Following the move to S J Berwin by a team of Baker & McKenzie German tax lawyers late last year (see International Tax Review December/January 2001), the international law firm has lost a further five partners, this time to big five firm Ernst & Young. These include Steven Surdell, David Waimon and Russell Carr, a team of three tax attorneys from Baker & McKenzie's Chicago office, who all join Ernst & Young on February 1. Meantime, Ernst & Young also gains Michael Bumbaca in San Jose and Ton Daniels in Amsterdam. All five will be focusing on cross-border M&A and capital market transactions.
According to Jim Tobin, director of international tax services for Ernst & Young, there is a conscious effort to hire more lawyers into the practice. "This is mainly because there is a strong pool of talent in the law firms. I also think there is a growing sense among lawyers that the law firm model just doesn't incorporate the right platform for them to be able to practise international tax the way they'd like to."
Although Tobin emphasizes that Ernst & Young is not particularly targeting Baker & McKenzie - the firm has also attracted partners from firms such as Caplan & Drysdale, Dewey Ballantine and Battle Fowler - he admits that its pool of talent is an attractive one due to the firm's international focus. "But it's interesting that, even within Baker's structure, which is probably the most international and tax-oriented of any law firm, there is obviously a problem with the platform. We've hired these five people, but the firm has lost numerous partners to other big five firms as well."
Among these losses is high-profile tax attorney Phil Morrison, who moved to Deloitte & Touche in Washington, and Robert Dilworth, who moved to PricewaterhouseCoopers in Washington, both in 1999.
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David Waimon |
Commenting on the latest exodus, Waimon says that previous moves may have had a knock-on effect. "Baker & McKenzie has suffered a serious brain drain in the last several years, with a lot of its top tax talent moving across to the big five. International tax work is not easy to do in a vacuum and so we were getting very concerned about not having our colleagues nearby. That was part of the reason we moved." Surdell adds: "And it's not just Baker & McKenzie - if you look at the past several years, you see people leaving Kirkland & Ellis, Skadden Arps, Weil Gotshal and other major law firms to go to the big five."
"I think Baker & McKenzie would be the only firm where we could provide the kind of international tax services we want to provide, but it's still not nearly as well positioned as the big five," he continues.
Waimon notes: "When you compare the number of lawyers Baker & McKenzie has doing tax work to any of the big five, Baker is really something of a mom and pop grocery store."
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Steven Surdell |
Commenting on the moves, James O'Brien, chair of Baker & McKenzie's North American tax group, says: "Yes, they're important people to us. And in terms of the guys in Chicago, I'm from Chicago and we're all very close friends, so to me that's a personal loss. However, they're just a piece of our 115-attorney North American tax practice, and we're more than making up for such losses through the lateral hires we've made and are continuing to make." O'Brien sees the big five recruiting strategies as something of a compliment to Baker & McKenzie. "They are aggressively seeking out the best legal talents, so I suppose being their shopping mart is something we should be proud of. However, there has been much discussion among our tax partners and associates about how we can improve our practice and reduce the likelihood that individual attorneys may succumb to the big five's siren song. In short, we will be serving notice that the store is now closed."
O'Brien is also keen to point out that the moves are not one way. "We have started to see the first wave of lawyers who left from the big five to re-enter the law firm environment. For example, in the past couple of years we've hired back Jeff VanderWolk in London and Peter Daub in Washington."
The Chicago trio join Ernst & Young despite the fact that a number of former colleagues have moved to other big five firms. Says Waimon: "What was particularly compelling was the fact that Ernst & Young has been so successful in getting tax work from non-audit clients, and we think that's an indication of the quality of work Ernst & Young does."
Surdell agrees. "That's why we chose Ernst & Young over the other firms that were trying to recruit us. We also received offers and rejected them from other law firms, because we concluded that the greatest critical mass of tax intellect had migrated to the big five firms and Ernst & Young in particular."
Ernst & Young will continue to look for tax lawyers in New York, Washington and on the US West Coast, according to Tobin, with particular emphasis on cross-border and M&A. "Outside the US, we're looking throughout continental Europe right now. There hasn't been as much of a migration from law firms to the accounting firms in Europe, but we certainly think that the market dynamics are there for a similar trend."
Meanwhile, Baker & McKenzie's chair of global tax, John Peterson, says that the firm is actively recruiting in the US, Japan, Germany and the UK.
"We're thinner than we'd like to be in a number of places," he admits. "And we are working on that, as demonstrated by our merger with Briones Alonso y Martín in Spain. We will also have to meet the challenge of higher compensation, looking at the way profits are allocated and frankly increasing the leverage a little bit.
"The competition these days is for talent. It's much fiercer than the competition for clients and we realize we need to be more aggressive."
