Branded law firms are a fact in modern legal practice, but is big always beautiful and is there still a place for local firms?
The relative positioning and strengths of local and multinational firms and how they compete in European jurisdictions is always hotly debated by lawyers at opposite ends of the law firm spectrum. Does size matter, what are the merits of marketing and are clients willing to look beyond law firm brands?
There is no doubting that the past decade has seen the rapid emergence of a new breed of multinational law firm, with large networks of offices and hundreds – perhaps thousands – of lawyers. Interestingly, however, some of those leading the very largest global firms do not yet believe that the behemoths will inevitably take over the planet, or must replace the traditional, national law firm model.
There are even limits to how ‘international’ a firm can be at a local level, say some. The individual offices even of global firms must maintain a focus on purely domestic issues.
Being the best
The aim of international firms is to be among the top tier in each market in which they operate. However, you need the best local lawyers in order to have a flow of local work. The challenge is to create the right balance of local and transnational work without damaging either supply, says Hugh Verrier, Chairman of White & Case.
The fundamentals of law firm finances may also limit firms’ international ambitions, he believes. You cannot assume development outside your own jurisdiction if the clientele is not there, or there is no financial consistency. Law firm growth is often gradual with little outside financing. Only with a significant financial surplus can you expand ahead of your clients.
Pierre Raoul-Duval, Senior Partner of Paris-based Gide Loyrette Nouel, believes that the recurring issue of size may well have little to do with a firm’s pre-eminence. ‘I joined Gide when we were 30 lawyers, and even then people were saying “there, you will merely be a number”. Now we are around 750 lawyers operating from 24 offices around the world.’
What is important, if firms are to compete effectively in the international legal market, is cohesion among the partners, he believes. ‘What links firms’ success, or otherwise, is their strategy and the model they choose to adopt. Our founders wanted to build an international institution, to allow young lawyers to become partners, and as we have expanded our network we have followed the same methodology – to hire local lawyers, to develop local practices and for them to become partners too.’
Richard Fleck of London-based Herbert Smith adds that for a firm to embark on international expansion it must also have the right practice and client base. ‘If you do deals for individuals, you are unlikely to become global. To date, the majority of firms that have expanded internationally have been those that have either a large financial institution client base, regularly advise clients on how to structure themselves internationally or whose clients’ business has demanded they expand globally – for example, the energy sector.’
But the relative success of national firms is not merely in the hands of the global players, insist others. The current economic crisis has in any event forced some global firms, they note, to rethink their strategies and refocus core practices on those markets able consistently to support their size and scale.
In the Ukraine, for example, local firms still dominate the domestic markets, says Andrew Mac, the Kiev Managing Partner of Magisters – a 100-lawyer firm with its focus firmly on Eastern Europe.
Even in the boom years no major international firms made a local play and national firms still dominate 80–90 per cent of the work – the tendency remains for multinational clients to seek out a good local fi rm when they enter a new market.
Others emphasise that there is also much more to clients’ needs than major corporate and financial transactions. There are two basic forms of delivering legal services, believes Carlos Valls, Managing Partner of Barcelona-based Iuris Valls Abogados. Firms either dedicate themselves to process work – undertaking very complex transactions, which require leveraged teams and tremendous resources – or they focus on matters that require very local expertise and experience. Litigation may have equal strategic and international importance to a client, but can be done just as capably by smaller firms.
‘I have yet to meet the truly "one-stop shop"’
Kocián Šolc Balaštík
A fact of modern legal practice, however, is the power of the law firm brand. Despite national firms’ expertise, it can still be hard to match the profile of the international firms even within their own jurisdictions. Denyer of Allen & Overy poses the question: why do clients choose the firms they do and can firms change clients’ perceptions or preference?
For Valiunas of Lideika Petrauskas Valiunas LAWIN, the answer is often a question of practicality – can a firm manage the necessary international issues for the client?
General counsel want transactions concluded in a timely and effi cient way, but there is also undoubtedly a ‘psychological comfort’ in using a known entity – if something goes wrong, then they at least have the defence of having chosen a well-known firm.
Also significant in Europe, he notes, is the dominance of English law and the need often to include English lawyers in a transaction. We have to accept the challenge that international law firms will also want to become major players domestically. The brand is a powerful tool, but there may be an assumption of quality even if it isn’t always there locally.
