concerns about the hiring process, the loyalty of some has been undermined by concerns that the company has lost its entrepreneurial spirit, including chief debt financing attorney Neel Sachdev, a Kirkland veteran of more than 20 years.
In early August, Sachdev was one of several senior Kirkland attorneys who began talking to Paul Weiss counterparts, including Chairman Brad Karp, people familiar with the matter said.
Within days, discussions developed plans for Paul Weiss to hire a team of lawyers capable of advising the acquiring company on transactions, financing, tax, antitrust, litigation and restructuring.
The firm’s long-term aim is to recruit up to 200 lawyers in London and replicate its deep relationship with US buyout giant Apollo to European clients. Paul Weiss currently employs more than 30 lawyers in London, according to its website.
But the plan, dubbed “The Springsteen Plan” by Paul Weiss, was fraught with risks. The interviews were conducted behind closed doors, made easier by the fact that most of the lawyers were on vacation.
Paul Weiss also had to deal with Kirkland’s deep pockets. It’s not unheard of for Kirkland to offer more than $2 million to retain partners who are considering leaving, according to people familiar with the matter. Kirkland could also fire them.
By August 11, when Barris attended a Springsteen concert, plans were in place. Kirkland’s team of eight attorneys, including Sachdev, resigned on August 13. Paul Weiss immediately launched a second operation and by early September had added three more Kirkland partners, including a lawyer from Linklaters.
Forced into the lurch, Kirkland—a company more accustomed to planning raids than trying to foil them—began contacting clients to reassure them that the departures would not affect the quality of their service.
The company has also begun promoting staff within London, particularly those deemed at risk of leaving, people familiar with the matter said.
Offering one-time cash bonuses to attorneys considering leaving the firm, including those who negotiated with Paul Weiss. On at least one occasion, Kirkland prevented a partner from leaving Paul Weiss.
“This may work in the short term, but the cost is very high,” one person added.
Kirkland and Paul Weiss declined to comment.
Paul Weiss is also betting on private equity as the industry’s golden era of low interest rates is coming to an end, leaving companies facing higher financing costs and a tougher returns environment.
Despite the defections, challenging Kirkland’s position in London will not be easy. The recent hiring of Membrillera in London should also boost Kirkland’s relationship with US investment giant KKR.
Over the past decade, deep-pocketed US companies have shaken up London’s legal market, driving up salaries and forcing some so-called “magic circle” firms to break out of their historic pay structures. Headhunters and other lawyers said Paul Weiss’s gambit could also spark a wave of action among the capital’s top firms.
“It’s going to mean a lot of disruption,” Fox Rodney’s Lewington said.
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