CC funds fightback will test how effective magic circle defences are against US rivals

While the initial response to Weil Gotshal & Manges' daring four-partner raid on Clifford Chance's (CC's) private equity funds team focused on what the move meant for Weil Gotshal's UK ambitions, as the dust settles the wider significance for the City market will be defined far more by what the loss ultimately means for CC.

At the least, the City giant's success or failure in regrouping will be a fascinating test of whether CC's huge reputation in private equity, its magic circle brand and its institutional clout can out-muscle the ability of US rivals to lure away key senior talent.

And there is no doubt that the move punches a sizeable hole in one of CC's marquee practice areas. By its own admission, it doesn't currently have the partner ranks to service its existing funds clients once the departing partners – Ed Gander, Nigel Clark and Nick Benson and tax partner Jonathan Kandel – have left. Of course, this is before considering whether clients' patience will hold out – the team having already recently lost high-profile team head Jason Glover to Simpson Thacher & Barlett. Glover may not currently have enough resource at Simpson to take much more work from the team, but a host of serious competitors will certainly give it a good try.

Then there will be the logistics of the departures to consider. Team moves at this level typically lead to a good deal of shoulder-shoving over notice periods, ongoing client matters, and transferring associates and current indications are that this episode will be anything but an exception. But as for talk of legal action – believe it when you see it.

Yet despite the challenge it faces, CC still has much in its favour. As has been noted, many of the team's clients are institutional and have deep links with its unmatched European buyout practice. Major funds clients of the group include Apax, Charterhouse, Permira, Barclays Private Equity, BC Partners, Duke Street, 3i and Bridgepoint.

Of this group Permira and 3i look tough to prise away. It's a different story with BC Partners, which is already sharing duties on its current fundraising between CC and Simpson Thacher, while Bridgepoint is a relationship that had been run by the departing Gander. There will be particular focus on Apax, a trophy client in the sector but one which is a relatively recent funds client of CC (Gander and Benson are currently working on a major fundraising for the house).

There is, however, a slightly awkward narrative for CC to sell about the team's leadership. The sole remaining partner, Nigel Hatfield, is undoubtedly a very respected operator and was viewed by many as the natural number two to Glover. Yet Hatfield's apparent lack of interest in leadership roles, together with Gander's drive to take over the helm after Glover's departure last year, raises the question of whether Hatfield is a natural to front a team in need of some leadership.

And while it is clear that CC's buyout credentials and brand will buy considerable time, funds remains one of the most client-mobile practices in the Square Mile, and Glover has already had considerable success transferring some of its portfolio to Simpson Thacher. Brand has its limits.

To be fair, CC appears to be entirely realistic about this. Corporate head Matthew Layton outlines the firm's response as three-fold. First, the firm will look at options to promote from its 26-strong City associate base; second, the firm will look at options for laterals; and, third, there will likely be some rejigging of its 150-lawyer global funds practice.

There is definitely scope for all three options – especially if they are effectively combined, though the first will rely on a good chunk of associates not opting to head to Weil Gotshal. CC also obviously commands ample resources and a hugely attractive platform for ambitious funds partners (some last week thought that SJ Berwin's Michael Halford and Nigel van Zyl would be at the top of their hiring list).

In a market in which CC finds itself losing a fair sprinkling of talented partners to US rivals, the firm looks well advised to return the favour with a few more targeted raids on chasing pack rivals as the firm has done recently in corporate with the hire of Tim Lewis from Macfarlanes and Steven Fox from Ashurst. Drafting in other funds lawyers would mean retooling real estate and infra specialists, but it is a realistic goal. Overall, Layton's analysis that the firm will be given a period to get its house in order by clients is probably correct, and the firm enjoys the means to head off much of the damage.

But perhaps one of the major factors determining CC's success in rebuilding its funds team will be the health of its far larger buyout practice. There have been whispers among the team's many admirers that the practice is no longer as unassailable as it once was, with some rivals claiming the team no longer has quite the quality at the three key ranks: mid-level associates, junior partners and veteran partners.

The firm refutes this, claiming its practice is currently maintaining a strong run, and glancing at the team's recent highlights, it's hard to argue. Standout deals over the last 12 months include mandates for EQT (Dometic Group), Apollo and CVC (Brit Insurance), Carlyle and Vestar Capital (IPO of AZ Electronics Materials), Permira (acquisition of Unilever's Italian frozen foods business Findus Italia), not to mention working on the multibillion-dollar IPO of Nielsen Holdings.

The bottom line is that CC still has a chance to remain a strong player in the funds market but, with US law firms appearing to be on the verge of a breakthrough, it shouldn't kid itself how hard it will have to run just to keep up. The days in which the magic circle could rely on a form of client entitlement are rapidly drawing to a close.