Kirkland & Ellis' new City funds team has closed its first major instruction since joining from SJ Berwin earlier this year. The US firm has advised on the creation of the Terra Firma Capital Partners III fund, which raised €5.4bn (£3.7bn).

Terra Firma has invested more than €200m (£136m) in the fund. Other notable investors include the private equity division of insurance giant Allianz and the US State of Oregon. Funds partner Richard Watkins led for Kirkland, with support from senior associate Jenny Kapusniak.

Watkins joined the US firm's London arm earlier this year from SJ Berwin as part of Kirkland's high-profile hire of a team that also included private equity partners Mark Mifsud and Justin Dolling. The move handed the firm a significant foothold in the UK funds market.

This mandate will sound a warning to rival advisers in the European private equity funds market, which has historically been dominated by SJ Berwin and Clifford Chance (CC).

Terra Firma uses a range of firms including CC and Weil Gotshal & Manges.

Watkins commented: "Terra Firma is extremely active on a global scale at the moment. It is a heavy user of legal advice and we are looking to deepen the relationship we already have with them."

The deal comes after Terra Firma tabled a £3.2bn bid for music publishing giant EMI last month. The buy-out house also lost out to Kohlberg Kravis Roberts & Co in the £11.1bn race for Alliance Boots in April.