While it is not uncommon for a major law firm to state it is consistently upping its market position, it is not as common to see a firm succeed the way Paul Hastings has—at least when it comes to making hires.
The firm has made waves over the last year with a series of high-profile lateral gets, like the 43-lawyer team from Stroock & Stroock & Lavan in New York or the finance quartet from Latham & Watkins in London. It has shown consistently strong financial performance year after year under outgoing chair Seth Zachary and currently sits at No. 26 in the Am Law rankings—a position it has hovered around for the past decade.
Paul Hastings now finds itself in a common part of any branding journey to move upmarket—getting the market’s perception of the brand to catch up with what laterals and the firm’s leaders clearly believe about its potential.
A hard-charging duo, new incoming chair-elect Frank Lopez and managing partner Sherrese Smith, are looking to accomplish just that, focused on accelerating growth and their chances to be in the mix of those elite firms getting the biggest mandates. And they have the financial backing to do so.
While the firm does not publicly differentiate between its various office revenue flows, an important part of that consistent growth has been the firm’s performance outside of the United States, particularly in Asia and Europe.
“It’s an incremental growth strategy,” Lopez says. “We grow a bit in London, then a little in New York, then a little bit in Hong Kong. And then we broaden the scope.”
But, according to industry insiders who follow the firm’s performance in markets like London and Hong Kong, there is still some work to do if they want to fully differentiate themselves from firms they see as competitors, like Gibson, Dunn & Crutcher and Latham & Watkins.
Those same observers say Paul Hastings is paying a premium for some of its partner and business professional hires. Whether those costs will end up being a burden to the firm’s current upward trajectory remains to be seen.
Staking Its Place
According to data from Law.com Compass, Paul Hastings has 19 offices housing 979 lawyers, including 273 partners. While the firm does have nine international offices in the U.K., Europe, Japan, Brazil, Korea, China and Hong Kong, international head count suggests it is still very much a U.S.-centric firm, with New York and Washington, D.C., housing the most of the firm’s lawyers. London is the largest international outpost at 160 attorneys with no other non-U.S. office coming as close.
The focus on London for international growth is for a reason, says Lopez, who takes over in October.
“London is a core geographic focus for us. This Latham group has had a very immediate brand impact for us in the market,” Lopez says, referring to a high-profile finance team hired in July. “Already we are getting a bunch of opportunities from that, but we are also getting incoming resumes in areas that are going to be strategic. Our growth in London is on a parallel strategy with what we are doing in New York: restructuring, M&A and private equity. I suspect that you’ll see more growth [in those areas].”
Paul Hastings has long had a strong finance practice in London. But building out M&A and private equity will be more of a challenge, some insiders say.
One legal expert who knows the London market, and speaking on background, says “they are not Gibson Dunn and they are not Latham,” furthering the statement by saying Paul Hastings has, historically, been considered “the poor man’s Latham.”
But that same expert went on to say this perception has begun to change. The Latham hires were a turning point.
“They have been issuing some major hires and it seems like they are willing to pay above market as an investment,” they say. “When you have $2 billion in revenue, you can do things where the immediate business case is financially difficult.”
Tony Williams, a U.K.-based legal recruiter familiar with the firm and the legal market in the U.K., says the “trend” he had been seeing from U.S. firms in the U.K. is similar to what Paul Hastings has been attempting to do there: Build themselves out to be relevant enough to handle the biggest deals.
“I think the way the market has changed [over the past decade], one of the challenges now is becoming part of the group of firms that qualify for the mega-billions transactions or litigations,” he notes. “A number of firms in the States have taken the view that the number [of firms] to get that business consistently is a small number. It may be 20 or so, but not 50. So Paul Hastings’ mindset is likely, ‘We either stake our place in that group, or by default we are going to be out of it.’”
Capital Markets and Asia
The other primary geography for Paul Hastings is Asia, where the firm has about 70 lawyers across offices in Hong Kong, Shanghai, Beijing, Tokyo and Seoul.
The largest of those is Hong Kong, where the firm enjoys a top-ranked capital markets practice and has for some time.
That said, several industry experts have said its clout in Hong Kong is not what it was a decade ago. The firm disagrees.
“I would say not that we had a stronger brand [10 years ago],” Zachary says. “We had a less focused brand.”
The Hong Kong office is now focused less on real estate and other ancillary practice areas and more on the firm’s core competencies such as M&A, finance and private equity, he notes.
A longtime legal expert in Hong Kong who has seen the evolution of Paul Hastings in the market says he didn’t think the firm had lost any clout. They just haven’t moved beyond their capital markets work.
