"We don't view this as 'just it'," says Shearman & Sterling London and Brussels head Matthew Readings of the US firm's trophy hire of high-yield partner Ward McKimm.

The long-awaited hire – finally confirmed last week after months of discussions that were a very open secret in the market – ends a prolonged lateral drought at Shearman in London, coming almost three years after the office's last significant City lateral hire, of Freshfields TMT co-head Frank Miller.

Compared with the ever-more prominent role that Shearman's larger – and more profitable – New York rivals such as Latham & Watkins and Kirkland & Ellis are playing in the London lateral market, the difference has been stark.

While Latham now has more than 300 lawyers in London and Kirkland more than 200 thanks to a steady stream of high-profile recruits, including the latter's hire of Freshfields private equity star David Higgins at the end of last year, Shearman has a City lawyer headcount of about 150, according to Legal Week's recent survey of US firms in London.

And, in contrast to the strong growth of rivals such as Latham and Kirkland, Shearman has had a difficult few years. The firm de-equitised a number of partners in 2016 in a bid to boost profitability following a difficult 2015, and slipped several places down The American Lawyer's revenue and PEP rankings in 2018 despite a 7% increase in PEP to $2.3m.

London is still very attractive as a market for us and we will be looking to continue that growth trajectory

It also lost highly-rated London high-yield partner Apostolos Gkoutzinis to Milbank earlier this year, while a team of competition partners left the firm's Brussels base to join Quinn Emanuel Urquhart & Sullivan last year.

However, earlier this year Brussels managing partner and global competition head Readings took over the leadership of the US firm's City base, and he says McKimm's hire marks the end of Shearman's dry spell in the City.

"London is still very attractive as a market for us and we will be looking to continue that growth trajectory," he says. "We don't think we've plugged a hole and that's all we want to do. We may see further growth this year as there are conversations ongoing currently, but nothing is set to happen in the short term. We try to do lateral hires for longer-term strategic investment, not a short-term revenue boost."

According to Readings, Shearman made a deliberate decision to focus on organic growth and internal promotions during the last few years, but this strategy has now changed, with London now very much a focus for lateral investment, particularly in its core finance and M&A practices.

And McKimm, who has already left Freshfields, is set to be heavily involved in any future London recruitment, despite not currently holding an official leadership role in Europe.

According to those who have worked with and opposite McKimm, his reputation and name will boost Shearman's pulling power, despite his three years at Freshfields being quieter than he would have liked, with high-yield interest from sponsor clients such as CVC, Carlyle and Cinven slowing in recent years.

One City recruiter comments: "He is a star. He's the most impressive lateral Shearman has made in about 10 years – Ward is dynamic and they need someone like that in London; the firm has done nothing in the London lateral market for a long time."

However, one potential obstacle to building up around McKimm in a market where the very top performers can now command $10m a year, is likely to be Shearman's PEP, which despite growing by nearly 30% since 2013, stood at $2.3m in 2017 according to the AmLaw 100, compared to $4.7m at Kirkland and $3.25m at Latham.

One ex-Shearman partner comments: "Before, Shearman's strategy was around having strong private equity, high yield and leveraged finance, but I'm not sure the firm is profitable enough now to build that up."

While Shearman's average PEP may be lower than some of its US rivals, there is no suggestion that McKimm has taken a pay cut to join from Freshfields, despite the fact that his four-year guarantee was due to expire next year and the high-yield market has been far quieter in recent years than when he joined Freshfields. While neither firm will comment on his earnings, his package at Shearman is understood to be broadly comparable and he was not expected to see his profit share significantly altered had he chosen to remain at the magic circle firm.

There is no doubt, however, that being busier will be a welcome change for McKimm.

One partner who has worked with McKimm in the past says of his latest move: "It makes sense for his practice. There's been less appetite for high yield lately, particularly on the sponsor side. Shearman has more on the credit and issuer side, so Ward will be busier."

Ward is dynamic and Shearman need someone like that in London

Another high yield partner adds: "When he went to Freshfields, they broke lockstep to accommodate him and then 2016 was pretty slow. I imagine it would have been pretty painful not to have that work – it would probably have been quite uncomfortable."

In contrast, Shearman – the US firm he initially joined in 1997 in New York – counts the likes of Citi, Morgan Stanley, Barclays, Credit Suisse and JPMorgan among its roster of clients, and even though many of the individuals he worked with at the banks during his initial stint at Shearman will now have moved on, many in the market still view him as a lender's lawyer.

His return to Shearman takes him back to his traditional practice roots, as well as his close friend David Beveridge, now Shearman's global senior partner, with many speaking of the "team getting back together".

While Shearman's discussions with McKimm started long before Gkoutzinis left and Readings maintains he has not been brought in as a direct replacement, part of of the draw for McKimm is likely to be building up the team, which numbers six partners in London, around him under a re-energised global leadership.

For some though, the move raises questions about both firms' plans. Some argue that Shearman's lack of a big-name PE City private equity partner (Mark Soundy left for Goodwin Procter in 2016 alongside tax partner Sarah Priestley), could make it more difficult for Shearman on the high-yield side, while others argue the firm's resources would have been better spent on an area like PE rather than high yield, where it already has some good names.

Freshfields, meanwhile may miss the comfort of such a well-known pair of hands on the debt side to back up its private equity practice following the loss of Higgins, and while practice head Adrian Maguire is on sabbatical until November.

One partner comments: "This could be seen to weaken Freshfields on the PE side in the battle with the US firms. It's another blow to the team."

Another adds: "They've lost someone who's a recognised name and it's hard to replace that."

In reality, however, while the firm wanted to keep McKimm for his experience and relationships, Freshfields is likely to be just fine, despite the loss of its second high-yield partner in six years to a US firm.

With Valerie Ford Jacob in the US and partners in the UK including Andy Hagan, who McKimm brought over from Kirkland in 2016, Denise Ryan and Simone Bono, who joined in 2011 from Simpson Thacher & Bartlett, Freshfields still has enough partners capable of doing sponsor-side high-yield work, should the market pick up again, without needing to recruit laterally in a hurry.

One Freshfields partner said: "It's disappointing for us, and we'd have loved to keep him, but in terms of having a very strong team, I think we've still got it. We're very relaxed about his move – a lot of clients recognise bonds are in a different place now and I don't think we need to replace him. Ward is a fantastic guy and we're hugely grateful to him – in a way his work is done, he's left us with a great team."

The bigger question is whether McKimm will really be able to galvanise Shearman in London after several years on the wane.