In this second edition of Who’s Who Legal: 100 we reflect on the past year and its impact on our line up of leading law firms and the legal marketplace at large.
2012 has been a challenging year for the legal sector. Amid the current economic climate, increasing fee pressure and growing competition, it is no surprise that law firms are focusing on providing clients with an optimum service, increasing their efficiency, broadening their scope and maintaining recognition in the market. Given this backdrop, there has been a fair amount of consolidation within the market at all levels as well as an uptick in the number of strategic alliances between firms around the world. Who’s Who Legal takes a closer look at how our WWL: 100 line-up has been affected.
Consolidation and alliances
While the economies in Europe and the US have been suffering, emerging markets in Eastern Europe, Africa, Asia and Latin America have continued to grow. The promise of activity in these markets and the cash flow from clients in these regions has not been missed by law firms; indeed, many see a global strategy as essential for survival.
A global strategy can take many forms. While some firms have opted for a full-blown merger with local partners in emerging markets, or in nearby destinations considered to be “gateways” to such markets, others have opted for strategic alliances or decided to open their own offices in “hot” locations.
Of our 100 leading firms, 44 have either merged or have entered into an alliance with international firms since 2010. The most popular locations for law firm mergers or alliances include Asia, Australia and Latin America. However, consolidation in the market has also led to several mergers across the Atlantic and within Europe. One of the most notable mergers announced last year and to take effect in 2013 is the combination of Norton Rose and Fulbright & Jarworski to become Norton Rose Fulbright. Both firms were previously listed in the WWL: 100. A further large-scale merger was between SNR Denton (previously listed in our WWL: 100), Salans and Fraser Milner Casgrain; the combined firm is now listed as Dentons and consists of 79 offices in 52 countries.
Of those remaining, 28 have opened new offices since 2010 to support their global expansion. The most popular destinations for offices are Seoul following the decision by the local government to open its doors to foreign law firms; Singapore; Shanghai and Beijing; Moscow; Almaty and Houston, Texas. Many of the offices were opened to grow the firm’s energy and natural resources practice, a thriving market. Furthermore, in the last year an additional three firms in the WWL: 100 were reported in the legal press to be considering a merger or a potential tie-up.
The figures certainly indicate that law firms strongly believe they need to increase their presence in emerging markets, whether by a merger, alliance or their own strategically positioned offices to access new clients and aid existing clients in their international business. With the volume of legal work decreasing and competition over what remains heightening, clients have been able to raise the bar on the quality of service law firms provide. For a firm to compete it has become essential to be able to offer a “one-stop shop” to service the entirety of a client’s international needs.
While law firms stand out in the market for different reasons, recognition as a leader in the field by the legal press and clients, as well as a strong degree of visibility is of great importance.
Our research shows that in many cases clients prefer to use a mix of law firms – each recognised as a specialist in their field – for each area of work. This enables the client to ensure that the best lawyers are selected for each individual task. Many of our 100 leading firms are recipients of our awards which are bestowed upon the leading firms and individuals in each of our 32 practice areas and to the outstanding firms in 56 countries and five US states, demonstrating their depth of talent in specific fields and impressive reputation among practitioners and clients. Some of the firms have a narrow focus, including Fross Zelnick Lehrman & Zissu, an IP law firm and the winner of our trademarks law firm of the year award for the eighth consecutive year; Fragomen a corporate immigration firm and nine-time winner of our award; and Littler Mendelson, a labour and employment firm devoted to representing management, our award winner for the second year running. Others, are full service, international powerhouses with exceptional reputations for certain areas, such as Allen & Overy for banking, Linklaters for capital markets and Freshfields Bruckhaus Deringer for competition and arbitration. The graph below highlights the firms winning multiple awards.
Our WWL: 100 line up demonstrates that there is no single path to success.
With competition between law firms increasing as the amount of legal work decreases, maintaining long-standing relationships with clients is more important than ever. In order to provide clients with the best service possible, on top of offering “on the ground” advice in key locations, firms are placing a greater emphasis on ongoing compliance advice and risk management. Furthermore, they are looking to take on instructions from other parts of the business, not just the general counsel. In this way, regulatory work has enabled firms to create day-to-day relationships with clients at a high level. Law firms are also making full use of the technology available to enable constant communication.
Moreover, client service is changing. Hourly fees are often being sidelined for more flexible arrangements such as conditional, capped, and discounted fees. Online bidding for work is also not uncommon, while outsourcing of legal work to minimise costs is becoming the norm.
Clients are looking for value, be that in the form of a top-quality service for a reasonable fee or additional services on top, such as secondments to the client. Overall, they want a great service and the nominations received from clients by our leading law firms show that they are certainly delivering.
While 2012 saw the demise of Dewey & LeBoeuf – the largest law firm failure in history – it was also a year of positive results for many law firms around the world.
Dewey & LeBoeuf serves as a stark warning to firms looking to expand and lure top partners without the profits to back them. The firm once had more than 1,000 lawyers in 15 countries; by all appearances it had embraced global expansion, yet alleged mismanagement led to Dewey & LeBoeuf finding itself more than $300 million in debt, a result of recruiting partners to the firm with guarantees of high pay and relying on an extensive credit line to meet them.
Many firms are contemplating further redundancies in 2013 and it certainly remains a challenging market to survive in. Yet, as recent results show, the legal sector has still performed remarkably well compared to the wider economy. According to report by Legal Business, the legal market is reported to have grown eight-fold in the last 20 years while the wider economy has grown by two-and-a-half times over the same period. Furthermore, in the US, Wells Fargo Private Bank’s legal specialty group survey revealed that leading law firms posted an average five per cent increase in gross revenues last year, the largest year-on-year increase since 2008.
The UK, home to some of the world’s leading international law firms, has also experienced revenue growth, with Clifford Chance reporting in July 2012, a seven per cent increase in both revenue and average profit per equity partner, a figure greatly aided by the firm’s growth in its Asia-Pacific practice, where it has kept partner numbers comparably lower than some of its rivals.
A further way in which this year’s line up has altered is in the form of three new additions. Maples and Calder has performed exceedingly well in our research this year, winning our private funds award and being named the leading firm in the Cayman Islands. Ropes & Gray has also put on a strong performance with 41 listings across 14 chapters, while Schellenberg Wittmer is awarded the accolade of Swiss Law Firm of the Year.
The year ahead promises further challenges; the global economy is still weak, recovery slow and confidence below that which is needed to encourage transactions. Yet for those firms prepared to maximise their opportunities, it offers a chance to embrace a changing legal market and be at the forefront of client service.