Riding the highs and the lows

Despite the experience of an almost
overwhelming first year, and the subsequent
demise of big-ticket M&A, nothing yet requires
change in the Latham & Watkins business plan for
Spain, says managing partner José Luis Blanco.

The last few years have seen
considerable speculation
surrounding likely new US
corporate law firm arrivals in Spain.
With interest surrounding not only who
might arrive and the relative market
demand for a new legal player, but also the
suitability of the US law firm model in
Spain, and the ability of any firm to recruit a
credible local figure to launch their
operation.

White & Case, Shearman & Sterling and
Orrick are often among those most
regularly suggested as potential new
arrivals so it was perhaps surprising that it
was Latham & Watkins that opened its
doors in Madrid and Barcelona in January
2007. More surprising still, say some, was
the firm's ability to recruit big-ticket M&A
partner José Luis Blanco, Head of Corporate
at Cuatrecasas, to lead its Iberian entry.

Many in the market have since
questioned Latham's ability to make a
significant local impact, and to establish a
practice capable of riding out the highs and
lows of the Iberian economy. Eighteen
months on, however, and Blanco is happy to
report on the firm's initial success, and to
demonstrate that predictions of Latham's
demise in Spain have been greatly
exaggerated.

Project Gillespie

The business case for Latham & Watkins
Spanish practice was compiled over a
weekend in late 2006 to the soundtrack of
Dizzy Gillespie's classic Have Trumpet Will
Excite, reveals its author and now managing
partner, José Luis Blanco.

'Gillespie envisaged a top-tier greenfield
legal practice with a core focus on M&A,
private equity and acquisition finance,
which could capitalise on the increasing
sophistication of the Iberian business
market. And that remains the position,' he
says.

There is no denying that Latham has at
least found initial success in Spain.

'As much as I wish it wasn't true, they
have clearly had an unbelievable first year,'
says one senior partner at the Madrid office
of a competing Anglo-Saxon firm.
Despite only officially opening in January
2007, Latham & Watkins has already
featured prominently among some of
Iberia's largest deals of the past year.

The firm acted for US private equity (PE)
giant, and established Latham client, The
Carlyle Group last July on its debut Spanish
€1.48 billion leveraged buy-out of Applus
Servicios Tecnologicos – the largest single
investment yet undertaken by a PE fund in
Spain. It also acted for Iberdrola, another
established client, in the series of
acquisitions it undertook last year, and more
recently for Repsol – previously one of
Blanco's clients – in February's $2.2bn
(€1.5bn) sale of a stake in its Latin American
subsidiary Repsol YPF to industrial operator
Peterson Group, by size the most significant
Argentinean M&A deal in recent years.

'Without a doubt we had a first year that
exceeded all of our expectations, and many
of these deals were planned and executed
directly from our own offices,' says Blanco.

Willingness

Prior to taking the lead at Latham in Spain,
Blanco was at both Cuatrecasas and
Garrigues so he is well placed to assess the
relative merits and demands of the different
styles of practice.

His position at Cuatrecasas, he admits,
was very comfortable on both a professional
and personal level and that he had no
problem rejecting early advances from
Latham & Watkins.

'When I was first approached I had been
recently promoted and I truly felt that I was
contributing to the success of the firm in
conquering the very highest levels of the
Spanish legal market,' he says.

Nonetheless it was while undertaking a
review of Cuatrecasas own strategic position
that he began to seriously consider the
potential of a start-up operation, he says. 'The
attraction of something completely new, with
the brand recognition of Latham, was clearly
appealing. But nonetheless I still told them 'I
am not your man.''

But the idea stuck and when Blanco was
again approached he was asked to draw up an
ideal law firm entry scenario. It was a meeting
and an outcome that was to eventually lead
him to formulate his Gillespie plan.

'I was unexpectedly struck by the
willingness I found in Latham to be prepared to
come into the market without any pre-defined
ideals, and to be ready to listen to outside
opinions,' he says.

