New York may be an ultra-competitive legal market but many of its leading law firms are becoming increasingly focused on taking market share in a different city: London.

In recent months, firms such as Cravath Swaine & Moore; Davis Polk & Wardwell; Cleary Gottlieb Steen & Hamilton; and Skadden, Arps, Slate, Meagher & Flom, among others, have all hired prominent laterals in London. Most of these are focused on growing their corporate practices in the U.K, to help service European deals, restructuring, funds and finance work, and their hiring is made easier by the fact they can offer larger compensation packages compared with U.K. firms.

“Many high-performing firms have made a strategic choice to prioritize growth in London in practices such as finance and private equity,” noted Kent Zimmermann, law firm consultant at Zeughauser Group, calling London an attractive market for “money practices.”

Just this week, New York-born Kramer Levin Naftalis & Frankel confirmed a merger with U.K.-rooted Herbert Smith Freehills. On the same day, Davis Polk confirmed it was launching a new restructuring practice in London with the hire of Sidley Austin restructuring partners Mark Knight and Jifree Cader. Both lawyers were listed as co-heads of Sidley’s London restructuring practice.

“Europe is an increasingly important area of focus for our restructuring clients,” Davis Polk chair Neil Barr said in a statement, noting the firm is continuing “to build out our corporate practice in London.”

Paul, Weiss, Rifkind, Wharton & Garrison’s fast growth in London has made waves through the market. The firm's London office now has more than 30 partners, according to Paul Weiss' website, up from three in summer 2023, as the firm has lured partners from Kirkland & Ellis and U.K. firms such as Linklaters and Clifford Chance.

Other New York firms are also growing in the city, albeit at not quite the same clip.

Cravath hired two leveraged finance partners from Linklaters in the last few weeks to grow the number of English-qualified lawyers it has in London, according to sources familiar with the moves. The firm didn’t return messages seeking comment on the moves.

Leveraged finance partner duo Rohan Saha and Chris Medley are joining Cravath's relatively small London base, in a further expansion of the firm's nascent English law bench.

Cravath’s hiring follows the 2022 firm additions of legacy Shearman & Sterling partners Korey Fevzi and Philip Stopford. They were Cravath's first hires of England & Wales qualified lawyers in its more than 50-year history in London. The firm’s slow-build strategy in London this year also saw it sign up to a new workspace in the U.K. capital at 100 Cheapside.

Meanwhile, Cleary, Gottlieb, Steen & Hamilton has added seven lateral partners in the last two years, the firm said, including M&A heads from Linklaters and Ian Shawer, head of private equity at Travels Smith.

Cleary said it grew its London revenue by 30% year-over-year in 2023. Overall, London revenue has grown 50% from 2020, the firm said. “Growth within our priority areas of private equity and funds, antitrust and M&A continues to be a priority for us, but we are not interested in growing at a rate that risks compromising our revenue projections, balance of practice resources or firm culture,” Cleary managing partner Michael Gerstenzan wrote in an email.

He cited the firm’s longstanding presence in Europe as a reason the firm didn’t feel the “same pressure” to expand quickly as other U.S. firms that are entering or growing in the region.

Skadden has also taken a measured approach to growth in London. The firm added four lateral partners (two from Linklaters, one from Latham & Watkins and one from Willkie, Farr & Gallagher) over the last few years.

Rich Youle, head of Skadden’s London office and co-head of the firm’s private equity group, said the firm’s strategy in London is “very considered.”

“We have been laser-focused on growing an extremely high-performing and collaborative team,” he wrote in an email. “We are going to continue on that trajectory, attacking the market as powerful challengers and both promoting our own excellent homegrown talent to partner and attracting top-tier lateral talent that aligns with Skadden’s values and expertise—particularly across M&A, financial sponsors, debt finance, secondaries, insurance, financial regulation and controversy.”
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Opportunities, Challenges

“There’s only two markets that matter anymore”—New York and London, said Matthew Bersani, a founding partner of Cliff Group, a legal consulting firm. These markets often have the biggest deals and the highest realization rates, above 90%, he added, while in smaller markets, the realization rate can be below 80%.

The focus on New York and London is a change from prior decades when firms sought to be in multiple offices around the globe, he said. Now firms are going back to the model of “we want to be in the most profitable markets” and then will farm out work to other firms in smaller, less profitable markets, Bersani said.

“You really got to be top-tier in those two places in terms of your percentage of assets globally,” he said, explaining that 60% to 70% of firm head count should be in New York and London in order to achieve a PEP that is competitive with top firms.

Top U.K. firms will continue to face challenges matching New York-based firms’ compensation unless and until they can significantly increase their PEP, he added.

New York firms’ profits per equity partner figures often surpass top U.K. firms’ by $3 million dollars or more, according to Law.com data, helping them poach top talent in London.

“The U.S. firms are, generally, more entrepreneurial, more aggressive in their hiring stances and more profitable,” Alisa Levin, partner and co-founder of legal recruiting firm Green-Levin-Snyder, said in an interview.

One knock-on effect of international expansion is that billing rates are generally lower outside of the U.S., which can cause profitability issues for U.S.-based firms.

But with U.S. firms becoming more prevalent in the London market, that might change.

“Some rates in London are comparatively less than rates for similar work in New York,” Zimmermann said. “However, that may not always be the case as more high-performing U.S. firms grow and command their rates there, likely bringing rates broadly up in London.”