Elite global capital market firms form impenetrable circle

The elite group of 12 London and New York law firms which dominate the global capital markets field - as defined by a leading academic - could soon contract further, lawyers have said.In his inaugural professorial lecture given at Westminster University last week, James Flood said 'the aristocracy of the legal profession' work together repeatedly and 'have adapted to each other's cultural norms'.

He named US firms Cleary Gottlieb Steen & Hamilton, Sullivan & Cromwell, Shearman & Sterling and UK giants Clifford Chance and Linklaters as those among the elite.'They probably do not work with many other firms at all, since they represent the top tier on both sides of the Atlantic,' he said.

'The "magic circle" of firms competes within itself.' Magic circle firms Allen & Overy, Freshfields and Slaughter and May and Wall Street giants Cravath Swaine & Moore, Davis Polk & Wardwell, Skadden Arps Slate Meagher & Flom, and Paul Weiss Rifkind Wharton & Garrison made up the remainder of Professor Flood's leading capital market firms.David Bickerton, a capital markets partner at Clifford Chance, said: 'There is a very strong relationship between investment banks and leading law firms.

In the US there are well-established and exclusive relationships between some of the bulge-bracket investment banks and top law firms, where as in the European markets major investment banks have a panel of four or five law firms they use.'He added that it was therefore unlikely that any new firms would break into the market and that 'the 12 may decrease if anything'.Nick Eastwell, a finance partner at Linklaters, said he was surprised that the number was so high because 'less than 12 firms actually work in all the areas of capital markets'.'There is a great deal of investment needed to break into the top tier,' he said.

'With the momentum the major firms have at present we are unlikely to see any new faces challenging for supremacy in the near future.'Andrew Towler