Clifford Chance partners were not voting for the status quo when they elected Matthew Layton. In fact his election to the top job demonstrated an appetite for a shakeup of the old ways rarely seen among magic circle partnerships or leadership contests.
Within weeks of succeeding David Childs in May 2014, Layton overhauled the firm’s constitution, scrapped leadership elections and installed a new executive management team, slimming down bureaucracy at the colossal firm. He also opened a discussion around overhauling the firm’s partnership to bring its salaried partner band into the equity, and a few months later held a successful vote on extending its lockstep ladder to create ‘superpoints’ for star lateral hires.
That Clifford Chance partners bought in to a culture of change says as much about the firm itself as about its latest leader. Indeed, the approval of changes to Clifford Chance’s top of equity more than a year ago makes Freshfields’ and Linklaters’ recent efforts look comparatively sluggish.
“Big changes were clearly signposted as my platform for standing for election,” Layton says, “so it was clear the partnership was hungry for it.”
Layton’s appetite for making things happen is perhaps a product of one of his most commonly praised attributes: his career pre-management.
“He was the private equity M&A guy,” says one source. “Layton didn’t just drift into management, he was a very serious proper practitioner.”
So it was no surprise Layton was the immediate favourite to takeover from David Childs, despite being initially reluctant to throw his hat into the ring. Private equity remains Clifford Chance’s core quality practice, though many in the market have speculated this is changing, particularly given the slow drift of private equity stars to US firms such as Latham & Watkins over the last two years.
Layton is also Clifford Chance man and boy, joining in 1983, four years before the combined firm came into being and 17 years before its German and New York tie-ups. Layton became a partner in 1991 and was global head of corporate by 2008.
But while he has certainly accomplished a lot, the firm’s current trajectory, driven by the engine of innovation, expansion and a need to increase profits, has divided opinions both inside the partnership and in the wider market.
Whereas his predecessor Childs’ term came to be defined by a commitment to financial stability, Layton’s has so far been characterised by bolder decisions and a focus on innovating. Almost two years in, and Layton says he is “well into the big picture strategy roll-out now”, and there is “a lot of momentum happening across the business”.
That is certainly true. He created the new role of head of innovation and business change last year, handing it to former Amsterdam boss Bas Boris Visser; undertook a review of the firm’s historically indispensable German office that led to nine partners leaving the firm; sanctioned a major change in the firm’s business services delivery by rehousing staff in a second Canary Wharf office; and appointed Accenture boss Caroline Firstbrook as his new chief operating officer.
Each of these moves pushes forward a strategy to reinvigorate Clifford Chance as one of the best law firms in the world, tackle cost pressures, bump up US and Asia revenues by 20 and 25 per cent respectively over the next five years, and dominate the UK and European market for international corporates.
“We set our vision to be global law firm of choice and behind that we have a whole series of initiatives across the firm around investing in certain geographies and focusing our energy on where we can make the biggest impact,” Layton says.
Some may be surprised to learn the jurisdiction Layton is most focused on is Europe, particularly given the German restructure at the end of 2014. Layton recently appointed Paris partner Yves Wehrli to the role of continental Europe managing partner, a move he said came from a noticed opportunity to “bring the region together in terms of how it approached new opportunities with clients”.
“We’re really invested in Europe, which is a bit different from some of the rumours you hear about other firms,” Layton says. “But we need to make sure we have the right teams on the ground.”
Equity cuts in Germany saw the firm doing exactly that, he says. Now it is time to start building up the region again, promoting internally and making lateral hires such as Düsseldorf corporate head Anselm Raddatz from Freshfields. But unlike the growth targets lined up for the US and Asia, Layton will not put a number on Europe.
“We’re looking at a lower rate of continued growth in continental Europe, but we’re already seeing better profitability in the region,” he reveals.
Some are not convinced. One ex-Clifford Chance partner in Germany says the firm is on a “risky route” in the UK and Europe.
“It’s changing from a partnership to a firm where corporate value and revenue are the only drivers,” the source adds. “Considering Matthew’s profitability expectations, the model might work for a few years, but if not it could be the end of Clifford Chance. The revenue he’s aiming for can only be achieved with very specific high-value types of M&A work, and that’s not the full-service model.”
Market sources claim Layton has set his sights on a £1.8m global top of equity over the next two years, which would mean almost a 40 per cent uplift on the current £1.3m top of equity. Although ambitious, some say Layton risks “burning bridges” with some of its traditional corporate partners and clients.
“Transactions under a certain volume will no longer be interesting or possible for Clifford Chance lawyers,” a source says. “The same is true for disputes.”
Interestingly, while Clifford Chance missed out on any involvement in the Volkswagen dispute in Germany – arguably the largest case ever to hit the local courts – Jones Day has been appointed by Volkswagen’s board to lead the investigation in the country. And its team is almost entirely staffed by ex-Clifford Chance lawyers.
“Overtime I think some people at Clifford Chance will be angry that the firm let these partners leave,” says a German source. “These were good lawyers with very good business relationships.
“Clifford Chance always tried to be ahead of the pack, so there should be deep blue water between it and its closest competitors in Germany,” the source continues. “What Matthew wants is innovative but whether that’s good for the firm’s roots or not is another matter.”
In the US, Clifford Chance made faster and more immediate inroads than the rest of the magic circle thanks to its merger with New York firm Rogers & Wells in 2000. But the story since then has not been so straightforward, and the firm has had a hard time in the jurisdiction, failing to make a name for itself as a major player and seeing a decline in US litigation revenue and some high-profile departures (including almost all the rainmakers from legacy Rogers & Wells).
Layton has had to dispel rumours of another US merger on a number of occasions, and now is no different.
“We’re looking at organic growth in the US,” he says, adding growth will come in the structured and leveraged finance spaces, M&A and international regulatory and compliance work. “There’s no plans for a merger or more offices,” he insists.
It is looking out for new market developments, not prioritising repetitive existing work, that will shape the future of the firm, Layton says. This has meant the firm has focused less on traditional banking and finance work in recent years, instead pooling its resources into capital markets and global finance. Clifford Chance’s tax practice is also taking off as the firm aims to become “deeply immersed” in its clients’ businesses.
On a business level, Layton is undoubtedly pushing the firm into the modern world and is brave enough to conquer new ground. The effectiveness of his strategies will play out over the next few years. Meanwhile, on a personal level, Layton is encouraging a new sense of entrepreneurialism and commercialism at the firm.
“The partners certainly respect him,” says a source. “He’s a brilliant guy and if the rocket engine he’s putting into the car works, it will be great for the firm.”
Layton is staying down to earth and looking at the challenges ahead.
“There’s an uncertain environment ahead,” he says. “It’s imperative we have strong controls and disciplines around the business to identify what the risks are and make sure we’re prepared to deal with them as they evolve and emerge.”