Top German independent Hengeler Mueller introduces salaried partner tier

Move set to help firm retain emerging talent in face of competition from international rivals

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German heavyweight Hengeler Mueller has introduced a salaried partner tier in a move that looks set to help the firm retain more of its emerging talent in the face of competition from international rivals.

The creation of the new tier of partners, first reported by German legal title Juve, was agreed at a recent partners meeting and signals a significant change to the firm's traditional pure lockstep, all-equity partnership model.

Dr. Sebastian Schneider, a partner in the firm's recruiting committee, told Juve the change was designed to give associates “more options on their partner track”.

Thomas Mueller, co-managing partner, said: "We can confirm that Hengeler Mueller has modified its partnership track. We are convinced that the modification will be beneficial for our clients and will contribute to the long-term success of our firm."

Juve reports that the move is intended to create a “transitional phase” into the equity partnership. Previously lawyers at Hengeler would complete six years as an associate before having the chance to join the equity partnership. 

As of this week, following the completion of those six associate years, lawyers must spend two years as salaried partners before being given the chance to join the equity, an opportunity that only arises at that point.

Significantly, however, they will have the option of remaining as salaried partners although they will not have the right to vote at partners’ meetings, Juve reported. 

The move brings the Frankfurt-based firm more in line with many of its US and UK competitors and is the latest example of a leading independent firm departing from the pure lockstep, all-equity partnership model. 

Recent years have seen a succession of elite Wall Street firms modify their lockstep partner remuneration model to compete more effectively with larger rivals like Kirkland and Latham & Watkins, whose flexible pay allows them to persuade rainmakers to join them with generous pay deals.

Cravath Swaine & Moore abandoned its lockstep structure in December 2021 a few months after Davis Polk made the same call. Both firms cited their strategic ambitions.

However, Hengeler's move is targeted at retaining the next generation of talented lawyers: Europe's largest economy has continued to attract attention from leading US firms seeking to grow their teams, especially in the private equity arena.

A similar consideration prompted Kirkland to shorten its track to equity partner status by a year in 2021, allowing salaried partners to qualify for coveted equity status three years after being promoted and therefore nine years after joining from law school.

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