US advances reach a very threatening point

Legal Week's in depth strand has been timely of late. While May's focus on libel and privacy coincided with sustained hysteria about injunctions, this month's international firms in London focus comes as Weil Gotshal & Manges pulls off arguably the most significant City raid yet inflicted on a leading UK law firm.

If nothing else, the resignation of a four-partner funds team from Clifford Chance (CC) is evidence that a select band of US law firms is becoming a steadily more menacing threat to the City's finest.

This has been particularly evident in private equity. Despite the practice area remaining a shadow of its credit boom self, US firms have returned to predatory recruitment. This is happening for two reasons: clients remain more likely to move with partners than in banking and general M&A, and many US firms have domestic clients looking to do deals in Europe.

Such trends are even more stark in the globalising funds market. A practice area in which five years ago foreign law firms couldn't get their foot in the door in the City is now in danger of being taken over wholesale by US law firms.

Of course, many still wonder why US firms are so fixated on lateral hiring, given its erratic record as a means of successful expansion. In this context, Weil Gotshal is a good example – while some of its partner recruitment has been hugely successful, it has misfired on a number of occasions. And its struggle to branch out its City practice – glaringly in the case of restructuring, but also in acquisition finance and commercial litigation – has been mystifying.

Some have also questioned whether Weil Gotshal needs a UK funds team of this size and whether clients will transfer. Set against that, the firm obviously has a very robust global private equity practice and US funds business (the firm's executive partner, Barry Wolf, is a funds specialist by background and was closely involved in the CC hires) and the firm looks confident of its ground.

With Linklaters banking partner Stephen Lucas and Jones Day restructuring veteran Adam Plainer already recruited this year, Weil Gotshal has certainly made a huge statement to the market about its UK ambitions.

But even leaving aside the prospects for thrusting US invaders, the steady march of foreign firms has major implications for top London firms. Regardless of whether lateral hires deliver at their new home, the loss of City partners in marquee practice areas – as CC has just suffered – can deliver a powerfully symbolic blow. It is one thing to lose individual stars or chunks of your teams, but when firms start losing both to US rivals, questions will inevitably be raised.

And if profits per equity partner is a major part of the brand or share price of top City firms, another important component is the ability to retain key talent. Should the magic circle start regularly failing on that measure, the whole game will change.