Page 160 - 2019 - Leaders in Legal Business (n)
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increasingly operating abroad, whether making investments, sourcing raw materials, selling
finished products, manufacturing, or protecting intellectual property. In addition, companies
abroad may be investing in the firm’s home market and undertaking a range of other activities.
Since the financial crisis we have had a significant oversupply of lawyers in many Western
markets, so firms are keen not only to safeguard their own client relationships, but also to gain
new clients. Globalization gives firms an opportunity to stay relevant to their clients by offering
the services clients need wherever they need them in the world. Conversely, if a firm does not
respond to a client’s changing geographic need, it risks having a less significant or strategic role
for that client and a smaller share of the client’s legal spend. Furthermore, a commitment to, and
connections in, locations where a major corporate is based, which is now a more varied choice of
location, is often seen as critical to gaining the most high-profile and lucrative engagements.
Many firms, when given a choice, would often prefer not to establish outside their home
jurisdiction, but the growth potential of new markets and the need to defend their existing client
relationships from firms with a more international footprint (which will seek to work for the client
abroad and then bring the relationship home) has left many firms with little choice but to consider
some level of international development.
Unfortunately, the cost of developing an international practice, especially in mature and
competitive markets like those in Europe and Asia, is high. Many international firms have been
established in locations such as Hong Kong and Singapore for more than 30 years. They are now
an established part of the local business community. A new entrant will often struggle to hire the
right quality talent, and to demonstrate a service offering that is credible in the market and
positively differentiated from incumbent firms. Given the subdued recovery in Western markets
with PEP still, in real terms, below its 2007 and 2008 highs, any investments inevitably receive
close scrutiny by partners. Accordingly, the investment pot is limited and needs to be spent wisely
and strategically. It is for this reason that firms have increasingly been considering mergers or
large team hires as a quicker, potentially cheaper and more effective means of achieving a credible
international presence in a relatively short period of time.
While a merger may have certain advantages, it is not an easy or risk-free option. The
number of firms in a particular market with the right client mix, practice profile, compatible culture
and comparable economies will be limited. Care and time will be needed to achieve the right deal.
Law firm mergers are not for speed daters.
It is against this context, where firms see the need for an international platform but find the
range of compatible firms for a full merger limited, that the use of the Swiss verein and similar
structures has emerged. With this structure, the firms come together under a global brand; however,
the member firms, their management and financial performance are independent. Some firms
appear to be using this structure on a short-term basis before achieving de facto full financial,
management, and practice integration, as in the case of Hogan Lovells, while others appear to be
using this structure as a long-term business model, as in the case of Dentons and Norton Rose
Fulbright. Whatever the structural choice, the challenge is for any firm to integrate its offering so
that it can present the right level of capability to its clients where it is needed, provide an efficient
and effectively coordinated service while meeting the client’s expectations as to pricing, and
delivering a credible return to the firm’s partners. This is a tall order.
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
145
finished products, manufacturing, or protecting intellectual property. In addition, companies
abroad may be investing in the firm’s home market and undertaking a range of other activities.
Since the financial crisis we have had a significant oversupply of lawyers in many Western
markets, so firms are keen not only to safeguard their own client relationships, but also to gain
new clients. Globalization gives firms an opportunity to stay relevant to their clients by offering
the services clients need wherever they need them in the world. Conversely, if a firm does not
respond to a client’s changing geographic need, it risks having a less significant or strategic role
for that client and a smaller share of the client’s legal spend. Furthermore, a commitment to, and
connections in, locations where a major corporate is based, which is now a more varied choice of
location, is often seen as critical to gaining the most high-profile and lucrative engagements.
Many firms, when given a choice, would often prefer not to establish outside their home
jurisdiction, but the growth potential of new markets and the need to defend their existing client
relationships from firms with a more international footprint (which will seek to work for the client
abroad and then bring the relationship home) has left many firms with little choice but to consider
some level of international development.
Unfortunately, the cost of developing an international practice, especially in mature and
competitive markets like those in Europe and Asia, is high. Many international firms have been
established in locations such as Hong Kong and Singapore for more than 30 years. They are now
an established part of the local business community. A new entrant will often struggle to hire the
right quality talent, and to demonstrate a service offering that is credible in the market and
positively differentiated from incumbent firms. Given the subdued recovery in Western markets
with PEP still, in real terms, below its 2007 and 2008 highs, any investments inevitably receive
close scrutiny by partners. Accordingly, the investment pot is limited and needs to be spent wisely
and strategically. It is for this reason that firms have increasingly been considering mergers or
large team hires as a quicker, potentially cheaper and more effective means of achieving a credible
international presence in a relatively short period of time.
While a merger may have certain advantages, it is not an easy or risk-free option. The
number of firms in a particular market with the right client mix, practice profile, compatible culture
and comparable economies will be limited. Care and time will be needed to achieve the right deal.
Law firm mergers are not for speed daters.
It is against this context, where firms see the need for an international platform but find the
range of compatible firms for a full merger limited, that the use of the Swiss verein and similar
structures has emerged. With this structure, the firms come together under a global brand; however,
the member firms, their management and financial performance are independent. Some firms
appear to be using this structure on a short-term basis before achieving de facto full financial,
management, and practice integration, as in the case of Hogan Lovells, while others appear to be
using this structure as a long-term business model, as in the case of Dentons and Norton Rose
Fulbright. Whatever the structural choice, the challenge is for any firm to integrate its offering so
that it can present the right level of capability to its clients where it is needed, provide an efficient
and effectively coordinated service while meeting the client’s expectations as to pricing, and
delivering a credible return to the firm’s partners. This is a tall order.
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
145
