Navigating Private Equity Talent: Strategic Hiring Trends in London’s Legal Market

Fides have extensive experience in helping clients find the right talent within the highly competitive Private Equity-focused legal market. In this article, we provide insights gained firsthand from our searches, coupled with an analysis of the data we’ve gathered on lateral hires in the year to date. We offer a view on how law firms can best position themselves to secure the right talent and take their practice forward.

As discussed in our previous article, the London Private Equity market is at the forefront of the competition for market share among leading firms, with US firms aggressively expanding their presence. They have consistently recruited top-tier talent from both UK firms and international competitors. The appeal of US firms is most clearly demonstrated by the offer of significantly higher compensation, at times exceeding £2 million per annum, and surpassing the PEP of many UK counterparts.

Firms such as Kirkland & Ellis, Latham & Watkins, Sidley Austin, McDermott Will & Emery, and Gibson Dunn have strategically bolstered their Corporate and Finance teams with key hires, thereby solidifying their market presence. In total, US firms have made 11 Private Equity Partner hires in London this year. Their influence is also evident in revenue generation, with US firms outperforming their UK counterparts in revenue per lawyer. Of these 11 hires, only 3 came from UK firms, and for the most part, we have witnessed experienced partners trading one US firm for another, underscoring the dominant position of these platforms.

In contrast, UK law firms have largely adopted a more selective approach to lateral hiring, prioritising strategic additions over aggressive expansion. Clifford Chance is the exception. Nine lateral partner hires were made by British-headquartered firms in London, with four of these made by Clifford Chance in the first quarter. Five of these nine hires were from US law firms, with three being “first day” Counsel to Partner hires. This demonstrates how UK firms often target emerging talent when hiring from US firms, avoiding the high cost of more established partners.

Both Clifford Chance and A&O Shearman have made significant hires from US firms in the Private Equity space, demonstrating that UK-headquartered platforms can and do compete for more senior hires. The two magic circle firms have both attracted senior Private Equity lawyers from elite US firm Skadden this year, with the firm losing four Private Equity-focused lawyers to British firms without making any lateral Private Equity hires in the last five months.

As discussed in our previous article, Spencer Baylin, Clifford Chance’s head of Private Equity, explains that one of the key elements differentiating Clifford Chance from US firms is its full-service offering across the region. Bruce Embley joined the firm from Skadden, having previously served as co-head of Freshfields’ global M&A practice. George Knighton, whose practice focuses on both private and public M&A as well as Private Equity transactions, became a partner at A&O in 2008 and has returned to the firm after five years with Skadden.

While UK firms maintain strong relationships with domestic and European clients, they face increasing challenges in competing with the financial incentives offered by US firms. UK firms have built a reputation for excellence in specialised sectors that align with their ‘brand’. However, retaining top Private Equity talent has become increasingly difficult as US firms continue to attract high-profile partners who are seeking to ‘trade up’ to a longer equity runway.

It may seem that UK law firms are consistently losing out, but that’s not the entire truth. Maintaining an effective billing rate that attracts a US law firm while remaining profitable is not as straightforward as one might think. Firstly, there is a significant disparity in associate pay standards, which can be around 40%. Another important factor to consider is the substantial difference in rates within the market. The European market, in particular, has struggled to keep pace, with London being one of the few global hubs able to leverage rates nearly equivalent to those in New York. Additionally, competition for instructions among the top firms is fierce and heavily relationship-driven in the private equity sector. A search we recently completed on behalf of a leading US law firm serves as testament to this, with the firm seeking targeted references from work givers to ensure that the hire could effect meaningful changes through portable relationships.

The basis of this search centred on capability and relationships rather than a focus on output, which, in this case, was impressive but less of a driving force behind the hire. Fides is currently running a variety of searches in this area, including in London, Germany, the Netherlands, and elsewhere. One is a leadership position for a top 20 firm in London, while the other represents a jurisdiction opportunity for a top 10 UK firm in Germany. Traditional portability is not the motivation for these searches. The emphasis is more on alignment, existing practice health, and aspirations for growth in the future, particularly in years 2 and 3 of the new hire’s tenure with the firm.

In contrast, Fides is also operating on a Private Capital mandate in London for a rising US law firm that is more focused on transferability, the relativity of rates, and success in years one and two. This client offers generous rewards, with 50% of the compensation linked to performance. The base draw is appealing, but partners receive half their income as a fixed profit award, while the other half depends on year-end performance. This model can lead to significant financial gains but may also cause fluctuations in earnings. These varied approaches to partner recruitment reflect the footprint and strategies of individual firms.

In conversations held with candidates regarding these searches, lawyers have explained that growth in this highly competitive market is hard-earned, and a new platform must provide the right support to enable a successful transition. Additional capabilities in areas such as antitrust, tax support, and leveraged finance have been cited as important factors when it comes to providing a holistic Private Equity service to clients.

It is therefore crucial for firms to consider their current strengths and intended areas for growth when approaching the talent market. A focused approach to selecting candidates with the right experience will create synergies for both the platform they join and the potential for an increase in their billings. This presents both challenges and opportunities when making a partner hire.

Overall, US firms have been more proactive in lateral hiring, particularly regarding senior partners. They can leverage financial incentives and global market positioning to attract top Private Equity talent. UK firms, however, continue to make hires at all levels.  We have learnt that all firms can find the right talent in this space, provided there is a coherent strategy that utilises the strengths of the existing platform, matched with the skills and ambition of the right candidate.

Moves Tracker, compiled by Fides Search: