Canvassing ex-partners a few days after Hogan Lovells’ board recommended Miguel Zaldivar (pictured) as the firm’s next chief executive, Legal Business was in the awkward position of having to spell his surname. Even several current City partners admitted to having never met him.
Yet the Hong Kong-based, Venezuelan energy and infrastructure specialist who spent most of his career in the firm’s Miami arm is all but certain to succeed Steve Immelt at the helm of the firm next July, following a rubber-stamping vote by the partnership later this month.
Relocating to DC and starting his four-year term at the tenth anniversary of the transatlantic union of Hogan & Hartson and Lovells, it is striking that the UK partnership has for the second time in a row missed out on the top role, despite having the firm’s biggest office. Initially Warren Gorrell and Lovells’ David Harris shared the role, but a European lawyer has never taken the sole leadership brief. As the European/Asian side of the business is the same rough size as the US half – and arguably sits higher in the local legal pecking order – it is a grating choice for a self-proclaimed ‘merger-of-equals’ union.
But then the path leading to the firm’s top executive role is somewhat winding, with candidates technically not allowed to campaign, or put forward manifestos. As such it falls to the 12 board members – themselves elected by the partnership – to recommend a name after ‘soundings’. While the model has the benefit of avoiding fractious elections, it also comes with the very sizeable drawback of making it hard for clear strategies to emerge. Great for status quo and continuity but competing at this level of the legal market sometimes requires more than continuity. And, frankly, Hogan Lovells has had ten years of continuity with mixed results at best.
Likewise, three of the six ‘putting their names forward’ were London-based, which ultimately weakened the position of each of them. What mattered more, however, is that UK and Africa managing partner Susan Bright and corporate veteran Peter Watts were little known outside the UK, with litigation chief Michael Davison probably the only real contender thanks to his global role and profile.
With Madrid-based IP partner Burkhart Goebel’s position complicated by the firm’s chair, Leopold von Gerlach, also residing on the continent, the two strongest names in the fold were American. Arguably.
Leading one of the 2,922-lawyer firm’s most successful practices globally, DC-based regulatory head Alice Valder Curran was seen by some as the more obvious frontrunner. That the choice ultimately fell on the less known Zaldivar is notable. Appointed to lead the Asia Pacific and Middle East region last year, he oversees one of Hogan Lovells’ less profitable businesses, accounting for just 7% of the firm’s revenue, despite being credited with bringing China and Japan to the edge of profitability. Neither is Hogan Lovells regarded as having huge momentum in the region.
The concern is less that the snubbing of the legacy Lovells partners will cause immediate resentment than foster the sense of disconnection between the US and European businesses that has never been properly bridged a decade after the merger. Many London partners feel the US business has little to do with them, sentiments held not with rancour, just accepted as facts of professional life.
What will be more welcome by some is the appointment of a finance lawyer as a sign that the firm is still serious about investing in its transactional ranks, a supposed priority post-merger that never quite lived up to expectations. But with such a cautious investment push, the question is if the window of opportunity in building up Hogan Lovells’ deal teams in London and New York has closed. It is certainly a lot narrower at the decade’s conclusion than at its start.
The London M&A practice has been similarly underweight for years, even if Hogan Lovells remains a dependable broad-service finance team in the City. In the US its strength has traditionally been in real estate investment trusts, hardly a mainstream transactional operation. That’s not to say that no progress has been made, with global billings from M&A and PE rising 33% to $487m between 2014 and 2018 under Immelt’s watch, a respectable showing. The London office also fields a group of well-regarded young and mid-vintage partners including Ben Higson, John Connell, Dan Simons and Richard Diffenthal. The 2017 hire of a five-partner Silicon Valley team from Weil Gotshal & Manges is arguably the one unquestioned home run, with the profitable team said to have presided over $40m in billings in 2018.
The party line is that thanks to Immelt’s efforts the firm now has a well-integrated transatlantic platform on which to build the first-ever truly global mainstream M&A practice. But frankly a lot more needs to be done, most jarringly in New York where Hogan Lovells still fields only around 200 lawyers, an anorexic line-up for a firm of its ambition and heritage. The five-year 23% overall revenue growth to $2.12bn in 2018 is also pedestrian, although the pace picked up somewhat under Immelt.
It’s not as much about willingness to spend on high performers – some of its top US rainmakers are already on around $10m. But a firm that has traditionally taken pride in being a nice place to work and nurturing home-grown talent needs more readiness to target laterals and address underperformance. There has rarely been a sense of the sustained momentum in its investment that was always going to be required to make ground in its target markets.
Zaldivar will have a massive job to do in a limited space of time; as a string of recent City departures show, patience is running out. Giving some love to London when it comes to appointing Zaldivar’s deputy and key practice heads wouldn’t be a bad place to start.