Target

Latham's evolution from a Los Angeles-based
firm, and subsequent national and international
expansion, has instilled within it a flexibility
and ability to adapt to circumstances, believes
Blanco.

The firm officially has no headquarters.
Latham's Managing Partner, Robert M Dell, is
based in San Francisco, the Chief Operating
Partner, Mark Newell, is located in Washington
DC, and Leeam Black the firm's Chief
Operating Officer is resident in New York.

But despite the West Coast origins he insists
that there is certainly no laid-back California
air. 'Latham is not a law firm in which the
partners can sit back and wait for work.
Internal reporting is measured not along
geographic or even practice lines but on
individual performance.'

Only two partners are released of any client
work targets, Bob Dell and Mark Newell. The
remainder must aim for around 1,800 client
hours per year.

'We have a very strong work ethos,' says
Blanco. 'That helps to support a very flat
management structure. There are very few
layers. If there is an issue you are almost
immediately talking with the Managing
Partner.'

Strategy

The firm's willingness to adopt a very narrow
practice emphasis in Spain is what has helped
Latham attain the recognition it has achieved so
quickly, believes Blanco.

'It was key for the rest of the network that
we offered credibility. It would not be in the
firm's interest to be unable to offer a first-tier
local practice, and to do that we had to be
focused.'

Since launching, in Spain, the firm has
targeted only what he regards as the key
strategic corporate and finance issues. Ancillary
areas such as employment, intellectual
property, and real estate continue to be
outsourced as required.
Blanco is keen to emphasise

also that
Latham has not opened off of the strength of
one or two major clients, such as Carlyle, and
that it is looking to build a practice advising
top-tier local clients also.

'The top end of the market clearly has
barriers to entry, but success is based to a large
degree on individual lawyers with a solid track
record of deals. In addition, internationallyminded
clients now want a law firm with a
global reach and strong US law capabilities.'

The firm's entry in Spain, say some, was
greatly facilitated by the work of former Banco
Santander Head of Legal for Latin America
and formerly London based Counsel Juan
Manuel de Remedios – who suggest some, laid
the ground work for the firm's entry and
helped target its current team.

Latham in Spain now counts two partners
(Blanco and Antonio Morales) and around 20
other lawyers, most located in Madrid. What
was important for Blanco however was the
ability to do deals from the outset and to prove
the firm's place in the market. 'Our own clients
and those of Latham clearly took a gamble but
it gave us the chance to show that we were
capable of doing what was required.'

Latham in Spain is looking to succeed only
on prestige and reputation, he says. 'We will
grow to the size that we feel is necessary for
the type of work we want to do and the type of
clients we wish to serve. We're not looking to
bring in teams of lawyers.'

Latham has however made no secret that it
is willing to compete on salary and to offer
remuneration packages at the top end of the
market. For a law firm with reported 2007
profits per equity partner of $2.2 (€1.4m) Spain
remains a relatively inexpensive market for
junior lawyers, particularly when compared to
the UK or Germany.

'The Latham & Watkins brand is
undoubtedly an attractive one. We offer
defined career paths and have made it clear to
our junior lawyers that we are not going to
bring in lots of lateral hires and limit their
professional development,' says Blanco.

Nonetheless some suggest that Latham is
still missing important pieces of the practice
jigsaw, notably credible tax, finance and
competition expertise. Since launching the only
senior hires have been of energy partner
Antonio Morales from Lovells, and corporate
Of Counsel Lorena Vázquez from Clifford
Chance.

The lack of specific tax and finance
capability is something that Blanco accepts. He
states however that such expertise has always
been a requirement of the Latham plan and that
the firm is already out looking for talent. 'We
are not looking for dramatic growth, but we
expect lawyer numbers to rise to around 25 by
the end of this year.'

Despite the premium currently being placed
on competition expertise among many
transactional firms this is not however an area
in which Blanco says he is placing significant
recruitment emphasis. 'We are able to draw on
the expertise of the firm's Brussels practice,
which already includes Spanish qualified
lawyers.'

