American dreaming

AFTER CLIFFORD CHANCE PLANTED ITS FLAG IN SAN FRANCISCO, PHILIP HOULT LOOKS AT THE OPPORTUNITIES IN THE US FOR UK FIRMS OUTSIDE NEW YORK

The most surprising thing about Clifford Chance's recent raid on Brobeck Phleger & Harrison was not that it happened but that it took so long for the firm to establish a presence on the west coast of the US.

The move will see at least 16 partners - predominantly specialists in the field of securities litigation - join the London-headquartered firm and will add offices in San Francisco and Palo Alto, along with satellite presences in San Diego and Los Angeles, to its global network.

There are many observers who predict that, having established a platform in California, the world's largest law firm will not stop there in building its US practice.

Alan Hodgart, management consultant at Hildebrandt International, says that Clifford Chance and other magic circle firms will eventually target several of the seven or eight key business regions outside New York and Washington DC, including Los Angeles, San Francisco and Silicon Valley, Chicago, and Boston.

These locations typically have a sizeable concentration of Fortune 500 companies and substantial local economies.

'If you are a magic circle firm, you have got to be there,' Mr Hodgart says.

'Clifford Chance, over time, will be in three or four of those markets.'

It is unlikely that Clifford Chance will swoop on a firm in, say, Chicago - the most likely destination after California - immediately.

Even for a firm its size, taking on a team as large as that from Brobecks will still be a big chunk to swallow.

As it stands, only a handful of UK firms have any sort of presence outside New York.

Apart from Clifford Chance, Freshfields Bruckhaus Deringer, Lovells and CMS Cameron McKenna have offices in Washington DC.

As the regulatory centre for the US, a presence there is increasingly thought essential for those UK firms looking to develop a transatlantic antitrust practice, although Cameron's office has a strong energy focus.

Freshfields has just bolstered its presence in the US capital, hiring a partner from Vinson & Elkins and a senior official from the Department of Justice to build an antitrust practice in the office.

Ted Burke, Freshfields' US managing partner, says it was a natural step to fit in with its competition law strength in Europe.

'In antitrust, we are very optimistic,' he says.

'We are never interested in growth for growth's sake, but on the other hand what we have done might be seen as the beginning and not the end.'

However, Mr Burke is non-committal about whether Freshfields will look to other business centres in the US.

'No options are off the table, but then I would say that California is not high on the radar screen at the moment,' he adds.

However, go beyond Washington DC and New York and the number of offices of UK firms can be counted on one hand.

The most significant presence is Lovells' Chicago practice, which was opened in 1995 with the hiring of a reinsurance team from leading local firm Sidley & Austin.

Russell Sleigh, managing partner for Lovells' US practice, says that at the time the firm saw an opportunity to develop a transatlantic reinsurance practice.

In the space of six years, the office has grown steadily to its current complement of six partners and 14 fee-earners.

Although business was quiet in 1998, Mr Sleigh says the office is now extremely busy.

'They have a massive amount of work and can barely cope,' he says.

'Our decision to open was entirely right.

It shows what can happen if you market yourselves as having front-line expertise in the US and London markets.'

As a sign of continued faith in the reinsurance practice, Lovells, whose clients in the US include Lloyd's of London vehicle Equitas, recently hired two partners to strengthen its New York team.

Like Freshfields' Mr Burke, Mr Sleigh plays down the likelihood of Lovells opening in other US business centres.

'We do occasionally get approached by people,' he says.

'We have thought about it but not really given it serious consideration.

'The reason is that we are not - as things stand - looking to develop either a general US corporate practice or a US litigation practice.

What we are looking to develop is those practice areas that complement our international practice, such as reinsurance, fraud and asset-tracing and US securities.'

On the west coast, it is a similar story.

Although a large number of City firms spend significant amounts of time and money trawling the market for work, only two firms prior to Clifford Chance have an office in California - Bristol firm Osborne Clarke in Silicon Valley and Cheltenham-based Wiggin & Co in Los Angeles.

