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Overview

Traditionally one of New York's finest firms, recent years have been slightly less kind to Shearman & Sterling. The firm has seen some of its Big Apple peers power ahead in terms of profitability while out-of-town and UK rivals have begun to match its international muscle in key markets.

The consequences for the firm's 25-partner London operation are not yet clear. Despite being regarded as one of the most successful US incursions into the capital and a genuine challenger to the magic circle, the last few years have seen the London office share the mothership's lethargic growth in turnover and profits. It has also lost some big names.

Yet as the base of some its most important practice areas – and as one of the few US outposts in the capital to genuinely achieve critical mass on this side of the Atlantic – London may yet have a starring role to play in the firm's future. All of New York's leading firms are having to reappraise their London strategy as the City wins international market share from the US and, as the second-largest US law firm office in London, Shearman has a considerable headstart on much of the competition.

Meanwhile, a series of management changes – in London and beyond – have added to the sense of transition. High-profile City chief Kenneth MacRitchie (pictured below, right) handed over the reins to finance man Anthony Ward (below, left) in April 2008, before senior partner Rohan Weerasinghe rolled out a more sweeping shake-up of firmwide management.

Among the changes was the departure of MacRitchie from a slimmed-down main executive – reduced from six partners to three, with German chief Georg Thoma also stepping down as Manhattan bankruptcy partner Fred Sosnick came in. The changes left London without any formal representation at the highest level of decision-making.

History

As one of Wall Street's leading law firms, Shearman has seen some landmark deals and iconic clients, including the Rockefellers and Henry T Ford. The firm bought into globalisation early, opening in Paris in 1963 and London in 1972, making it one of the longest-established US outposts in the capital. Shearman's London office began practising English law in 1996 and has since become the second-largest organically-grown US presence in London (after White & Case), with around 150 lawyers.

The key phase of Shearman's London expansion came around the turn of the century, with a spate of high-profile lateral hires. For a while, it seemed Shearman might be the first US firm to genuinely break the magic circle's stranglehold on the best European instructions. But the office has lost a little momentum recently, thanks in part to slow growth at the firm's New York HQ. Shearman has, however, achieved critical mass in London and remains a force to reckoned with in the structured finance, projects, capital markets and M&A arenas.

Shearman made headlines for the wrong reasons in 2008 when the firm laid off a London associate after an incident at a Soho strip club.

Culture

Strategically, the London office has remained more aligned with its HQ than other US firms that have moved into local law, but, culturally, the high number of UK-qualified lawyers means Shearman's London outpost has gone more native than most. Another US-firm-in-London tradition that Shearman is about to jettison is the role of the 'gentleman amateur' managing partner. Longstanding office head Kenneth MacRitchie, who still practises in the projects department, is shortly to devolve some of his powers to other senior partners in the firm in order to address a perceived lack of organisational rigour.

Key departments

National/international coverage

Shearman was one of the first 'white shoe' firms to look beyond its own borders. This has left it with a business model that looks more like a magic circle firm than one of New York's finest.

Offices in Paris, London and Abu Dhabi (1975) have been joined by new offices in Beijing, Brussels, Duesseldorf, Frankfurt, Hong Kong, Munich, Paris, Rome, San Francisco, Sao Paulo, Silicon Valley, Tokyo, Toronto and Washington DC. The newest addition to the network was Shanghai, which opened in 2007.

In April 2008, the firm parted company with its 30-lawyer Mannheim arm, which coincided with a shake-up of the firm's senior management in Germany.

Key clients

In the US, the key client relationship has always been Citibank, with which the firm shares a skyscraper on Lexington Avenue in Manhattan. Other banks that loom large on its client list in the UK include Credit Suisse and the Royal Bank of Scotland.

Leading partners

Shearman went on a hiring spree at the beginning of the decade, taking some big names from the magic circle, such as Clifford Chance competition head Chris Bright. More recently, the firm has lost some key partners, including M&A stars Adrian Knight and Jonathan Coppin and leading projects partner Nigel Thompson, while US capital markets rainmaker David Beveridge has returned to the US.

Nevertheless, Shearman is still a draw for City partners, most recently capturing structured finance partner Ian Harvey-Samuel and corporate partner Lois Moore from Freshfields Bruckhaus Deringer; Laurence Levy (M&A) from Norton Rose; Lovells competition partner Matthew Readings; and structured finance partner Julian Tucker from Allen & Overy.

Some of the longer-standing big beasts in the London office include MacRitchie, Ward and Bright, Ian Nisse (property), Peter King (M&A) and projects head Nicholas Buckworth.

Career prospects

The firm's frenetic recruitment has left Shearman's London office with a poor reputation for promoting associates to the firm's all-equity partnership. The firm has generally preferred to promote its associates to 'of counsel' status at the rate of four or five a year but with few of these roles leading to partnership, they have generally proved to be a poor retention tool.

This situation may, however, be changing. The weakness of the US dollar and the narrowing of the profitability gap between US and London firms is beginning to stem the flow of lateral hires, while Shearman has promised that future expansion will be more focused on organic growth and internal promotions than big-money transfers.

Salaries

Shearman's pay-scales have long been the standard by which the 'mid-Atlantic' pay rate applied by many US firms in London has been calibrated. More recently, this mid-Atlantic rate has been drifting towards the Shannon estuary.

Although Shearman hiked its rates by 20% in 2006, the plummeting value of the dollar meant that 2007 saw a much more modest 4% rise, despite continued salary inflation at UK firms. As a result, the gap in the newly-qualified rate between Shearman and the magic circle has narrowed to £10,000, although its salaries are still far from ungenerous.

In April 2008, Shearman announced a pay increase of 7% for London associates, putting the firm's rates well ahead of those at top City firms at £80,000. Senior associates receive salary increases on a discretionary basis, with the base salary level set at £170,000 a year.

Trainees at the firm are among the highest-earning in the City, with first-year trainees earning £39,000, and second-years £41,500.

Recruitment

Work-life balance

With the salaries and bonuses on offer at Shearman, few associates are likely to be skipping out of the office at 5.30pm. However, chronic attrition rates in New York at the beginning of the decade led to a programme of sabbaticals, 360-degree appraisals and clearer career communication for associates.

Diversity

US firms take diversity more seriously than most, not least because a growing number of companies in the US include this among their panel selection criteria. According to the diversity league table compiled by the Black Solicitors Network in 2007, Shearman has the greatest proportion of ethnic minority associates in the UK.

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