Nobody knew it at the time, but when King & Spalding's New York head, Michael O'Brien, told a Legal Week roundtable, on succeeding in New York on 5 February, that firms in growth mode had to be active "right now", he will have had something specific in mind.

Just a few days after the session, held in association with the management consultant Alan Hodgart, he was busily announcing to the world his office's hire of the co-leader of Clifford Chance's US banking and financial restructuring practice, Robert Finley.

At the roundtable, O'Brien said he believed the market for laterals in New York was particularly volatile thanks to the consolidation that had been taking place in the market.

He argued there were a group of partners over and above the serial movers who were looking for a stable home where they would feel comfortable for the rest of their careers.

"Over the next few years the consolidation is going to stop," he said. "We are focused on generational shifts. That requires us to be very active right now."

Like the vast majority of firms represented at the Legal Week session – all headquartered outside the US' financial capital – Atlanta-based King & Spalding has been investing heavily in New York since it opened there in 1992. It now has more than 160 lawyers – and, given O'Brien's comments, more hires can be expected.

Further expansion should also be expected at the other firms that participated in the debate, given that not a single participant said they were already where they wanted to be in New York.

Indeed, growth at some of these firms has been considerably more dramatic than that achieved by King & Spalding.

In 2000, Paul Hastings Janofsky & Walker merged with the property specialists Battle Fowler, while last December Jones Day took on 100 lawyers from the IP boutique Pennie & Edmonds, boosting its presence in the city to more than 250 lawyers.

Paul Hastings' New York head, Barry Brooks, agreed with his colleagues that a significant presence in New York is a must for any firm with ambitions to advise on premium M&A and
capital markets work.

"There are not many major businesses that do not have touch points in New York," he said. "It is very clear to us that in order to be part of the global law firm club you need to be here.

"In transactional terms, New York is very parochial, especially for capital markets work. If you want to do a capital markets deal, you are simply not credible if you do not have a New York presence. You may have a tremendous relationship with a client in Florida that wants to do a high yield bond deal, but its financial advisers may say to the client, 'who are they?' if you are not in New York."

Charles Engros, Morgan Lewis & Bockius' New York managing partner, added: "Non-US clients continue to view New York as the primary gateway into the country. If you are in New York, you have a credibility that lawyers in other US cities do not have. And as business continues to internationalise, New York's pre-eminence will continue to increase."

Given New York's elevated status, it is, unsurprisingly, also viewed as a place where people have to work harder to succeed.

Hodgart said New York was unlike anywhere else in the US. Brooks, who is originally from the West Coast, agreed. "Conducting business in New York is like conducting business anywhere else, only it is tougher," he said. "Everybody is trying harder, pushing harder and competing at a greater level of intensity." Mike Feldberg, head of litigation at Allen & Overy's New York office, agreed: "It is just a little bit more competitive; you work a little bit harder."

Randy Mastro, head of Gibson Dunn & Crutcher's New York office and a former deputy mayor for operations of New York, added: "In other cities, people smile more often and lose their tempers less often. The hours are longer and the profitability of New York offices tends to be higher. But working in New York has its financial rewards."

Engros, however, provided a dissenting voice. "My experience is that lawyers around the country and the world work just as hard," he said. "New York practices can be more profitable because charge out rates are higher and there is more leverage between partners and other attorneys on the deals, because of the types of deals that are being done."

He said his experience of working with London lawyers had convinced him that while they were more conservative in their billing than US lawyers, the client paid the same because they charged higher hourly rates.

Stephen Land, managing partner of Linklaters' New York office, argued that working in New York was more similar to working in London than any of the other major US legal centres.

There was also disagreement over how easy or difficult it is to succeed in New York. "The marketplace is remarkably dynamic – change is possible and it actually happens," Feldberg said.

"New York is in many ways the least parochial place in the US. A lawyer from anywhere can come to New York and be made to feel at home, in a way that would not be possible in a small US city."

He pointed out that while London was dominated by the so-called 'magic circle' firms, in New York there were 30 firms that firmly believed they were in the top 10. "A firm that you never heard of yesterday could be doing a great job tomorrow. You can come here and go somewhere," he said.

But Ted Burke, the managing partner of Freshfields Bruckhaus Deringer's US offices, said that the New York legal market had traditionally been a fairly static one. He pointed out that while the list of top investment banks in New York had changed significantly since 1950, the group of leading Wall Street firms has changed relatively little.