“It still has a great brand,” the expert notes. “But only in that space [in Hong Kong]. Raymond Li and Paul Hastings. Everyone knows them. They haven’t expanded on it, that’s the thing.”
Raymond Li joined Paul Hastings in 2002 in Hong Kong after the firm bought out Koo & Partners and has been orchestrating major deals with China ever since.
“Li is the keystone of the whole region and everything else has been built out around him,” the Hong Kong expert says.
But the expert says that Paul Hastings’ lack of buildout around its capital markets practice is not necessarily a consequence of failing to go all in on the market, noting culture, loyalty and a skepticism of outside firms stifle lateral movement in the region.
Many attorneys, even if offered more money to leave their current firm, would be reticent to do so, believing that the market won’t be able to sustain the amount of business they would need to drive in order to justify the compensation. So they stay put. And growth for firms like Paul Hastings in the region is hard.
While London was viewed as the legal gateway to the European market for some time, that changed with the U.K.’s exit from the European Union in January 2020. And while tensions between the West and China are always somewhat beleaguering for business, recent activity has made that ground even shakier.
For Paul Hastings, that means its two largest international markets, the U.K. and China, are somewhat in flux.
Paul Hastings has clearly made the necessary financial investments in the U.K., with a 30% rise in head count in the last year and 41% increase in year-over-year revenue in the region.
“Clearly the new team is supercharging and getting it going [in London],” Williams says. “It’s a big bet. I don’t think anyone is going to stand aside to let them in. Latham, Kirkland and the rest will fight like hell to keep their share. As we know in relation to arms races, like what we saw with the USSR: You play chicken long enough, someone folds. They either stake a claim for playing or we are not playing.”
That level of competition is not a deterrent for incoming managing partner Lopez.
“There is complete buy-in. We are not a complacent firm,” Lopez said. “We have a collaborative spirit, an appetite for growth in general and [a desire for] elevation of the brand. Whether growing in London or San Francisco, all of it is in line with that ultimate goal. It is not about being international versus domestic. It is just about getting better and doing it with our clients. People here don’t think of it as an international strategy. They think of it as a global strategy.”
Asia is a bit more precarious. The bulk of Paul Hastings’ Asian market dealings are with China, which given contemporary geopolitical complications, is a volatile market.
“It would be ludicrous not to say that the relationship with China is fundamentally different [than it was in previous years],” Zachary says. “[There is] a decline in Chinese investment in the West and anxiety about Western investment in China. So those particular lines are quieter than they were.”
The Hong Kong expert referenced above says that while many firms are expanding instead to Singapore given the Hong Kong political climate, he isn’t sure that is a great idea for Paul Hastings.
“Hong Kong is where the capital markets are,” the expert says. “Singapore is another four hours away from China by plane and a very different market. I don’t see a reason for them to go there.”
‘Arrogant Swagger’ or Sour Grapes?
While the firm has been making waves, some within the industry have been less than receptive to what they see as aggressive and, at times, unrealistic statements from the firm regarding its heft in the marketplace.
“Paul Hastings’ boastful and arrogant swagger is completely untethered to the market reality,” says one Am Law 100 leader. “Their PR approach is alienating a number of constituencies.”
Another leader, when told that Paul Hastings intends to compete with Latham and Gibson for business in London and elsewhere, says, “Paul Hastings has been growing and has some impressive attorneys. It makes sense that they would aspire to be more like Gibson Dunn in the future, in order to attract top talent.”
That other firms would question Paul Hastings’ ability to make good on its ambitions may just be sour grapes, but the veracity of some opinions shows Paul Hastings’ approach to growth has rubbed some the wrong way. The firm declined to respond to those comments.
Regardless of what other firms think of Paul Hastings’ strategy (and public relations push behind it), the firm is moving full-steam ahead.
“It’s all about momentum,” Lopez says. “We are at an interesting moment where the broader legal market is contracting, but we look at this year and we could be up this year based on demand and trajectory.”
While the firm may have its own ideas about where it sits in the market currently, a shift in perception takes a while.
“Reputations are built over a continuum of time,” Deborah Farone, former chief marketing officer at Cravath, Swaine & Moore and founder of legal marketing and consulting firm Farone Advisors, said. “It never happens overnight. It’s a combination of the work that you produce, the people you employ and their individual reputations, and how you treat everyone in touch with the business. That means everyone the firm comes into contact with is a potential amplifier to the outside world—your lawyers and support staff, clients, referral sources, alumni recruits and vendors. There is a lot that goes into the equation.”
As with any branding campaign, it may take years to see whether the clients and financials follow the investment. Soon enough the market will provide an answer.