Fleck of Herbert Smith believes that a brand may help bring clients to a firm but it is still up to the individual lawyers to build the necessary relationship of confi dence and trust. Firms hope that there is no difference in quality between jurisdictions but there is undoubtedly an ‘IBM factor’ – brands are more comfortable for some people even if the local, national expertise is more capable.
Martin Šolc of Prague’s Kocián Šolc Balaštík believes that the current economic pressure on clients means that more are questioning brand assumptions. ‘I have met many general counsel who go into extensive detail of who is and who is not good in a particular market. They are aware when they hear pure “marketing” and prepared to go beyond this to understand firms’ real capabilities.’ Brands also bring pressures to those that own them, believes Valls, who was previously with Clifford Chance. Big firms need big clients and to offer a broad practice. There is a focus on highly leveraged work, for which there may be much internal competition. But the brand may also be perceived internally as more important than the individual, who may naturally begin to feel that they are increasingly less significant.
Local offices of national firms also have the ability to react more quickly to client needs and to market idiosyncrasies, believes Šolc. In times of crisis, how will the ‘head office’ understand the degree of local flexibility required? National firms are not an object of decision-making but able to take their destiny into their own hands.
White & Case’s mission is to be something more than a large entity, insists Verrier. Autonomy is important and an issue large firms grapple with, but a firm cannot merely add a branded veneer and call itself a true partnership. Conversely, if all of the firm’s offices had to wait for a decision from New York they would quickly collapse.
Tomasz Wardyñski, Founding Partner of Poland’s Wardyñski & Partners, thinks that in the current environment, global firms might find it difficult attracting the necessary senior talent to help build their local practices because of the growth and development of local law firms.
‘I may sometimes have worries over the future of Allen & Overy but I do not worry about a lack of good people in the firm or wanting to join us’, responds Denyer. ‘But the challenge actually is deciding if are we are the right firm for them to join – we don’t suit everybody.’
‘A firm cannot merely add a branded veneer and call itself a true partnership.’
The question is whether national and global law firms are using different legal tools to satisfy clients or merely operating on different scales.
All major firms now have an armada of support staff driving their brand forward. ‘My challenge is to ensure we all work towards a common global mission and that there is sufficient understanding and collective participation’, says Verrier at White & Case.
But even firms such as his now question the need to open offices in all corners of the globe and – for him – independent national firms remain vitally important. The real opportunity is to build referral relationships that work both ways, he says.
Martin Šolc nonetheless acknowledges the clear differences between the financial scale, and perhaps target messages, of national and global firms. ‘My presumption is that the propaganda of the global firms is to stress perceived strengths that are not always present, but I have yet to meet the truly “one-stop shop”. The reality for national firms is that marketing is done to counter perceived weaknesses than market actual strengths.’
For Wardyñski, ‘marketing’ is not proper terminology when it comes to law fi rms. ‘We have the type of work we want to do and clients we want to work for. There is therefore no difference between big or small, global or national firms in this respect. But resources do matter.’
The issue ultimately comes down to what type of service firms want to market and what name they want to build, and some therefore question the claim that there is inevitably a momentum towards larger law firms.
‘I see no trends in my market towards bigger fi rms, in fact the exact opposite. There is a move towards quality and the crisis has opened a lot of eyes beyond simple perceptions – many big firms have simply bodies to where the legal action now is – but local firms have to focus consistently on their own markets’, says Mac at Magisters.
Despite the economic crisis, the process of globalisation has, however, not stopped, noted the panellists. The trend towards more international business will therefore continue. Growth has slowed in most firms, but the global economy means that large law firms will continue to grow and the issue remains how to manage their scale and architecture, says Verrier at White & Case.
In the current economic scenario, others suggest that despite such crossborder flows there may, however, emerge greater clarity between national, regional and global firms. The crisis has renewed the emphasis on qualitative, as much as quantitative, matters.
It is clear that the global law firms will continue and the quality of the local fi rms will continue. A lot of firms want a global presence but have no practice justifi cation for it, says Fleck at Herbert Smith.
Martin Šolc agrees. ‘I believe that the trend remains but I also think that different law firm models exist and must exist. It is the result of the general increase in the quality of legal services. Models are evolving slowly but it is too simplistic to say that the biggest law firms will monopolise client relationships.’
Scott Appleton is an Editor at Iberian Lawyer based in Madrid. He can be contacted by e-mail at email@example.com.
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