Suzanna Ring sizes up Davis Polk & Wardwell's prospects as the US leader makes its English law debut in the City

If most partner hires in the Square Mile are straightforward to the point of being mundane, news last week that Davis Polk & Wardwell had hired Freshfields Bruckhaus Deringer corporate partner Simon Witty stands as a rare exception.

The hire signals the English law launch of Davis Polk, one of the few remaining leading Manhattan law firms to have resisted forging a fully fledged City practice. The appointment will also be assessed for what it says about Davis Polk – historically one of Wall Street's legal elite but a firm that until recently was regarded as having lost ground to more expansive peers like Sullivan & Cromwell and Simpson Thacher & Bartlett.

Yet with Davis Polk moving into Hong Kong law in 2010 with the hire of two high-profile partners from Freshfields and Linklaters and last year's English law launch in Sao Paulo, an English law launch in London had been widely tipped.

The hire of Witty – who joins the US firm in April – will also attract attention, and there is no doubt that the corporate lawyer brings real credibility to Davis Polk's launch plan. He has been established as one of Freshfields' most prominent corporate partners of recent years after working on a string of high-profile equity capital market (ECM) deals, including public offerings for Telecity Group and AZ Electronic and secondary offerings for Centrica and Punch Taverns.

But his reputation was probably sealed by his work alongside colleagues like Julian Makin during 2008 and 2009, when Freshfields worked on a string of groundbreaking capitalisations for institutions battered by the banking crisis. Among these mandates were the £12bn rights issue for Royal Bank of Scotland (RBS) (for underwriters Goldman Sachs, Merrill Lynch and UBS) and HBOS' £4bn issues (for Morgan Stanley and Dresdner Kleinwort) in 2008. He also advised joint sponsors Merrill Lynch and UBS in a subsequent capital injection into RBS by the Treasury in January 2009.

In this context, some will be surprised that Witty has left a prime position in one of Europe's top deal teams to join a US start-up – especially as Davis Polk's partner profits of $2.21m (£1.4m) in 2010 lag many of its peers and are roughly comparable with Freshfields.

It is apparent personal reasons played some role in the decision, with Witty known to have some concerns over the pressure on older partners to retire at City firms – a contrast to the more flexible stance at US counterparts. (Though it is also clear Freshfields would have preferred to retain Witty). His lack of ease with the pressure on older partners was signalled in 2007 when he was identified in an age discrimination claim as one of a group of 'grey panthers' – Freshfields partners that had disagreed with plans to overhaul its pension scheme.

But if no-one disputes that Witty is a good fit for Davis Polk, neutral observers point out that even one of Wall Street's top legal firms has considerable ground to make up in the City. In contrast to markets like Paris and Hong Kong – in which the firm has made investment – corporate and securities work in the UK is heavily institutionalised and requires advisers to field sizeable teams. A credible attempt to win English law transactional work would probably require the firm to build a team of at least five partners, including high quality coverage in tax, pensions and competition.

The firm also has a long way to go to catch up to its New York peers, which have been investing in English law practices in earnest for five years. Sullivan hired Allen & Overy (A&O) corporate partner Vanessa Blackmore and Milbank Tweed Hadley & McCloy's Tim Emmerson in 2006 and 2007 respectively. Simpson Thacher at the time was moving into finance with several much-touted hires from A&O, and followed up in corporate with the recruitment of Clifford Chance heavyweight Adam Signy and funds head Jason Glover. Sullivan now has eight UK-qualified partners, while Simpson fields seven. Meanwhile, Skadden Arps Slate Meagher & Flom now has nearly 30 UK partners.

Cynics also argue that the 163-partner Davis Polk lacks the profitability or scale of its New York rivals to back its ambitions.

tom-reid-davis-polkSet against this, Davis Polk's reputation and client base remains potent and there is a feeling that the firm under new managing partner Tom Reid (pictured) has struck a more ambitious tone. Reid also refutes claims that Davis Polk will be ghettoised in a narrow ECM practice, promising a wider push into corporate, private equity and even litigation. He comments: "We don't have a theological construct of how this is going to evolve, but we will be looking to get the highest quality people to broaden out our English law capability into our other core areas."

Reid also refutes critics who say the firm has waited too long to enter the market: "We had no interest in being on the bleeding edge. We are not concerned with peers that have taken this decision ahead of us. We really had to be sure we could get the quality of people that we wanted."

One local managing partner of a US firm is equally dismissive of the familiar griping from City firms, commenting: "The magic circle has brainwashed people into thinking you need 1,000 lawyers, which the client actually doesn't like. If you have high quality people and a certain critical mass in the key areas – ECM, M&A, leveraged finance and tax – then that's enough."

Davis Polk's move will also be viewed in the context of an increasingly international outlook from leading New York law firms. For one, the firm has been a key referral partner for Slaughter and May, a relationship that is expected to be inevitably weakened by its English law launch.

Slaughters senior partner Chris Saul comments: "This is an extension of moves Davis Polk has made in capital markets in Hong Kong and Sao Paulo. While it may, of course, impact the amount of work we do together, we would look to continue the excellent relationship that we have. We are, moreover, fortunate to have strong and valued relationships with a number of other outstanding Wall Street firms."

Slaughters cites Paul Weiss Rifkind Wharton & Garrison, Cravath Swaine & Moore and Wachtell Lipton Rosen & Katz as among those that may benefit from increased referral work in light of Davis Polk's move. And Cravath and Wachtell have shown no sign of contemplating a UK law launch.

In the medium term, Davis Polk looks to be one of the hottest tickets for quality partners looking to join a launch team and the firm certainly has the practice and resources to be as successful as it dares. But, as ever, the magic circle will be relieved that conservatism slows the march of its most potent Wall Street rivals.

———————————————————————————————————————————————–

DAVIS POLK – AT A GLANCE

Fee income – $870m

Profits per equity partner – $2.21m

Key London clients –
AstraZeneca, Lloyds Group,
Royal Bank of Scotland
and Shire

London headcount – Seven
partners and 29 other lawyers

London head – Paul Kumleben

———————————————————————————————————————————————–

Related: In depth – International firms in London