How to Differentiate US Law Firms

Introduction

Students hear a lot about US firms, but they often struggle to effectively distinguish between them.  This is reflected in the curious collection of American firms that candidates apply to.  We’ve seen some candidates happily apply to London powerhouses like Latham & Watkins while simultaneously throwing in an application to new arrivals like Katten Muchin Rosenman.  

Other than the fact that both Latham and Katten pay handsomely, their London offices have very little in common.  This guide will help you distinguish between US law firms so that you can target American firms for training contracts in a more logical and consistent  manner.

Segmentation

We agree with Chambers Student that there are broadly two types of US firms in London:

• ‘True’ US: American firms that have opened up an office in London and grown organically (e.g., Sidley Austin, Paul Hastings, Gibson Dunn, etc.)
• Mid-Atlantic: American firms that have entered the UK market via a merger with an established British firm (e.g., BCLP, Jones Day, K&L Gates, etc.)

This guide focuses on “True” US firms.  Mid-Atlantic firms are a diverse bunch.  We won’t talk about them further in this article because it’s fairly easy to distinguish between them by consulting the usual sources of Chambers Student, Lex100 and Legal Business.

You can break the True US firms down further by looking at their:

• financial performance
• current headcount in London
• trainee recruitment
• pay
• practice area focus

Financial performance

The last decade has seen a loose grouping of 15-20 leading US law firms with international ambitions comprehensively outpace their London counterparts.  While UK firms have prevaricated about breaking their partnership lockstep (which limits partner pay based on seniority) to expand into the world’s biggest legal market in the US, American firms have won substantial market share in London.  

Macro trends such as US firms’ historically strong relationships with sponsor clients, favourable currency movements and the continued growth of the US economy is partly responsible for this continued growth.  

But the main reason is that American firms have won the war for talent at partner level.  

Whereas UK firms operate traditional lockstep remuneration models with partner seniority determining pay, US firms offer star partners richer rewards through an “eat-what-you-kill” system where partners receive a share of what they bring through the door.  If you are an up-and-coming junior M&A partner at Freshfields, do you really want to subsidise older partners and wait 15 more years before you earn what you are worth?

US firms’ meritocratic compensation model and innate profitability creates a virtuous circle: it attracts the best partners from UK firms, which - if executed correctly - drives profitability higher and helps attract more of the Magic and Silver Circle’s best partners.

The chart below compares the worldwide financial performance of the UK Magic Circle with the leading US law firms.  No UK firm except from Slaughter and May gets close to profitability of the leading US law firms.  While this data is worldwide rather than UK only, it gives you a good idea of how their platforms compare.  

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Focusing on the True US firms only (gold circles), we can see that there are broadly three clusters of firms:

• Hyper profitability at scale - Kirkland and Latham have successfully combined global scale in revenue with enviable profitability.  Skadden sits on the edge of this group.  After a few conservative years of lateral recruitment in London, Skadden has expanded aggressively this year in London in a bid to make up lost ground on Kirkland and Latham.
• Hyper profitable but subscale - This segment consists of well-known US firms like Weil, Gibson Dunn, Ropes & Gray, Sullivan & Cromwell, etc. that crop up repeatedly on headline deals throughout the City.  They don’t have the same global reach as their counterparts at Kirkland, Latham and Skadden but they compete for the same work.
• Chasing pack - Most of the names in this segment don’t have quite the same pedigree in the US as their counterparts in the other two clusters.  This is reflected in their lower profitability.  But you should pay attention to variations in the London market. Goodwin Procter has expanded steadily in London in recent years, while White & Case’s enthusiastic lateral recruitment is a familiar bane to managing partners of UK law firms.

Current headcount in London

A determining factor for many prospective trainees is the size of the law firm that they are joining.  

We go into much more detail on the ramifications of law firm size in our Prioritisation Guide (which is included with any application review purchased from Next City Lawyer).  In short, if you train at a small London office like Sullivan & Cromwell, your experience as a trainee will differ wildly from your peers at White & Case’s much larger London office.  

The optimum size of a law firm depends on what you want from your training contract.  You can see the relative size of US firms in London by looking at the horizontal axis in the chart below.

