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It all sounds remarkably familiar.
Picture a high-profile banking partner bobbing up and down in a swimming pool, smiling and joking to the camera.
It could not have been less Ashurst Morris Crisp — and yet here was one of its rainmaking banking partners, Stephen Mostyn- Williams, spread across the pages of a monthly legal magazine. The message was there for all to see — Mostyn-Williams and Ashursts just did not go together.
Sure enough, Mostyn-Williams soon left for the London office of US firm Shearman & Sterling.
Two years on, Mostyn-Williams’ friend and professional rival Maurice Allen has left his firm amid similar talk of cultural differences and personality clashes.
Like Mostyn-Williams at Ashursts, say City insiders, Allen at Weil Gotshal & Manges was like a square peg in a round hole.
But it would be too simplistic to put the blame for the London office’s current problems solely at Allen’s door.
No doubt the firm will be hoping it will be able to draw a line underneath the departure of Allen and his team. But the events leading up to their departure aptly illustrate the difficulties faced by all the US firms that have embarked on ambitious expansionist projects in London.
The City’s legal community had been talking about Allen’s discontent with ever increasing fervour until last Thursday (27 January), when Legal Week revealed the crisis talks taking place between Allen and the Weil Gotshal management.
Events have since moved quickly. Allen resigned the day after Legal Week hit the streets, and on Monday (31 January), fellow banking partners Nick Holt and Martin Hughes also resigned.
At the time of writing, it was unclear whether more defections would follow.
At the extreme, Allen’s departure could precipitate the demise of Weil Gotshal’s entire English law finance practice, leaving the strong corporate practice to fend for itself.
But Legal Week understands that the finance practice is not acting as one.
Securitisation partner Jacqueline Kelly, for example, has dabbled in the recruitment market. Shearman & Sterling interviewed her, but she is understood to have turned the firm down and resolved to stay at Weil Gotshal.
And the office’s new head of banking, James Chesterman, has been linked with the London office of Wall Street firm Simpson Thacher & Bartlett. It is unclear whether his promotion to replace Allen as head of the finance practice will be enough to keep him at Weil Gotshal.
But if relationships within the Weil Gotshal finance practice are still unclear, there does appear to be a difference in opinion between the London office’s corporate and banking practices.
Former Clifford Chance partner Mike Francies, who heads the corporate side and has now become London managing partner, is understood to favour staying with Weil Gotshal.
The efforts of Weil Gotshal’s managing partner Stephen Dannhauser and board member Tom Roberts, who flew in from New York late last week to hold crisis talks with the London management, appear to have been enough to placate the bulk of the London partners for now.
It is hard to imagine Weil Gotshal’s New York management pulling the plug on the office, given the sheer scale of the investment that Weil Gotshal has made in London since its inception four years ago.
New York is understood to have ploughed between £5m-£10m into the London start-up. It has now grown to 17 partners and 94 lawyers: the largest English law capability of any US firm in London.
In January, the firm made up five partners, including Charles Alexander, James Gubbins and Andrew Harting in corporate and Kate Allchurch in banking.
The firm’s healthy banking and finance team and strong corporate practice brought in fees of £18m last year, which were reported to have translated into average profits per partner of £440,000.
The office has been helped by a good list of active clients. Chase Manhattan, Hicks Muse Tate & Furst, Telewest, CeNeS Pharmaceuticals, MediaOne and the Knutsford Group are among those that have contributed to the profits.
Legal Week’s sources at the firm say that the top partners’ take-home pay is around the high £600,000s. Francies says the office is already profitable. but insiders say that the profits were not coming in fast enough for the New York management. In 1998, it reversed its earlier hands-off approach — and so began the series of events that led up to last week’s headlines.
The first ‘tension’ emanated from New York. Partners began to complain that Allen was not coming through with all the clients he had promised from Clifford Chance, which included Bankers Trust, Citibank and Chase Manhattan.
As one source puts it: “Some of the business did not materialise. Not all the clients that were promised came.”
The trouble was that Allen had spent almost a year out of private practice before he joined Weil Gotshal in London.
He recovered Chase after two years at Weil Gotshal via a general tender, but had greater difficulty convincing some of the others for several reasons.
For example, by the time Allen had joined Weil Gotshal, his contact at Bankers Trust — general counsel Stephen Ball — had moved on to be general counsel at Nomura.
Subsequently, Ball instructed Weil Gotshal in London, but the volume of work did not match that potentially on offer at Bankers Trust, although Allen did do some work for Bankers Trust once it had been taken over by Deutsche Bank.
The second ‘tension’ came from London rather than New York.
