Ever since Linklaters first launched in the U.S. 50 years ago with an office in New York, it has had a tough time trying to establish itself as a key player in the market.
Like many of its international rivals, it has found the U.S. to be a brutally competitive place where the culture and economics do not necessarily play to its strengths. Yet the U.K.-headquartered firm’s progress in the U.S. since it arrived in 1972 has been slower than its key competitors.
In the last few years, it has not grown its head count substantially, nor has it increased its market share. It also has failed to make a mark in the practice areas for which it is known and admired elsewhere in the world.
Now Linklaters has made some key changes that could finally put it on the map in the U.S. But is it too little, too late?
Where Linklaters Stands
Linklaters’ hiring stateside has been noticeably less than the likes of other U.K-headquartered firms such as Freshfields Bruckhaus Deringer and Allen & Overy, which have pursued a more aggressive strategy in recent years.
To be sure, last year Linklaters hired a duo from Prudential Financial to launch a U.S. data solutions, cyber and privacy practice out of the New York office, and then a partner from Loeb & Loeb. But this pales in comparison to some of its competitors.
In 2021, Freshfields opened an office in Silicon Valley that has performed particularly well, while Allen & Overy launched in Silicon Valley and in San Francisco with an eight-partner team from White & Case. A&O then opened an office in Los Angeles with a group of 19 lawyers from Akin Gump Strauss Hauer & Feld, and in 2022 launched in Boston with a life sciences litigation team from Goodwin Procter.
Linklaters’ revenue from its operations in the Americas, which include an office in Brazil as well as two in the U.S., has also declined in recent years. According to the firm’s limited liability partnership accounts filed in the U.K., £92.4 million, or 5.7% of the firm’s global revenue came from the Americas in 2020. This figure dropped to £91.2 million, or 5.5% of the firm’s total revenue of £1.77 billion, according to its 2021 LLP accounts.
In comparison, Allen & Overy’s 2021 revenue from the Americas was up from the previous year, totaling £161.2 million, or 8.9% of its overall revenue. Freshfields’ revenue in 2021 from the Americas stood at £174 million, or 10.6% of its total, and Clifford Chance’s revenue from the Americas was £246 million, or 13.5% of its total, according to Companies House, which publishes LLP accounts in the U.K.
“The problem for the Magic Circle is they realise if you want to be a significant global firm, 15%, 20%—up to 35% of your revenue coming from the U.S. is what you need to have a strong longer-term capability,” said Tony Williams, former managing partner of Clifford Chance and principal of Jomati Consultants.
“If you are going to be serious, 10% revenue in the U.S. is the absolute minimum. You need to be adding around 5% every few years, otherwise you can’t say you’re a truly global firm. The U.S. is half of the world’s legal market, you have to be there,” he added.
Linklaters is notoriously tight-lipped on the issue, refusing to provide comment for this piece, but current Linklaters partners say that the need to grow in the U.S. market is high on the firm’s agenda.
“There’s a desire to look at all the possible areas where we can be expanding profitably—certainly within our U.S. offices. Our U.S. team and the scope of the transactions they work on is pretty big, but the firm is always keen to grow there,” said one London partner.
“There’s an obvious focus on the U.S. It’s always important to have a strong global offering, and to do so you need that U.S. strength,” another London-based partner added. “It’s a particular focus of the firm to boost its base there.”
Linklaters currently has 33 partners in the U.S.—located in offices in New York and Washington, D.C, according to its website, although insiders insist others based outside the U.S. work on U.S. matters. The firm’s Washington office was closed in 2002 and remained shuttered for a decade because there was “no economic justification to keep the office open,” a spokesperson said at the time. Linklaters reopened that office in 2012.
Playing To Its Strengths?
The firm’s strategy is to expand on its current strengths and reputation—something that is easier said than done.
“We are not really set up to compete on domestic work in the U.S.,” so Linklaters must instead play to its strengths of doing large cross-border transactions, one London partner explained.
The firm plans to build up specific expertise in certain practice areas in the U.S., such as antitrust, tax and regulatory, according to one partner. In areas where the firm already has qualified people, it will mostly look to expand with internal candidates, partners said.
One person familiar with the matter said these practices are part of a wider U.S. focus and strategy. And that, according to Williams, is critical if Linklaters is to succeed with its expansion plan.
“The advantage of antitrust and regulatory is it having a global reach—there’s a breadth and depth there,” he said. “And I don’t say they wouldn’t be relevant but…how are you going to be a major player without the major corporates, financings and litigation? If you’re admitting you’re not playing with those heavy hitters, I don’t think it will be enough.”
