DLA Piper will need to lure some big names to work alongside former alliance partner Cliffe Dekker's chief operating officer in its new Johannesburg office, if its first foray onto the continent is to be successful, partners in the region say.

Cliffe Dekker Hofmeyr and DLA announced this week that their 10-year alliance would come to an end this month. DLA will instead open its own office in Johannesburg, recruiting Cliffe Dekker COO Michael Whittaker to lead the venture. For the time being at least the two firms will continue to have a referral relationship.

According to DLA global co-chief executive Simon Levine the firm's plans in the country are modest. "When we open an office in Johannesburg I am not planning to emulate Webber Wentzel or Cliffe Dekker - it [the new office] will be based on client demand, focusing on transactional work and will remain relatively small. In the meantime we want to work with Cliffe Dekker and we hope they will continue to work with us."

One South Africa-based partner though warns that DLA would have to go on a significant hiring spree to make the office work. He says: "DLA will not succeed unless they hire large big hitting teams as other firms have done."

"I expect they will be small for a long time unless they take big teams from the other firms. They'd have to go after very senior practitioners and they would have to take those practitioners with their teams. The market here has matured quite significantly, you can't come in and go through an organic growth period."

More moves on the horizon

Despite Levine's affirmation that the firm will stay small in South Africa local partners expect other Cliffe Dekker lawyers to follow Whittaker to DLA. "They will try and take some Cliffe Dekker partners" says one local partner. "They will cherry pick the guys they want."

But Cliffe Dekker chief executive Brent Williams says he is not aware that any other Cliffe Dekker partners are joining DLA. "There is always the possibility that one or two partners may go," he says. "My own sense is that people are not walking out the door to follow Michael."

According to another local partner, further DLA lateral hires are likely to be in the M&A and project finance practices as there are "some serious energy projects in the country".

He adds: "A project finance team would help them cover the biggest driver of project finance at the moment which is energy."

In addition to scale, rates could prove to be an issue for the transatlantic firm in South Africa. As one partner comments: "The international rate is very high compared to the South Africa market. It's about 30-40% more expensive, so this rate card will play a big role and that will impact on the pan-Africa practice."

Given the size of Africa, using the Johannesburg base as a hub for work across the region will be crucial for DLA.

"There would be no point in opening a Johannesburg office given the saturation of the market here unless it [the practice] was pan-African," says one partner.

Rocky history

What Cliffe Dekker's does next internationally is a question which still needs answering. With 115 partners it is likely to be too large a merger partner for an international law firm, meaning another international alliance could be a likely option. 

Williams makes no secret of the firm's desire for another international alliance partner, but says: "We won't be falling out of our seats to be reactive to the next best thing, we will be quite thoughtful over how we take this forward, we are a very strong firm in our own jurisdiction, less than 1% of our revenue was made up of work from DLA Piper so our immediate universe doesn't change much."

The split, which ended months of speculation about the state of the firms' relationship, came after the South African firm balked at attempts by DLA to more closely integrate after their decade-long courtship. The pair first tied up in 2005, building on an informal referral relationship that had been in place since 2000.

Reports had been emanating from the market for months that the alliance was on rocky ground. In October 2014 Legal Week reported that the firms were set for management-level talks to resolve issues between them. Both firms were understood to have pitched for the same mandates for mutual clients of the firm on a number of occasions.

Levine says of the split: "Cliffe Dekker wanted to remain independent and we had to find a way of respecting that properly."

Williams says that there were several sticking points in the merger terms proposed by DLA, he says: "The proposed integration involved quite substantial control [by DLA] of the material levers of our business in terms of making partner hires and developing new lines of business."

He says the frim would also have had to pay a "substantial brand fee" to DLA had it merged and that this combined with the loss of brand value from axing the Cliffe Dekker name was felt to be too risky.

News of DLA's subsequent launch comes after a number of other international firms have moved into South Africa in recent years, either through their own openings or through alliances, with the country seen as a good base for a wider pan-African practice.  Firms making a play in the market in some capacity include Norton Rose, Simmons & Simmons, Hogan Lovells, Allen & Overy, Clyde & Co and Linklaters.

International firms that have built South Africa practices through local lateral hires include Allen & Overy which hired a four-partner team from Bowman Gilfillan in 2014 and Baker & McKenzie which hired an eight-partner team in Johannesburg from Dewey & LeBouef following that firm's 2012 demise.

 

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DLA Piper will need to lure some big names to work alongside former alliance partner Cliffe Dekker's chief operating officer in its new Johannesburg office, if its first foray onto the continent is to be successful, partners in the region say.

