Page 163 - 2019 - Leaders in Legal Business (n)
P. 163
to be appreciated that these are based on global responses, not just a handful of business centers.
It is also notable that there is a direct correlation between the size and breadth of a firm, and its
level of global brand recognition. To some extent, in branding terms, bigger really is better. While
individual tables may be contentious, firms should not lose track of the fact that their wider
reputation is important. Name recognition in the boardroom (which may be thousands of miles
away from the law firm’s head office), credibility with key regulators, acceptance by investment
banks, and name awareness by key shareholder groups can be important factors in a law firm’s
ability to win and keep work from a client.
Really Global?
Despite the trends mentioned above and the development of $1 billion and $2 billion law
firms, it is questionable as to how close we are to the creation of truly global law firms. The $1
billion firms are dominated by U.S.- or U.K.-originated firms, with King & Wood Mallesons being
the honorable exception. Indeed, of the Global 100 firms, only seven do not have a major U.K. or
U.S. presence, and all of these are ranked 80 or below in the Global 100. This is understandable,
given that the U.S. and U.K. are the two largest legal markets in the world. Of the 30 law firms
with revenues more than $1 billion, in 2013 only 11 had more than half of their lawyers outside
their home country and nine (all from the U.S.) had fewer than 25 percent of their lawyers based
outside their home country. In part this reflects the depth and maturity of the U.S. legal market,
but, given the global dispersion of GDP and the growth rates achieved in developing markets, it is
probably fair to say that firms with say less than half of their lawyers outside their home market
are not truly developing a global capability. Of course, many firms will not want to develop a
global capability — and for good reason. If you are highly placed in a major business and financial
center running a very profitable law firm, then investment outside your home city (even into your
home country) is likely to be expensive and ultimately dilutive of firm profitability. Spending
money to lose money is not a great investment decision. For this reason, many of the most
profitable firms in major markets (especially New York) will take a rather jaundiced view of
international expansion and only make any such investments when they need to do so in order to
protect their major investment bank and other key client relationships. Even then they will
(probably rightly) build the smallest international outpost that is acceptable to those clients. It is
partly for this reason and differential profitability, culture and control issues that we have never
seen a truly top-tier combination between a U.K. and U.S. law firm.
The different approaches taken by different firms means, for perfectly understandable
reasons, that neither the global legal market nor the firms inhabiting it will, or will need to, develop
in a consistent way. Firms will identify their own markets. Some will succeed and some will fail,
but so be it. The diversity of the business models in the legal sector enhances creativity and client
choice, so even as the global legal market develops, firms are unlikely to be fixed with purely
binary choices.
Leadership
In an era of larger law firms, whether with multiple offices in the home country and/or a
significant international presence, the challenge of leading and managing such firms become more
challenging and time consuming. No longer will the partners come from the same cultural,
educational, or ethnic background. Language issues will inhibit communication. The sheer size of
148
It is also notable that there is a direct correlation between the size and breadth of a firm, and its
level of global brand recognition. To some extent, in branding terms, bigger really is better. While
individual tables may be contentious, firms should not lose track of the fact that their wider
reputation is important. Name recognition in the boardroom (which may be thousands of miles
away from the law firm’s head office), credibility with key regulators, acceptance by investment
banks, and name awareness by key shareholder groups can be important factors in a law firm’s
ability to win and keep work from a client.
Really Global?
Despite the trends mentioned above and the development of $1 billion and $2 billion law
firms, it is questionable as to how close we are to the creation of truly global law firms. The $1
billion firms are dominated by U.S.- or U.K.-originated firms, with King & Wood Mallesons being
the honorable exception. Indeed, of the Global 100 firms, only seven do not have a major U.K. or
U.S. presence, and all of these are ranked 80 or below in the Global 100. This is understandable,
given that the U.S. and U.K. are the two largest legal markets in the world. Of the 30 law firms
with revenues more than $1 billion, in 2013 only 11 had more than half of their lawyers outside
their home country and nine (all from the U.S.) had fewer than 25 percent of their lawyers based
outside their home country. In part this reflects the depth and maturity of the U.S. legal market,
but, given the global dispersion of GDP and the growth rates achieved in developing markets, it is
probably fair to say that firms with say less than half of their lawyers outside their home market
are not truly developing a global capability. Of course, many firms will not want to develop a
global capability — and for good reason. If you are highly placed in a major business and financial
center running a very profitable law firm, then investment outside your home city (even into your
home country) is likely to be expensive and ultimately dilutive of firm profitability. Spending
money to lose money is not a great investment decision. For this reason, many of the most
profitable firms in major markets (especially New York) will take a rather jaundiced view of
international expansion and only make any such investments when they need to do so in order to
protect their major investment bank and other key client relationships. Even then they will
(probably rightly) build the smallest international outpost that is acceptable to those clients. It is
partly for this reason and differential profitability, culture and control issues that we have never
seen a truly top-tier combination between a U.K. and U.S. law firm.
The different approaches taken by different firms means, for perfectly understandable
reasons, that neither the global legal market nor the firms inhabiting it will, or will need to, develop
in a consistent way. Firms will identify their own markets. Some will succeed and some will fail,
but so be it. The diversity of the business models in the legal sector enhances creativity and client
choice, so even as the global legal market develops, firms are unlikely to be fixed with purely
binary choices.
Leadership
In an era of larger law firms, whether with multiple offices in the home country and/or a
significant international presence, the challenge of leading and managing such firms become more
challenging and time consuming. No longer will the partners come from the same cultural,
educational, or ethnic background. Language issues will inhibit communication. The sheer size of
148
