Page 143 - Leaders in Legal Business - PDF - Final 2018
P. 143
The Development of a U.S. and U.K. Law Capability
Despite the emergence of other new business and financial centers, English and New
York law currently govern an overwhelming majority of cross-border transactions, financings,
and disputes. Any firm seriously wanting to work on higher-value international transactions will
need to demonstrate either a credible capability to work under English or New York law firms,
or choose an effective relationship with other law firms so that the client receives as seamless a
service as possible. This has been the key driver for U.S. firms to develop in London. In the
U.K., more than 5,000 lawyers work in U.S.-headquartered law firms, which is a clear
demonstration of the impact of U.S. firms in the market. Some U.S. firms have performed
extremely well in London and have developed top-tier practices, but others have struggled to
make an impact in what is one of the most competitive legal markets in the world. The progress
of U.K. firms in the U.S. had been more mixed, with Clifford Chance’s troubled merger with
Rogers & Wells in 2000 probably being the most high-profile move into New York.
However, the big four U.K. firms — Allen & Overy, Clifford Chance, Freshfields, and
Linklaters — now seem to be making effective progress in the U.S., although they now
recognize that this will be a difficult market to crack. The Hogan & Hartson and Lovells merger
in 2010 to create Hogan Lovells appears to be working well, although Hogan & Hartson was not
a primarily New York-focused firm.
Building out a U.S. Practice
The U.S. is the world’s biggest, most diverse, and most profitable market for legal
services. Various estimates attribute between 40 percent and 50 percent of external legal spend
occurring in the U.S. Even the financial crisis and the emergence of developing markets do not
appear to be threatening the primacy of the U.S. legal market. Indeed, the litigious nature of U.S.
society and the new, post-crisis assertiveness (or rapacity, depending on your views) of U.S.
regulators has helped U.S. firms to exceed pre-crisis levels of revenue (although not necessarily
in real terms). As a result, many U.S. firms rightly see the U.S. as a primary market for
development. The U.S. legal market is not just about New York. Washington D.C., Chicago,
Atlanta, Houston, Boston, Los Angeles, and San Francisco, to name but a few, are all major
centers of legal services, and many would probably rank in the top 10 cities of the world in terms
of legal spend.
Our strategic alliance partners, Altman Weil, track mergers involving U.S. firms3 and
2012, 2013, and 2014 were the three most active years ever in terms of U.S.-related law firm
mergers. This is no surprise, as firms have been seeking to develop the depth and breadth of
practice across the key U.S. markets. Some of these mergers have or will create $1 billion or $2
billion firms in their own right. The U.S. as a whole is still a relatively fragmented market, but if
this merger trend continues over the next few years, a far smaller group of truly national firms
will emerge, operating at different levels in the market. It has to be appreciated that once these
mergers are integrated, it can be expected that many of these firms will use their size and
financial strength to build even more significant international practices, either by further
mergers, team hires, lateral additions, or Greenfield openings.
3 ALTMAN WEIL, http://www.altmanweil.com/mergerline.
129
Despite the emergence of other new business and financial centers, English and New
York law currently govern an overwhelming majority of cross-border transactions, financings,
and disputes. Any firm seriously wanting to work on higher-value international transactions will
need to demonstrate either a credible capability to work under English or New York law firms,
or choose an effective relationship with other law firms so that the client receives as seamless a
service as possible. This has been the key driver for U.S. firms to develop in London. In the
U.K., more than 5,000 lawyers work in U.S.-headquartered law firms, which is a clear
demonstration of the impact of U.S. firms in the market. Some U.S. firms have performed
extremely well in London and have developed top-tier practices, but others have struggled to
make an impact in what is one of the most competitive legal markets in the world. The progress
of U.K. firms in the U.S. had been more mixed, with Clifford Chance’s troubled merger with
Rogers & Wells in 2000 probably being the most high-profile move into New York.
However, the big four U.K. firms — Allen & Overy, Clifford Chance, Freshfields, and
Linklaters — now seem to be making effective progress in the U.S., although they now
recognize that this will be a difficult market to crack. The Hogan & Hartson and Lovells merger
in 2010 to create Hogan Lovells appears to be working well, although Hogan & Hartson was not
a primarily New York-focused firm.
Building out a U.S. Practice
The U.S. is the world’s biggest, most diverse, and most profitable market for legal
services. Various estimates attribute between 40 percent and 50 percent of external legal spend
occurring in the U.S. Even the financial crisis and the emergence of developing markets do not
appear to be threatening the primacy of the U.S. legal market. Indeed, the litigious nature of U.S.
society and the new, post-crisis assertiveness (or rapacity, depending on your views) of U.S.
regulators has helped U.S. firms to exceed pre-crisis levels of revenue (although not necessarily
in real terms). As a result, many U.S. firms rightly see the U.S. as a primary market for
development. The U.S. legal market is not just about New York. Washington D.C., Chicago,
Atlanta, Houston, Boston, Los Angeles, and San Francisco, to name but a few, are all major
centers of legal services, and many would probably rank in the top 10 cities of the world in terms
of legal spend.
Our strategic alliance partners, Altman Weil, track mergers involving U.S. firms3 and
2012, 2013, and 2014 were the three most active years ever in terms of U.S.-related law firm
mergers. This is no surprise, as firms have been seeking to develop the depth and breadth of
practice across the key U.S. markets. Some of these mergers have or will create $1 billion or $2
billion firms in their own right. The U.S. as a whole is still a relatively fragmented market, but if
this merger trend continues over the next few years, a far smaller group of truly national firms
will emerge, operating at different levels in the market. It has to be appreciated that once these
mergers are integrated, it can be expected that many of these firms will use their size and
financial strength to build even more significant international practices, either by further
mergers, team hires, lateral additions, or Greenfield openings.
3 ALTMAN WEIL, http://www.altmanweil.com/mergerline.
129
