PE law firms look east for expansion

A third of Europe's major law firms have plans to expand their private equity practices "significantly" over the next 12 months, with much of this growth being driven by Asia.

Kirkland & Ellis and Taylor Wessing are among the firms forecasting growth of at least 10% in their private equity departments. This could bring Kirkland's 360-strong team to almost 400, while Taylor Wessing's PE unit would swell from around 64 to more than 70, according to unquote" data. A further 30% of firms plan to expand "as opportunities arise", with none of the biggest firms looking to downsize in the near future.

Weil, Gotshal & Manges is another legal firm which plans to substantially bulk up both its fund and deal structuring teams over the next year. Fund formation specialists in particular are playing an increasingly important role at the firm at a time when so many GPs are hitting the fundraising trail. "The difficult environment means it's taking longer for the mega funds to raise capital and the whole process is much more negotiated," says Michael Francies, private equity partner at Weil. unquote" has already reported the launches of 23 funds active in Europe this year alone, including Waterland Private Equity's fifth vehicle, which raised €1.1bn in just five months.

Indeed, firms like Kirkland and Proskauer Rose have also been preparing for the increased demand by taking on new fund structuring staff, while Weil itself controversially poached a four-man fund formation team from Clifford Chance in June. "If you really want to be a top private equity practice, you need to have a global fund formation team as part of your armoury," explains Francies. "We'd been trying to recruit or get together a team for quite a long time and we'd missed out on a few possibilities, but in retrospect I'm glad we did." Despite their new hires being threatened with legal action by Clifford Chance for breach of fiduciary duty, Weil nevertheless prefers to "try and start on day one with some mass" rather than employing team members on a one-by-one basis, because otherwise "clients don't believe that you've got credibility".

Weil is also joining the pack when it comes to looking east to expand its private equity offerings, having already employed around 20 PE professionals at its offices in Hong Kong and Shanghai. In fact, Asia is one region where the HR specialists would be willing to relinquish their policy of recruiting en masse. "If the right person came along, we'd definitely be interested in more deal lawyers, even on their own," says Francies. "We're very happy to recruit people in Asia because our clients are all looking out there and without more good people, we could be passing up potential opportunities." Other firms which have shown themselves to be highly aware of the importance of Asia in recent months include Addleshaw Goddard, which is launching offices in Singapore and Dubai, Allen & Overy, which is one of a few firms which secured a local licence to practice in Singapore, and Berwin Leighton Paisner, which has been established in Singapore for the past four years. Not all of these firms are practising PE law locally yet, but all have a strong corporate presence to which they plan to add the asset class as the offices build up. "You can't be a major law firm without having a presence in all the relevant markets - and obviously Asia is a huge market," adds Francies.

The journey east is one on which scores of private equity houses have also embarked. Employment agency Private Equity Recruitment (PER) has seen a marked increase in demand from London-based firms recruiting at all levels for their established or developing Asian operations. Most offices are being located in Hong Kong or Singapore, with Shanghai also a popular choice. "They're hiring a lot of people from the local Asian markets but are also looking for 'returners' - people who have the right cultural background, who are in the UK for either work or education, but who are happy to return," says PER's managing director, Gail McManus. Mandarin speakers have the greatest advantage, although anyone with a Chinese, Singaporean, Korean or Vietnamese background is a strong contender. According to McManus, it's attractive for global firms to employ people who have had a wider cultural exposure than merely their domestic market "because they tend to fit a little bit better within the businesses".

At the portfolio level, however, Asian recruitment appears to be less active. Skillcapital, one of the only specialist executive search firms for private equity-backed companies, has recently undertaken several projects in Singapore. While partner Tim Hutchins described the region as a "really interesting, dynamic marketplace", the firm is focused on markets closer to home, where management-replacing buyout houses have more of a stronghold. "If you look at the kind of investments that are taking place in Asia, the majority are currently through joint ventures or minority stakes." He adds, however: "That may change."

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