Allen had accepted that the London office would reflect Weil Gotshal’s New York culture: an ‘individualistic, eat what you kill’ approach.
But while the office was still small and the banking practice was in the majority, partners maintained the collegiate style they had brought with them from their City firms.
As one partner at a rival City firm said at the time: “Weil Gotshal is a team of really good friends who have become a formidable threat to the magic circle firms.”
As the office grew and the corporate department became the focus of most new investment, the ‘individualistic’ style began to take hold.
Legal Week understands that this encouraged rivalry between the steady banking practice and the successful, if cavalier, corporate department, which Francies led from November 1998.
A source close to the firm says that the tensions came down to a rivalry between Francies and Allen. “Mike was more successful. It has put Maurice’s nose out of joint, that’s all,” he says. Both Francies and Allen, however, have denied that there has been any friction between them.
But to make matters worse, the difference in partners’ billing prompted New York to cold call individual partners in London to demand some consistency of performance.
“Mike works day and night and they expect all of us to do it,” says one Weil Gotshal partner.
As New York became more concerned with the London office, the more it imposed its own heavy-handed style of management. One insider describes it as “brutal”.
“It is bad for morale because the pressure has led partners within the firm to now eye one another with suspicion rather than support,” he says.
Francies insists there has never been any such tension and argues that the banking practice is just as profitable as the corporate practice. But Weil Gotshal partners began to vote with their feet.
Finance partner Nia Morris left in 1998 for family reasons. So it was left to banking partner Sean Pierce to make the splash with his defection to Freshfields in February 1999.
He had been high on Allen’s recruitment list and quickly signed up, becoming the office’s fourth partner. Pierce says in the beginning, Weil Gotshal was “a great party”, but he admits: “I was a bit naive. The US firms can never compete with a firm like Freshfields in London.”
A source at the firm retorts: “This project was always going to take commitment and while some partners had it, others did not.”
Weil Gotshal did stand by its fledgling London office when one of its highest billers, New York M&A litigator Dennis Block, openly criticised the way the firm had gone about its European strategy.
In the end he left to join Cadwalader Wickersham & Taft in New York.
One partner close to Block says: “Block thought the concept was out of control and too much money was being poured into London with no benefit because it was not managed well.”
If Block’s views represent the traditional US hostility to Europe, the views of Allen and Francies register at the other end of the spectrum.
Allen, in particular, complained that his banking practice needed
a European network. For him, expansion into continental Europe was inevitable and the sooner it was sorted the better.
He believed that single lateral hires like that of the firm’s first German corporate partner — Geza Toth from Feddersen Laule Ewerahn Scherzberg Finkelnburg Clemm — were not enough to keep the firm in touch with the current pace of consolidation in Europe.
The firm does have a three-year plan to build up a network in Europe, but so far it has spurned all merger opportunities.
Sources say the firm allowed Allen to hold a series of merger talks in these countries, but when offered a deal, New York dragged its feet and lost out to English and US rivals.
In an interview with Legal Week last year, Allen said: “They [US firms] regard a major investment in Europe — and it is a major investment if you are going to do it properly — as a practical impossibility.”
Allen was keen that London should reassert its autonomy from the US to send out the message to prospective merger partners in Europe that it would not mean being dominated by New York.
But the real crux of the matter was that Allen and some of his team did not like being dominated by New York.
Some observers argue that Allen was right to feel exposed because Weil Gotshal’s New York banking and finance practice is not one of the firm’s core strengths and so cannot help Allen to influence investment priorities.
One partner close to Weil Gotshal in New York says the rift was more to do with strategy. Allen and the New York management simply disagreed about the way forward globally.
“Maurice was not in sync with New York. The firm wanted to develop other practice areas, but he was bent on other ideas,” says the source. “Maurice is a wonderful promoter, but he is selfish and I would have sleepless nights if he was my partner.”
But Allen has never hidden his desire to build a fully-fledged international banking practice with a corporate support unit. It is unclear why it took four years for New York to realise that.
Much of the talk within the City during the past few days has centred on Allen’s role in the affair. But it could be argued it is the firm itself that has changed.
If it now believes the London office should be corporate rather than banking led, then perhaps it is just as well that Allen and his team have left.
One thing is certain, Weil Gotshal cannot afford to suffer the same loss of face suffered by Chicago’s Sonnenschein Nath & Rosenthal, when it closed its London office late last year.
Ironically, Allen appears to be heading for Ashursts, the same firm that parted company with Mostyn-Williams — that other larger-than-life banking partner — two years ago. One only hopes, for Allen and Ashursts’ sakes, that the firm’s culture has since changed sufficiently to accommodate someone like Allen since Mostyn-Williams’ exit.

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