One area the firm will be looking to bolster is its U.S. corporate offering, following the departure of Peter Cohen-Millstein in February. According to Linklaters’ website, there is now only one M&A partner in the New York office, although it promoted three mainstream corporate lawyers in the city in early April.
“Linklaters, the Wachtell of the U.K., just lost their only real public M&A partner in New York and a big chunk of the practice is walking out the door,” a U.S. recruiter said of the move, comparing the firm to the top Am Law firm Wachtell Lipton Rosen & Katz, known for handling major M&A, shareholder litigation and other corporate work. “That’s a major loss for them. They were doing the very bare minimum to maintain a presence here and now as a result they are really losing their diamond.”
The firm has done 22 M&A deals with a U.S. involvement since the start of 2022, with a total value of $6.59 billion, according to data from Refinitiv. In 2021, Linklaters worked on 98 M&A transactions worth $38.5 billion. In contrast, arch rival Freshfields worked on deals valued at $259.6 billion and Clifford Chance’s deals were valued at $95.8 billion.
Linklaters’ standout year came in 2020 when it advised on 77 deals worth $102.9 billion.
For Linklaters to remain a player in the U.S., it will have to make an unprecedented number of promotions from associate to partner and make counteroffers to partners being recruited by other firms, the recruiter said.
Former partners are skeptical of the firm’s desire to grow organically through promotions. Some expected the firm to turn to the lateral market—and do so relatively quickly—but said it would face considerable challenges.
“I think they’re going to try to plug it quickly, I’m sure they’ll try to address it as soon as possible,” Matthew Bersani, a partner at the legal consulting and recruiting firm Cliff Group, said of the firm’s efforts to fill the gaps in its New York corporate practice. “But it’s a challenging market to do that.
“I think there is a lot to attract the right person to these platforms, it’s just that it is a little bit more of a startup environment than joining Skadden Arps or something,” he continued. “They do have a lot to sell, and I think they’ve got the money, I think it’s just the question of persevering in the face of a tough market.”
The firm’s progress is unlikely to have been helped by the abrupt departure of U.S. leader and senior partner hopeful Tom Shropshire in February 2021. Longtime partner Tom McGrath replaced Shropshire in the role in April 2021 for a four-year term.
A Cultural Conundrum
To increase the firm’s lateral hire ability, Linklaters modified its lockstep model at the end of 2021, making three key changes. Behind its decision was a desire to make the firm “more competitive in the U.S,” the firm said. But in practice, this does not appear to have yet been borne out.
“At their very core is their lockstep model. I’ve heard they’ve given themselves the power to change that, but I’ve seen them do that zero times”, said Keith Fall, a partner at the New York legal search firm Walker Associates.
A U.S. partner at another U.K.-headquartered firm agreed. “They’ve had a distracting discussion about changing their compensation system which didn’t result in a really noticeable transformation,” the partner said.
However, others are more optimistic about the firm’s ability to secure talent now that modifications to the lockstep system that provide more flexibility have recently been made.
“Really, it is a lockstep in name only—now they have flexibility,” consultant Williams said. “Linklaters had the courage in terms of changing their lockstep arrangements and I salute them for doing so because that was a truly cultural change.”
That cultural challenge is significant and has long been cited across the wider industry as a stumbling block in transatlantic law firm merger talks.
“You don’t want people who are of a completely different mindset and a wrecking ball to your wider firm culture,” Williams said. “The Magic Circle has spent decades getting their people to play nicely, give consistent high levels of practice and establish important quality clients. Do they always get it perfect? No, but certainly significant progress has been made. They’ll be reluctant to put that at risk.”
Fall, the New York legal recruiter, noted the difficulties that come with a U.K. firm that has hundreds of legacy partners and a particular way of doing things, trying to integrate with American lawyer culture.
“There’s ego at play, conservatism at play, I’m sure there’s inertia at play, and I’ll bet there’s jealousy at play,” he said. “If you’ve been at Linklaters your entire career, and waited your turn, climbed the lockstep one rung at a time, I’m sure sure it does not feel good for some lateral partners to join overnight and make more money than you, regardless of their portable business and what they’re able to bring in through cross-selling in New York.”
One recruiter who wished to remain anonymous said that Linklaters is very thorough when considering lateral hires and a great deal of emphasis is placed on finding the right fit. The process, the recruiter noted, takes a lot longer than at some of its peer firms.
And then there’s the question of money.
“It wasn’t until fairly recently that they increased [the lockstep] cap with special points for certain partners,” the recruiter said. “My impression is that it came too late.”
It is still unclear what Linklaters’ next steps will be, or whether the firm will achieve what it wants in the U.S. market.
“As we know,” noted one London-based Linklaters partner, “it is notoriously difficult for firms to get established in the U.S.”
Dan Packel and Christine Simmons contributed to this report.