"The New York legal market certainly underwent changes as a result of the M&A boom in the 1980s," he said. "For it to change as dramatically again would require a similar 'big bang' and that might come in the form of the increasing demand for the international delivery of legal services."

Several of the speakers agreed that it was going to become increasingly difficult for newcomers to break into the New York market, given the absence of suitable merger partners and the competition among existing firms for lateral hires.

Peter Coll, the partner in charge of Orrick Herrington & Sutcliffe's New York office, said it was becoming harder to name top quality New York law firms with around 150 lawyers, whereas 10 years ago there were many. In a reference to the disappearance of Pennie & Edmonds as an independent force, he said IP boutiques were now starting to disappear.

O'Brien used to be a partner at private equity specialist O'Sullivan, which merged with O'Melveny & Myers in 2002, before he took up an in-house role.

"I used to be a great believer in niche, high-end, 100 to 150-lawyer firms," he said. "When I came back, I had completely changed my mind."

Engros said team moves would predominate.

"That is where the consolidation is going to be in the next five years – it will involve established firms picking up the right practice group to complement their existing and desired client base."

Mastro said his firm had always adopted a policy of incremental growth based on quality lateral hires.

"For us, rational planned growth where the quality of the lawyer and the demands of the client are paramount has worked better than taking over an existing firm and trying to sort out how that plays out in the New York market," he said.

However, Linklaters' Land said firms should not be dogmatic about their approach to expansion. "We have had experience ourselves around the world of entering into different markets. In some jurisdictions, mergers have been an attractive possibility, in others we have preferred to expand through lateral hiring."

Burke warned that growing through lateral hiring had its own risks. He said firms needed to resist the temptation to hire partners on an "as available" basis.

"When firms get to a certain size, hiring a partner because of that partner's book of business rarely makes sense," he said. "The overall effect on firm profitability could be negligible – virtually a rounding error. The key drivers should be quality, cultural compatibility and potential contribution to the firm's practices and strategic goals.

"Mergers present huge challenges but can be attractive in that, if successful, they enable a firm to achieve key goals so much more quickly."

However firms choose to grow, most of the participants argued that in order to succeed in the New York market, New York offices needed to adopt a local mentality. "You have to have New York partners who are players in the marketplace, people who have reputations of sustained excellence here," Feldberg said. "It is always possible to find ways of integrating these lawyers with their colleagues around the world."

Mastro added: "We do not regard ourselves as a firm from somewhere else trying to break into the New York market. We are New York lawyers not only surviving but thriving."

As for the best way to move up the food chain in New York, Jere Thomson, New York head of corporate at Jones Day, said firms needed to build on their existing strengths in order to take advantage of the volatile recruitment market. "One of the most likely ways to succeed in New York in the long term is to play from your strengths and build on those particular areas where you have ambition," he said.

"Often you are able to attract lawyers who like the idea of being in a firm that is not just in one city. It is also easier to attract people with reputations if you have got strengths elsewhere that give them a national and international platform. This makes the firm additive to their practice."

Several speakers agreed that there is sufficient middle market work available to allow ambitious firms to build a strong foothold on which to grow their practices.

"The largest deals make the tables and the headlines but a tremendous amount of transactional activity at high levels, but outside the headlines, goes on in New York and many of these deals can be done very profitably," Brooks said.

"Many of us do make our bread and butter doing these types of deals and we also try to ensure that we do our share of large high profile international transactions that add to our credibility and reputation as a New York player."

O'Brien added: "There is clearly always going to be a lot of room in the middle market. The successful strategy has to be to maintain the top-end of the market in order to demonstrate that you are a safe choice and then to aggressively attack the middle market. You mostly do that by hiring good people and supporting them."

Coll, however, stressed that getting a slice of premium work was critical. "If you come to New York, you have to start doing some of that sophisticated work at the very top of the pyramid. If you do not, you are not going to get the prominence you need to grow."

Mastro said he did not see New York as a "limitless pie that will continue to expand". He said there would be winners and losers in a market where partners were more willing to move between firms than ever before.

"Those firms that have developed the strongest institutional links and are succeeding financially will continue to attract good people," he said.

"Those are the firms that will continue to thrive."