Cliffe Dekker Hofmeyr and DLA announced this week that their 10-year alliance would come to an end this month. DLA will instead open its own office in Johannesburg, recruiting Cliffe Dekker COO Michael Whittaker to lead the venture. For the time being at least the two firms will continue to have a referral relationship.

According to DLA global co-chief executive Simon Levine the firm's plans in the country are modest. "When we open an office in Johannesburg I am not planning to emulate Webber Wentzel or Cliffe Dekker - it [the new office] will be based on client demand, focusing on transactional work and will remain relatively small. In the meantime we want to work with Cliffe Dekker and we hope they will continue to work with us."

One South Africa-based partner though warns that DLA would have to go on a significant hiring spree to make the office work. He says: "DLA will not succeed unless they hire large big hitting teams as other firms have done."

"I expect they will be small for a long time unless they take big teams from the other firms. They'd have to go after very senior practitioners and they would have to take those practitioners with their teams. The market here has matured quite significantly, you can't come in and go through an organic growth period."

More moves on the horizon

Despite Levine's affirmation that the firm will stay small in South Africa local partners expect other Cliffe Dekker lawyers to follow Whittaker to DLA. "They will try and take some Cliffe Dekker partners" says one local partner. "They will cherry pick the guys they want."

But Cliffe Dekker chief executive Brent Williams says he is not aware that any other Cliffe Dekker partners are joining DLA. "There is always the possibility that one or two partners may go," he says. "My own sense is that people are not walking out the door to follow Michael."

According to another local partner, further DLA lateral hires are likely to be in the M&A and project finance practices as there are "some serious energy projects in the country".

He adds: "A project finance team would help them cover the biggest driver of project finance at the moment which is energy."

In addition to scale, rates could prove to be an issue for the transatlantic firm in South Africa. As one partner comments: "The international rate is very high compared to the South Africa market. It's about 30-40% more expensive, so this rate card will play a big role and that will impact on the pan-Africa practice."

Given the size of Africa, using the Johannesburg base as a hub for work across the region will be crucial for DLA.

"There would be no point in opening a Johannesburg office given the saturation of the market here unless it [the practice] was pan-African," says one partner.

Rocky history

What Cliffe Dekker's does next internationally is a question which still needs answering. With 115 partners it is likely to be too large a merger partner for an international law firm, meaning another international alliance could be a likely option. 

Williams makes no secret of the firm's desire for another international alliance partner, but says: "We won't be falling out of our seats to be reactive to the next best thing, we will be quite thoughtful over how we take this forward, we are a very strong firm in our own jurisdiction, less than 1% of our revenue was made up of work from DLA Piper so our immediate universe doesn't change much."

The split, which ended months of speculation about the state of the firms' relationship, came after the South African firm balked at attempts by DLA to more closely integrate after their decade-long courtship. The pair first tied up in 2005, building on an informal referral relationship that had been in place since 2000.

Reports had been emanating from the market for months that the alliance was on rocky ground. In October 2014 Legal Week reported that the firms were set for management-level talks to resolve issues between them. Both firms were understood to have pitched for the same mandates for mutual clients of the firm on a number of occasions.

Levine says of the split: "Cliffe Dekker wanted to remain independent and we had to find a way of respecting that properly."

Williams says that there were several sticking points in the merger terms proposed by DLA, he says: "The proposed integration involved quite substantial control [by DLA] of the material levers of our business in terms of making partner hires and developing new lines of business."

He says the frim would also have had to pay a "substantial brand fee" to DLA had it merged and that this combined with the loss of brand value from axing the Cliffe Dekker name was felt to be too risky.

News of DLA's subsequent launch comes after a number of other international firms have moved into South Africa in recent years, either through their own openings or through alliances, with the country seen as a good base for a wider pan-African practice.  Firms making a play in the market in some capacity include Norton Rose, Simmons & Simmons, Hogan Lovells, Allen & Overy, Clyde & Co and Linklaters.

International firms that have built South Africa practices through local lateral hires include Allen & Overy which hired a four-partner team from Bowman Gilfillan in 2014 and Baker & McKenzie which hired an eight-partner team in Johannesburg from Dewey & LeBouef following that firm's 2012 demise.

 

• Download the new Legal Week Live app from the App Store or Google Play to read Legal Week on your mobile device.
• If your firm is a subscriber, obtain log in details by calling Giovanni Spinella on +44 (0)20 7316 9941 or emailing