"What we are seeing now is the second wave of US firms which sense that, if they are to have London offices, then there is no reason why they should not compete with English firms."
So says Maurice Allen, partner at Weil Gotshal & Manges – so far the US law firm with the biggest full-service capability in English law.
In three years it has grown to 85 lawyers in London – and Allen sees more growth on the horizon. To be the perfect small model of a big English firm, Allen says, Weil Gotshal should be about 100-125 lawyers strong.
One criticism often levelled at US firms trying to break into the English legal market is that they lack the depth and infrastructure to compete effectively and service their clients. Surprisingly, Allen agrees, in part.
"I would say in some ways that that is right. But my question is this: 'How much infrastructure do you need?' You need to create something that has everything a big firm has, but you don't need 10 of everything.
"When I joined Clifford Chance in 1980, we had 25 partners – probably less than 100 lawyers in total – but nobody said we lacked infrastructure."
In search of the 'holy grail' of critical mass, Allen does not believe that US firms will be content – or able – to continue growing organically. They will have to be acquisitive or die. This applies to Weil Gotshal as much as anyone else.
"Over time, the American firms will consolidate," he says. "The US firms that are building over here are not top-tier in the United States. They have more of an incentive to do it because the US market has reached its peak of profitability. But they will not all survive in London.
"Maybe what Weil Gotshal has in London will not be enough to get us where we want to be. We are striving over the next five years to remain as we are, but, to get to where we want to be, we will have to take-over or merge with somebody.
"So we are building something that will be attractive to English firms or a European one that doesn't want to be taken over by an English one. We are positioning ourselves to be one of the survivors."
Allen also sees that the influx of US firms is not over yet. "Very few of the top 10 US firms are trying to build a UK capability at the moment. When they do, it will be for defensive reasons and it will be too late for them to do it organically. They will build by strategic merger."
But what are US firms trying to achieve when they set up English practices in London? In Allen's view, they often do not have a particular strategy. "By and large, American firms don't really have a strategy, other than to make money.
"It sounds crass, but it literally is the case. They just see the people who can make them money and invest in them. That is what happened when we opened the office in London. They bought into our view of how you did things."
Getting the right team together is vital if you are to be a success, he believes. He does not feel that Weil Gotshal would have invested here at all had the right people not been available.
"The important thing is to get a team together with the right pedigree. People are very snobbish about where you came from." Allen also believes this is the reason why US firms have taken so long to enter the English market.
"Five or six years ago, you could not have persuaded 85 people to leave the top five firms and join this weird little American outfit that nobody had heard of.
"But now there is a sense that many of the good guys in many companies are frustrated by the fact that many partners in their firms don't perform. They say to themselves, 'why should I make the effort when I don't see every partner doing that?' That is the attraction of firms like us."
While Allen is keen to point out that he and his partners have not established "Camp America" in London, there are still clear cultural differences between the English and US firms.
"We are a lot more driven here than in an English law firm. I am not saying that is an entirely good thing, but it is like working for a bank here. In contrast, many English firms are very cosy places – they pay you lots of money, give you a job for life, it's like a boys' club and very pleasant.
"This isn't pleasant, but you can see why the Americans make more money than the Brits. Most English lawyers aren't in it purely for the money."
The US focus on the bottom line has advantages and disadvantages in Allen's view. On the positive side, it means that the London office is given far more autonomy.
"It surprised me," Allen admits. "They don't care how we run our company. They don't impose their ethos and culture on us. They control completely through the bottom line – only if you don't meet your targets or make money will there be questions. We like it that way."
The downside of this approach is that many Americans tend to be very short-term in their outlook. "When we take on a lateral partner, the firm literally does say 'how much is this going to cost us?'
"What we find is that it takes three years before a partner can ever show he or she is cash-positive and five years before you can actually show you have a return on your original investment. Any English firm wouldn't be bothered. It is a completely different mind-set."
Allen cites this as the reason that many of the larger US firms still only have small representative offices here at the moment. "They regard a major investment in Europe – and it is a major investment if you are going to do it properly – as a practical impossibility."
But where is the work coming from? Allen believes that the US investment banks are the battleground. He says that the firms which are vulnerable to losing market share to the US firms are the second-tier English practices. With the easy pickings in the US gone, London is the natural market in which to expand.
"In the US, there are 50 good law firms who have all grabbed a particular hole in the market and it is difficult to see a gap," he says.
"In the UK, you have the Big Five and then nothing. It may look competitive, but we can go into the gap currently held by the second-tier firms. Most US law firms have attracted good lawyers from the second-tier firms and many of their stars have left."
Weil Gotshal has captured a strong share of the English firms' market rather than simply servicing clients from its US head office.
"Our clients are a strange mix. Our firm has not traditionally had a strong finance practice in the US, so about 75% of them are new clients of the firm.
"In the short term, it is a disadvantage because it is quite difficult to start and grow a business from nothing, but the advantage is that as we are focused on clients with a large US presence, that is feeding back to the firm in the US. It is a bit like the tail wagging the dog," Allen says.
"But now that we are moving into M&A, it is a different story. We have a huge number of American institutions which are doing business over here that are a lot more comfortable dealing with an American firm."
The challenge ahead for Weil Gotshal and other firms like it is to persuade clients that they need a firm with dual-capability. But Allen is confident they can achieve this.
"Clifford Chance sold the idea of European coverage to the banks – now everybody has bought into the idea that this is what they need and I think it will happen with US and UK capability. What Clifford Chance is doing with Rogers & Wells helped us too.
"They went around their clients selling the advantage of having US and UK capability. That legitimises us. It will become the accepted wisdom."
Allen is understandably bullish about the prospects for US firms in London. He sees an interesting parallel in the US domination of investment banking.
"It is like Merrill Lynch and Morgan Stanley when they arrived in London. They were told they had no chance of getting in because the market is tied up by the British merchant banks. Now they are the dominant forces.
"In five years' time, people won't question why American firms are here. They will be thought of as part of the English legal scenery."