'The precedent is now set for double-digit million-dollar compensation': legal headhunters on their predictions for 2018

Last year saw a number of big-money partner moves, from Skadden Arps Slate Meagher & Flom's hire of White & Case private equity star Richard Youle to Freshfields Bruckhaus Deringer buyout heavyweight David Higgins' $10m move to Kirkland & Ellis, while many top UK firms are rethinking their compensation systems in an effort to ward off the advances of US rivals with money to burn. But what does 2018 have in store for the recruitment market? Legal Week talked to leading consultants and headhunters on the prospects for the year ahead.

Dominique Graham, global head of professional services, Signium “We spend a lot of time talking to law firm management about their brand positioning in the market, including doing a lot of intelligence report work in relation to their clients and would-be clients, to help them inform their position in the market. The market is moving towards a global elite, small boutiques and everything in the middle. If you are in that middle area, you have to think very hard about what you are going to do. “Our merger mandates are very busy and that has been the case for at least two years. It is not firms who are struggling, but firms who are doing well and are focused on turning their income and opportunities into sustainable revenue streams. “The post-Brexit scene is much livelier than we had anticipated, but I think in part that is because in the UK they are focusing on international revenue streams as opposed to domestic ones, and that is creating much more froth and is contributing to that merger market.”

Nakul Kapur - director, Sequoia Associates “US firms are still driving the hiring in London - we have met with US firms looking to hire 40-50 lawyers over the next few years. Firms with big UK domestic practices are perhaps hiring less on the partner side and, if they are, it is usually a case of a particular strategic gap that needs to be filled.

Good regulatory partners are like gold dust at the moment

“Practically all firms are looking to hire on the regulatory side. Good regulatory partners, junior or senior, contentious or non-contentious, are like gold dust at the moment. The same goes for partners with funds formation experience. Demand for private equity partners and those who have relationships with the credit funds has not lessened either. “Brexit is the known unknown in all of this. The US firms haven’t really slowed down their hiring which is what is keeping us really busy. However, we are hearing partners at some US firms voice concerns that their firms do not have strong European networks, particularly in Germany, and this could be a concern for them going forward. The magic circle and big international firms clearly win out here. “Consolidation for certain aspects of the market is inevitable. A good US merger is the holy grail for a lot of firms, although matching up profit per equity partner (PEP) and expectation is a difficult thing. The UK firms’ expectations of the firm they should merge with often falls down on PEP.”

Nick Shilton - chief executive, SSQ “There are lots of US firms that have got a voracious appetite to build out their London practices. The strides certain US law firms have made over the last few years has been significant, but there are very few US firms in London that would regard themselves as the completed article, and they will continue to hire from leading UK firms.”

The magic circle have reformed their locksteps, but I don’t think any have gone far enough to ward off the US firms

“The magic circle have all reformed their locksteps, but I don’t think any have gone far enough to ward off the US firms completely. They will also hire from each other in the City. There has been a shuffling of the pack of the last few years, with an increasing number of US to US firm moves in the past few years, and I expect to see that continue. “I think transactional practices will be the most lively – private equity hits the headlines and I think there will be M&A moves and moves in select areas of finance; particularly acquisition finance, which is linked to the private equity side. I think disputes will also continue to be pretty active, particularly on the white collar side.”

Vassos Georgiadis - founder, Melton Legal “The London lateral scene will likely be very active again, especially from UK to US firms, and between US firms too. As well as the usual areas of private equity and M&A, other hot areas for hiring will be regulatory (non-contentious and contentious), white collar crime, data privacy and cybersecurity. “We also expect the continental European market to be even more vibrant relative to previous years, especially Germany and France, and to a lesser extent Milan, Rome, Amsterdam, Dublin and Madrid (for example, Latham’s recent coup from DLA Piper in that city).”

Leanne Clark - managing director, Fox Rodney Search “Partners considering a lateral move have increasingly more insight and views about the culture of the firm at which they choose to further their career. The trend in 2017 towards US firms will likely continue in 2018, especially in corporate, banking and finance, and to a lesser extent dispute resolution. Interestingly, the majority moving from US firms tend to make moves to other US headquartered firms as opposed to returning to UK firms.

Ambitious partners at magic circle firms will be questioning where they see the future

“With the New Year, younger highly ambitious partners at magic circle firms in particular will be questioning where they see the future. Modest changes to the lockstep may not be enough for some, with the precedent firmly now set for double-digit million-dollar compensation. This is a significant milestone as it is close to the twentieth anniversary of an ad for the first million-pound solicitor, placed by my colleague Adrian Fox on behalf of a US firm.”

Freddie Lawson - director, FRS Associates “2017 was a year in which so many women found a voice. I would hope that 2018 is the year in which our industry starts to listen and act more. The female candidates that we help are demanding more of the firms they work in, and those firms with a poor reputation are being found out. We all care about diversity because we want to help drive social change within our industry, but there is no doubt that it also makes economic sense for the firms we serve to have a more diverse senior workforce.”

Evan Jowers - co-founder, Jowers/Vargas "I think the biggest change in the Asia markets going into 2018 is that for the first time in a number of years we're seeing firms focusing on growing their US equity capital markets (ECM) practices in Hong Kong and China. We are in a substantial boom market for Asia-related US IPOs. However, not every firm that wants to build or expand in US ECM in the region will be able to, due to a shortage of well-established US ECM partners considering a move, and the difficulty in attracting such partners from their established platforms in Hong Kong to a build or re-build effort. "Only a handful of top US firms in Hong Kong and China are getting most of the US IPO deal flow in the market currently, but this sector of the market will continue to be a big story in 2018." "Outbound M&A work in China has slowed down due to China government regulations, so the brisk pace of M&A practice expansion in China over the past few years will slow down in 2018, but expansion will still continue strategically, especially at the relatively junior equity partner level, and in particular in private equity and M&A."

Sarah Ingwerson - partner, Taylor Root

"From an in-house perspective, in 2017 we saw a significant increase in the number first time in-house legal appointments. We anticipate this will continue in 2018 as companies look to reduce their reliance on external firms and in turn their spend with them, as well as bring in-house legal expertise so they have a centralised point of contact." "This trend has been predominantly in the tech space. Once tech start-ups get to a certain size in terms of headcount or revenue, or their looking to do an IPO or fund raising they often need dedicated, internal legal support. When these companies take on board their first lawyer, it is not usual for their legal spend to actually increase. This is largely because they still require external legal support in discrete areas (where their in-house lawyer may not have specialist knowledge) such as employment,property and litigation for example. " "Another interesting trend, which we anticipate continuing, is companies recruiting lawyers on a part-time basis. There is such a demand for lawyers around two to five years’ PQE with general commercial and technology experience that companies often need to broaden out their candidate pool, particularly for lesser-known companies who may not have a strong brand in the market. "An effective and efficient way of doing this is by recruiting a more senior lawyer (ie 10 – 12 years’ PQE) on a part-time basis so that you get the skill set and technical experience but on a pro-rated salary which brings it within budget. This is a win/win as part-time lawyers are amazing value for money (often able to do a full time job in reduced days) and there are fewer part-time roles than full time so there’s a fantastically talented candidate pool to tap into."