Clifford Chance corporate head Guy Norman and private equity head Jonny Myers talk to Legal Week about restructuring the German corporate practice and explain how the firm's global private equity team can compete with US rivals following a string of exits.

With no fewer than five private equity partners leaving for Latham & Watkins over the last two years, it is well documented that Clifford Chance's (CC) practice has been through some turbulent times.

Recent attention is focused very much on Germany where, in addition (and unrelated) to the forthcoming departures of Frankfurt based global co-head of private equity Oliver Felsenstein and Munich partner Burc Hesse for Latham, it has also reviewed its wider local operations.

The review, the firm's largest region-specific appraisal in years, was focused mainly on the local corporate practice.

"Germany had just been less profitable in the context of the wider firm than was desirable or

indeed achievable. Some of the cost structure was also a bit out of kilter but we are not going to finish Germany and turn to Spain," says corporate chief Guy Norman.

"There will be more people over the next six months who will leave us in Germany and more will leave from corporate than other areas. PE is already entirely 100% solid – the rest of corporate is a much bigger practice and people are leaving from all parts of it."

Up to nine partners are expected to leave, with the firm restructuring the practice around its more junior partners according to Norman. The firm will maintain all three of its offices in Frankfurt, Munich and Duesseldorf.

"It's generally the case that senior partners are leaving though there's a mix across the age range. The ultimate impact is that we have empowered and pushed to the front some rising stars.

"Now we've got a smaller management section and cross section of people who are much younger…The value and importance of younger partners in the team is fundamental."

On the departures of high profile names Felsenstein and Hesse to the US player, which had already picked up a trio of CC private equity partners in London, Norman is relatively sanguine. At Latham they will be reunited with Kem Ihenacho, David Walker and Tom Evans, who have all joined since 2013.

"It's disappointing but not all that surprising. In reality, what's happened to Oliver and Burc is very separate to what's happening in Germany. The fact they're in Germany is coincidental not linked.

"Let's not blow this out of proportion. When Adam Signy went to Simpson Thacher, there were lots of 'how will the place survive' stories out there, but it's a refreshing opportunity to bring people forward and another illustration of the fact the firm is larger than any one individual."

jonny-myersJonny Myers, the London-based private equity partner now in sole charge of the practice following Felsenstein's resignation, maintains that the practice and its client base, which include Permira and existing Latham client Carlyle, will remain strong.

"Private equity is a key part of the firm. What's important to us is that PE is not just corporate – 'PE' is what the PE clients need across a whole range of services," he says.

"Ideally the clients and relationships are with the firm so you don't suddenly start protecting them the day of a departure," he adds.

Fat US cheque books

While more departures to US firms are inevitable due to higher pay, says Norman, the firm hopes to retain the edge on mega-deals in Europe, which require broad resources beyond core practices.

"We will lose more people there's no question. There will be people who will have a cheque waved in their face and will leave," says Norman.

In the face of US firms bulking up in private equity in Europe the pair say the firm's ability to provide strong employment, antitrust and regulatory advice will help.

"Our deals involve not only multiple jurisdictions but also a real depth in multiple practice areas and that's the edge we have," says Myers.

Although the trend for partners being tempted away from the magic circle to higher paying US rivals is well established, Norman believes UK firms can seek reassurance from the increasing number of moves between US firms, where the guarantees used to entice partners initially can make subsequent moves inevitable.

He concludes: "In order to pay for yourself with those numbers, your performance has to consistently knock the ball out of the park."

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