In 2000 Real Madrid signed Portuguese football star Luis Figo from arch rivals Barcelona in a move that signalled the start of the galacticos era at the Spanish club which used its financial clout to bring other international stars such as Zinedine Zidane, David Beckham and Brazilian striker Ronaldo to the Bernabeu in the following years.
US law firm Kirkland & Ellis has taken a similarly ambitious approach to the London market, assembling probably the most expensive team of star lawyers in UK legal history.
Last week Kirkland snared buyout star Adrian Maguire from Freshfields Bruckhaus Deringer’s premier City private equity practice. His move followed that of fellow Freshfields private equity partner David Higgins to the Gherkin-headquartered firm last year on a reported $10m (£7.8m)-a-year deal.
While it is unlikely the polished lawyers at Freshfields will emulate the Barcelona fans who threw a pig’s head onto the pitch on Figo’s return to the Nou Camp, the move has clearly ruffled feathers at the Magic Circle firm, and underlined Kirkland’s almost unrivalled ability to prise star partners away from its rivals.
The firm’s success is based on its laser-like focus on a handful of practice areas: financial sponsors, litigation and restructuring.
Its work for financial sponsor clients such as private equity houses Bain, Apollo and BC Partners, has allowed it to ride a huge wave of mandates as record amounts of capital are raised and deployed, leading to repeat work at premium prices as buyout houses do deal after deal.
One Kirkland partner says: “It is fairly simple for us, what we want to be is the go-to-firm for all the financial sponsors, we want to be super successful and we want to make a lot of money.”
A private equity partner at another firm says: “A year ago you would say the two leading private equity practices in the City in terms of the number of relationships with high end buyout houses were Freshfields and Latham – Kirkland’s stated ambition is to become the number one – only time will tell whether they will or not but they have the financial firepower and are willing to use it. Having Adrian gives them credibility with UK financial sponsors, it is a smart move.”
Maguire’s hire, which follows two years of discussions say insiders, has sent the legal market’s rumour mill into overdrive, with talk of a $10m-a-year deal over five years, but Kirkland partners play down the numbers.
“Every time we hire someone people say it is $10m, if that was the case we would have a very expensive partnership,” one says.
Some at rival firms question Kirkland’s chequebook approach which they argue must be subsidised by its lucrative US practice, but Kirkland partners insist their unique model allows them to pay top dollar while still being profitable in London.
“We have avoided all the low margin work, we are very cost conscious, we are never going to be a Magic Circle firm with hundreds of secretaries and five restaurants, we focus on resources which enable us to service our clients as oppose to building a massive law firm,” one says.
Another Kirkland partner says the firm is structured internally to allow partners to focus on client work and to ensure unproductive partners do not draw more than their fair share, a risk in lockstep firms where pay is based on seniority.
"All partners are working partners," they say, "we don’t have people waltzing around the office who just do lunch once a week."
Critics at rival firms say the Kirkland approach inculcates an aggressive, individualistic culture, but Kirkland partners argue their growth is based on teamwork.
“People told me before I joined ‘be careful, they are all a bunch of sharks’ but it is not like that,” says one partner.
Another partner says: “There is a big, big focus on making sure we are not territorial, that we share and are collaborative and team players, that is the main thing we are reviewed on, ‘how have you contributed?’ It is not about our numbers, that is a myth, it is about how you have contributed to the firm’s growth.”
The partner says this approach extends to its system of hiring new partners, with an expectation that big name hires will welcome further stars to the firm.
“There is a massive encouragement on A players hiring A players, even though we have a superstar, David Higgins, he will still bring in Adrian Maguire,” they say.
The focus on talent also extends to its younger lawyers, with Kirkland operating a unique system of promoting lawyers to a junior rung of its partnership early, and then giving them four years to either make it as a full equity partner, or move on, their partner status giving them the credibility to make partner at a rival firm.
“That partner badge opens up a completely different set of job opportunities. Worst case you go to a smaller firm to be a partner, or you go in as general counsel somewhere, which is much more difficult to do as an associate,” a partner says.
Kirkland’s continued growth in London is shaking up the City legal market, with Magic Circle firms revamping their compensation systems in a bid to hold onto talent, and once impregnable practices beginning to look shaky.
Freshfields will no doubt point to its deep private equity bench with star partners such as Charlie Hayes, who acted for CVC on its investment in Premiership Rugby last month, remaining with the firm. However the loss of lawyers of the calibre of Higgins and Maguire is undoubtedly a blow, and must lead to fears of further losses.
A Kirkland partners says: “We have ripped out quite a lot of business from all of them.”
Kirkland’s success has matched that of its private equity clients with its revenue doubling from 2007 to 2016, jumping from $1.3bn to $2.6bn. Profit per equity partner (pep) grew from $2.48m to $4.1m over the same time period. Last year the firm overtook rival Latham to become the biggest firm in the world with revenue of $3.1bn for 2017 and pep of $4.7m.
It has not all been plain sailing for the firm in London with a team of six private equity partners leaving to join Sidley Austin in 2016 and other exits including high yield partners Ward McKimm and Andrew Hagan who joined Freshfields in 2015 and 2016 respectively.
City law firm Travers Smith's managing partner David Patient says, like the Real Madrid approach, it is not clear if Kirkland’s aggressive and expensive hiring strategy will pay off.
“It is a little bit like assembling a galacticos team – it doesn’t always work, time will tell,” he says.
A Kirkland partner, when asked to opine on the firm’s future, says: “We see law as a business and we see Kirkland as a business and if it is properly managed we will be doing this for a long time, and if we are not, we will go the way of other firms that have vanished off the face of the planet.”
Real Madrid’s galacticos policy arguably ended in failure after a successful start when Beckham moved to the US to play for Los Angeles Galaxy in 2007. But later signings, including Portuguese goal machine Cristiano Ronaldo and Welsh winger Gareth Bale led to the teams’ domination of European football, with Real winning the Uefa Champions League for five consecutive seasons.
Kirkland partners will be hoping their team of stars emulate the latter squad, while the Magic Circle must be praying for an expensive failure.