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The vertical axis shows growth in London lawyer headcount over the last five years up to 2019.  This is the interesting bit.  While most US firms have grown significantly in London, some firms have shrunk (e.g., Sullivan & Cromwell, Shearman & Sterling and Jones Day).  This is largely due to partner departures at those firms, rather than the result of any strategic pivot away from the London legal market.  

Trainee recruitment

Unsurprisingly, there’s a correlation between the size of the firm, its financial performance and the number of trainees it plans to recruit in the future.  Given that law firms usually recruit two/three years in advance, trainee vacancies (shown on the horizontal axis) are a useful indicator of a firm’s growth ambitions.  

However, it’s an imperfect picture.  It takes a minimum of five years to turn an offer-holder into a newly qualified solicitor who is capable of working relatively independently and bringing in meaningful fees for the firm.  For this reason, trainee vacancies are only a partial predictor of a firm’s growth ambitions in London.  No one would deny Kirkland’s rapacious growth in London, but it’s notable that it has done this mostly by recruiting qualified solicitors and still has a comparatively small trainee intake.  

Some US firms like Simpson Thacher don’t recruit trainees at all and instead recruit laterally for newly qualified solicitors.  If you plan on paralegalling before your training contract, firms like STB are an excellent choice.  You will often do trainee-level work and have direct exposure to the firm’s lawyers.  This is a very different experience to working as a paralegal in Freshfields’ Manchester hub.

Pay

You will see from the above that True US firms pay far more than the Mid-Atlantic firms. An NQ at Kirkland & Ellis will earn nearly £60k more than his/her counterpart at Baker McKenzie - an incredible jump in terms of compensation.  While it’s easy to become obsessed with pay and applying to firms who pay more, it’s important to not lose focus on everything else: firm culture, trainee intake, secondment opportunities, practice area offerings etc. These other markers remain important when choosing your future law firm.

Practice area focus

Most of the True US firms in London focus on ‘high quality’ value-add work. By this we mean that they have fewer teams and tend to not be full service, and the teams they do have are quite busy.

For example, the M&A team at Paul Weiss will not do “low value” work like due diligence for corporate transactions and will instead farm this out to law firms that are cheaper and have more international offices (e.g. Dentons, Baker & McKenzie, Squire Patton Boggs, etc.). Clients view this as “low value” because they think any law firm can review 3000 leases in a data room but fewer are able to do the most complex and difficult drafting, for which they are willing to pay the exorbitant charge-out rates of US law firms. A 3 year PQE at Simpson Thacher & Bartlett costs £480 per hour of work… this is insanity!

A lot of US law firm growth in London has been targeted towards servicing specific clients. If KKR often goes to Paul Weiss for M&A but then the firm needs to loop in separate banking counsel each time to sort out the leveraged finance it can get a little disruptive, so Paul Weiss has grown organically and added banking (and then capital markets, and then tax, etc).

True US firms therefore tend to focus on M&A (especially private equity), banking, capital markets, restructuring and similar practice areas but avoid employment, pensions and other ‘non-essential’ practice areas. A firm like Kirkland will still have tax, antitrust etc lawyers but they mostly function as add-ons services to the M&A and banking teams - so if you really love a more niche area of law and want to have your own clients on your own deals and not be harangued by the transactional departments you are better off pursuing these elsewhere.

Conclusion

If you were hoping we would tell you where to apply then we are sorry to disappoint! As you will have seen from the above discussion, a number of factors go into ranking and differentiating US law firms and it’s important to consider all of them when applying. If you work with us we can help you drill down into this and select firms that are most likely to appreciate your profile and which would suit your personality best.

We slightly favour the bigger US firms that also pay more (e.g. Kirkland, Skadden, Latham) because we think they offer a good mix of broad practice areas, high levels of responsibility, top tier work and continue to grow in London. We are less keen on firms like White & Case that have a reputation for working their juniors extremely hard and also pay less.

Nevertheless, it’s important you do your own diligence when researching firms and networking. Try to meet people from these firms and dig into what they like and dislike and whether you could see yourself thriving in their work environment. The best way to do this is through a firm’s summer vacation scheme (ideally at least two to enable effective comparison).  As with any firm, prioritise your applications based on which ones have rolling deadlines (see our list of firms with rolling deadlines for 2022 here).US firms aren’t for everyone, but those who make it in (and stay) are well rewarded!

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