Even the latter operation is now only a representative office.

But, contrary to what you might expect given that the firm launched its Palo Alto office at the height of the Internet boom, Osborne Clarke resident partner Simon Beswick is optimistic about the start the practice has made.

Mr Beswick explains that there were three main reasons why the firm opened there.

As a practice, Osborne Clarke had become a lot more sector-focused over the past six or seven years - to the extent that some 50% of its revenue comes from the technology, media and telecoms sector.

'Silicon Valley is the heart of the technology market,' Mr Beswick says, 'and to be on the ground here cements our position.'

With the globalisation of business in full swing, the firm already had 150 California-based clients and a number of them were asking the firm to open up.

The third reason for opening was the prospect of getting a higher percentage of the work that Californian companies were doing in Europe.

Mr Beswick argues that the firm has been proved right on all three counts.

'We also found that there was a fourth reason for being here that we had not seen when we first thought of opening,' he says.

'Being in Silicon Valley has been the focal point of our European practice and we often get instructions across four or five jurisdictions.'

The fact that Osborne Clarke now has several European offices also means that the firm can capture a greater breadth of work rather than that relating purely to UK-focused instructions.

Having started with two people, the office now has six staff drawn from the UK and German practices.

It has picked up 70 new clients, of which 16 are Nasdaq-quoted, Mr Beswick claims.

'Although the underlying economic conditions are awful, we fully believe we can build a good position that justifies continued investment,' he says.

'We have a two to three-year window to build relationships.

When economic conditions improve, I would not be surprised if others were to open up shop.'

Mr Beswick says the benefits of actually being on the ground are substantial and the opportunities plentiful.

'When you are posted here, you realise that you have got more than you ever need to succeed as a law firm,' he says.

Meanwhile at Wiggin & Co, a private client and media firm, partner Mike Turner is similarly positive about the benefits of having a presence on the ground - even though in 1998 the firm decided to reduce its Los Angeles office to a representative office.

Wiggin & Co opened in 1988 to serve its US client base that was looking to do business in the UK.

'Our decision to open was not driven by the usual reasons why people open offices,' Mr Turner says.

'It was driven by pure opportunism because it was a good time in the economic cycle to do it.

It worked a treat and still does.'

One of the great advantages of actually having a presence, he says, is the ability to grow with the clients for whom you help to make preliminary international forays.

Cisco Systems - the Internet network provider - and clothes retailer The Gap are among the clients the firm gained thanks to its Los Angeles office.

For a small firm like Wiggin & Co, the idea of building a network of European offices was just unrealistic.

Instead a bigger impact could be and has been made by having an office in a location where there are no immediate competitors, Mr Turner suggests.

Although the firm has not had a permanent posting there for four years, he says that it will soon - probably within the next two to three years - re-establish a full-time presence.

Clearly, the current market conditions are likely to dampen the enthusiasm of UK firms to follow the likes of Wiggin & Co and Osborne Clarke in opening in the US.

Should things pick up, and with many firms having put the basic building blocks of their European practices in place, the time may yet come when UK practices make a concerted effort to establish operations outside New York.

The recently merged UK/US firm of Withers Bergman, which is aiming to become a transatlantic private client specialist, has already signalled its intention to open a Los Angeles office in the long term.

Hildebrandt's Mr Hodgart contends that ultimately having a presence on the ground makes more sense than simply flying in on a round-trip business flight, even though the American Bar Association is currently considering practice rules which will ensure there are no regulatory problems for overseas lawyers carrying out such temporary work.

Establishing a presence helps build relationships and contacts and paves the way potentially for a merger with the increasingly powerful and well-run 'magic circle' regional firms that have emerged in the US in recent years.

Once UK firms have got their European networks up and running, their attentions should turn to the opportunities across the Atlantic.

They may arguably be a few years' late, but it is better late than never.

Philip Hoult is a freelance journalist