The elite law firms in New York, the ‘white-shoes’, were traditionally slow to go global, especially compared to the magic circle. But Shearman & Sterling (“Shearman”) was one of the few exceptions. The firm was the envy of many for its strategic expansion into Europe. It built one of the best corporate practices in Germany, a market-leading arbitration practice in France, and gained a foothold in the London market before many realised it was possible. And this early global presence helped to attract big clients. In 1998, Shearman, with the help of star partner Georg Thoma, advised on the world’s largest industrial merger and the biggest cross-border deal at the time: the merger between German giant Daimler-Benz and US car manufacturer Chrysler.
During the 2000s, Shearman’s German practice boasted one of the highest revenue per lawyer ratios in the market and secured many publicly listed German companies as clients. With four offices and a significantly bigger practice than its rivals, Shearman was widely seen as the most successful US law firm to enter the German market, successfully competing against rivals Freshfields and Hengeler Mueller for large M&A deals. In 2004, the firm acted on Germany’s largest ever public-to-private deal as counsel to Blackstone on its acquisition of Celanese.
By 2010, Shearman’s London practice began to outperform its US practice by revenue growth, and the firm regularly went up against the magic circle on M&A deals. The firm had a habit of picking up lawyers to launch its international practices. In 2011, Shearman picked up a team of 17 anti-trust and competition lawyers for its Brussels operations and in 2013, Shearman hired of a team from Weil Gotshal & Manges to effectively launch its private equity practice.
Today, almost half of Shearman’s partners are outside the US; a higher ratio than many in the New York elite and The Lawyer ranks the firm as having one of the most international practices within its turnover bracket.
But Shearman has scaled back many of its offices since the glory days of its international growth. Its German team is a fraction of the size it once was, now with just one base in Frankfurt. Some suggest Shearman became too big too quickly in Germany pointing to the hiring spree between 1999 and 2002. Others say the firm failed to integrate its German team with the rest of its international practices.
Whilst partner defections aren’t abnormal for global law firms, Shearman has been particularly hit in Europe. The firm lost a large number of partners across its offices over the years including most recently, a series of competition partners in Brussels to Quinn Emmanuel Urquhart & Sullivan.
That leads to the issue of profits per equity partner (“PEP”). Shearman lags far behind the rest of the New York elite when it comes to PEP and that’s one reason behind the exits: rival law firms are willing to pay a lot more to hire partners. In recent years, the firm has tried to improve its profitability by expanding the number of non-equity partners and focusing on a niche group of practice areas. And whilst it’s still a far cry away from the likes of Simpson Thacher, Skadden and Cleary, it seems to be working: Shearman saw a growth in PEP of 7% in 2017 to $2.3m.
Shearman was one of the first international law firms in the Middle East. It launched in Abu Dhabi over forty years ago and bulked up the practice in 2008-9, almost doubling the number of lawyers it had on the ground. This was a smart move; the firm capitalised on activity in the region whilst the financial crisis was ravaging the rest of the world. Whilst the firm has since scaled back its presence in Abu Dhabi, it has been involved in many unique deals. Shearman won a number of awards for developing the legislative and regulatory regime for Abu Dhabi’s financial centre in 2015. A team of over 30 lawyers drafted a suite of civil, commercial and financial legislation to be in line with international standards. It was the first application of common law to the Middle East as the Abu Dhabi Global Market hopes to attract investors and multinationals to the region.
Shearman recently opened in Dubai and formed an association with a Saudi Arabian law firm, a move that will likely benefit from the region’s increasing diversification and financial investment.
Shearman has one of the biggest finance practices in the US and can tap into these relationships for mandates across the world. After the financial crisis, the firm could offer its European clients a range of financing options thanks to its dual-law capital markets capability, which was an attractive move when bank lending had frozen. The firm also has a number of US-qualified lawyers in London and boasts a market-leading high yield practice, another area where rival magic circle firms lag behind.
For some time Shearman has been trying to make litigation a core practice area. The firm has made a large number of lateral hires to build the team and litigation is now the firm’s third-largest practice. It has been involved in some interesting cases: in 2014, Shearman overturned a conviction against hedge fund trader Todd Newman in a victory that had huge consequences for future prosecutors in cases of insider trading. A write-up on the case can be found here. Meanwhile, Shearman’s arbitration practice has been involved in the biggest mandates across the world including the largest arbitration award in history. In the famous Yukos v Russia case, Shearman scooped up $60m in fees after billing over 130,000 hours of work.