Pace

Blanco is measured therefore about the firm's
prospects in Spain, but others suggest that the
prevailing international economic climate is not
a kind one for the type of transactional and
private equity-focused practice that he is
looking to build.

'I imagine that Latham is suffering from the
downturn as much, if not maybe more than the
rest of us,' says one competitor Madrid
managing partner.

The firm was very lucky in the success of its
launch but eighteen months on the deal market
has certainly changed, agrees Blanco. 'If
anyone tells you that the same level of M&A
activity will occur in 2008 as in 2007 then they
are not telling the truth. The outlook is very
different.'

The firm would in any event struggle to
repeat the pace of last year, he says. 'I do not
think that we could have got where we are any
faster. Last year will go down as a record one
for Latham & Watkins in Spain, I believe – it
proved to me that the project was possible. But
even if the credit crunch hadn't come, the long
hours we were working and the strain of
creating a new team meant that we would have
had to calm down.'

He insists however that his lawyers are not
sitting idle, and that the ability of the team
means that it can adapt to the prevailing
economic environment.

'An anti-cyclical practice for me is not one
that has large teams of lawyers competing for
dominance, but one in which individual
lawyers can change from doing acquisitions to
restructuring or refinancing. I do not see a need
to expand beyond what we are currently
capable of undertaking.'

Mid-size deals

Despite such flexibility a key demand placed
on Latham's lawyers is to go out and find work,
says Blanco, and the current market slowdown
is a good time to increase both client
opportunities and practice efficiency.

Alongside consolidating relationships with
current and potential clients, and taking the
time to build the firm's internal know how, his
lawyers are still doing deals for the same target
clients, he says.

'We make clear that we have a cost, that we
are not looking to enter into discounts, or to
move outside of our defined focus. There is
always an element of trial and error but we
have to be content to set limits below which we
will not go.'

He is coy however about whether the firm
will now target mid-size deals, saying only that
it is important not to send out mixed messages
to the market.

'We want to keep doing top quality work.
Size is not the determining factor in whether
we undertake a deal, and we will of course
advise on mid-cap deals if it is of strategic
importance to the client.'

Among the recent assignments, he
highlights, the firm's involvement in the
restructuring of Europe-based, and
longstanding Latham private equity client,
Electra to create Cognetas.

Sophistication

The ultimate goal however is to capitalise on
the growing sophistication of the Iberian
business market which, believes Blanco, will
demand greater specialisation and lead to
further segmentation of the legal market.

'So long as the domestic law firms retain the
glue that holds them together they will keep
their share of the market because they are so
linked to the economic success of the country.
They have brilliant lawyers, but predominantly
servicing local clients locally, and these are not
models that are easily replicated
internationally.'

In any event, he sees increasing
opportunities as clients work with a wider
range of law firms, particularly as conflict
issues become more evident. It is an issue that
Latham's total 2,100 lawyers must also face.

In the Iberian energy sector alone Latham
has represented Iberdrola, Repsol and Italy's
Enel (alongside Cuatrecasas in its €35 billion
joint bid for Endesa). 'Conflicts are a constant
and difficult issue. We align to Latham's
strategic goals worldwide and so accept that if
we have particularly deep penetration with one
client it makes it difficult for us to work with
others in the same sector,' says Blanco.

It is believed that the firm is nonetheless
well placed to capitalise on continuing crossborder
opportunities, and Blanco is clearly
confident that his plan is playing out as he had
hoped. For the time being he sees no need for
change.

'We are extremely confident with both the
current size of the firm in Spain and our model.
We are not looking to develop full-service
practices or to replicate the models of other
global firms, but neither are we a boutique. We
are content to be able to do two or three deals
at any given moment, and to grow with the
experience of the lawyers. Size is not an issue
for us.'

The success of Blanco's project, like that of
its namesake, will be determined ultimately
therefore by Latham's ability to combine
influences and to capitalise on a hopefully
increasingly more discerning audience.