An economic downturn doesn’t necessarily mean that partners stay put or firms are discouraged to bring on lateral partners.  For a partner-level attorney there are many opportunities for lateral movement.  According to The American Lawyer’s 2010 “Lateral Report,” 2,774 partners made lateral moves in the year ending September 30, 2009, a 10.6 percent increase from the preceding year.

This holds true in the Asia and Middle East markets as evidenced by Norton Rose’s recent survey showing a significant perceived shift in economic power from the west to the east.  Last year, Norton Rose moved even more partners to their Hong Kong office and Clifford Chance saw more work in all of its offices in Asia.  The majority of opportunity for partner level candidates stems from the continued interest of Western law firms in these emerging markets as US and UK law firms try to diversify and hedge their risks in a down US economy.  More established firms are looking to diversify their platform in such areas as international arbitration, restructuring, private investment funds and energy and/or build out their core strengths internationally by making opportunistic hires and internal transfers (typically from their US or London offices).  Newer offices are taking advantage of the turn in the market and increase in lateral partner movement to avoid the risk and expense of growing organically by hiring partners with regional experience and expertise.  That said, while lateral movement has been scattered among practice areas, most US and UK firms are looking for the same profile: a solo corporate partner with a sustainable and portable book of business valued at a minimum of $2.5 million and significant experience and contacts in the region.  In 2009, we saw over 55 lateral partner moves in Asia and the Middle East and 15 so far this year.

The demand for partners with regional experience is greater than ever.  It’s safe to say that a new office has a much greater likelihood of success by bringing in well-reputed partners who have been on the ground, have a viable book of business and local relationships and know-how, including cultural business and social norms and administrative and regulatory expertise.  We saw a record number of office openings in 2009 and already 10 have opened in 2010.  Just look at Ropes & Gray and Fried Frank who have both made great strides in China by bringing on well-reputed partners with local experience and both Western and Asian client bases.  While many recent office openings in Asia and the Middle East have been driven by increased needs of a US or UK client base, these newer offices must also compete for work in a new legal environment, and bringing on a partner with a strong base of business and/or relationships in the region can make or break a new practice.  Of course, “reasonable” billing rates, flexibility, cultural awareness, brand equity, international presence, a firm-wide commitment and a lot of patience also help a firm’s success in the region.

More established offices are also making lateral hires and internal transfers to further grow their core strengths and/or diversify their existing platform.  Early in 2009, Henry Liu, the former chair of Heller Ehrman’s China practice with over two decades of China-related experience, joined Nixon Peabody to lead its China practice.  More recently, Cleary Gottlieb relocated New York-based partner David Gottlieb to its Moscow office to further strengthen their cross-border M&A and capital markets practice.  This year, we’ve seen Ropes & Gray bring in Maxwell Fox as a partner in its Tokyo office from Paul Hasting’s Tokyo office where he had over a decade of on-the-ground experience representing a variety of technology companies and other clients in complex patent disputes, patent licensing, intellectual property issues and other intellectual property infringement litigation.  Fox will join Ropes & Gray’s existing IP practice, the 12^th appointment for the firm since opening in Tokyo in 2007.  Additionally, with the belief in the growing importance of Singapore as an arbitration center for disputes involving Southeast Asia, several firms, including White & Case, have expanded their Singapore office by launching an international arbitration practice.

Even with the hiring freezes and layoffs, a few law firms continued to promote partners in the region albeit at a much slower pace than 2008, with Tokyo seeing the most activity.  Close to 20 attorneys were promoted in 2009 in Tokyo alone.  While several firms like Clifford Chance and Allen Overy delayed their promotions in 2009, eventually promotions were made with Clifford Chance bringing up five attorneys in China alone, more than any other firm in the region.  White & Case brought up a global asset finance and global capital markets attorney; Latham brought up three attorneys in Asia, a corporate attorney in both Tokyo and Shanghai and a project finance attorney in Singapore; and Milbank brought up a member of its Global Project Finance Group in Tokyo.  So far this year, seven attorneys in Asia and the Middle East have been elevated to partner.

In this economic environment, another important consideration for a hiring firm is locating a partner-level candidate with a sustainable book of business.  Determining the actual likelihood of its portability has become even more difficult with globalization and the underlying uncertainties in this economic market.  Clearly, firms want to increase their profitability while keeping their fixed-cost associates busy.  While many partner salaries are closely tied to their individual revenue generation, associates can be seen as a fixed cost; moreover, a perishable fixed cost.  As a result, over the last 6-12 months, we have seen firms less willing to absorb associates accompanying a partner or group acquisition, as they want new partners to keep their existing associate pool occupied.  Accordingly, a partner with a book of business in the $3 - $5 million range remains very attractive to firms as he or she can keep several associates busy while maintaining profitability.  That said, a handful of firms still remain interested in partners with smaller books of business and we have seen several partners with books in the $1.5 million range and local managerial and administrative experience make lateral moves to stronger platforms.

In the past several months, we have been contacted by six firms planning to open new offices in China: two looking for a capital markets partner, one looking for a finance partner, one for a US-trained PRC national to head an inbound and outbound transactional team and another for an intellectual property partner.  An additional firm is looking opportunistically for a partner in any practice area as long as they have regional experience and a sustainable book of business.  In just the last six months, Cypress has been approached by more than 15 law firms with new partner-level searches in China, Japan, Singapore and the Middle East.  We’ve also received three opportunities for US-based China practice partners, bringing our total number of active partner openings to well over 25, many exclusive to Cypress.

On the candidate side, Cypress is currently working with more partner-level candidates than ever.  The majority of our current partner candidates are simply seeking a more secure or diverse platform to expand their current book of business or an opportunity to take on a more managerial role.  In this increasingly competitive market and current economic climate, there are certain considerations that we stress to our partner candidates.  We typically advise our partner candidates that business plans are more important than ever with firms trying to endure a lackluster year and plan their short and long-term Asia strategies.  A partner needs to have a well-thought-out strategy in terms of growth, business development and cross-selling opportunities.  They need to stress their flexibility and willingness and ability to be adaptive in this rapidly changing market.  The same is true on the flip side of the equation, we also advise our partner candidates to seriously consider a potential firm’s current financials, firm-wide commitment to the region and potential for growth.  In addition, billable rates are more varied than ever and we highly suggest that a partner candidate talk openly and honestly with a prospective firm sooner rather than later as we have seen this become a deal breaker at the last minute.  Keep in mind that while some firms are now willing to pursue flexible billing arrangements and rates, others are not.  If you feel hesitation from your clients, this is a very important factor to address.

The Chinese New Year has recently been celebrated and firms have returned to work and hiring.  In just the past month, we have seen a sharp uptick in partner movement and interest, and both firms and partners are looking to best position themselves for recovery, meaning individual and groups of partners are on the move, and firms are looking for that perfect partner to complement their current practices.  If you have any questions, we are more than happy to discuss the current market and opportunities throughout the region.  Please contact us at partners@cypressrecruiting.com.

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