Euro elite: focus Iberia – Pushing boundaries

Dominant in their home markets, law firms from Spain and Portugal have weathered the tempest by heading for far-flung locations.

As the EU’s fifth-largest economy, Spain is home to two of Europe’s legal giants, Garrigues and Cuatrecasas, Gonçalves Pereira: between them they have more lawyers worldwide than Linklaters – 1,410 and 970 respectively. In dwarfing the local competition, their reach is also significant. Madrid-based Garrigues has 34 offices in 13 countries and its Barcelona opponent, Cuatrecasas, 25 offices in 11 countries.

However, for their chief rival, 550-lawyer Uría Menéndez, size is less significant. Being the Spanish ‘best friend’ of Slaughter and May, the firm enjoys a comparable reputation for quality, as explained by Uría’s managing partner, Luis de Carlos: ‘Quality has always been the main driver, more than growth.’

Iberian lawyers are certainly in a buoyant mood. ‘2015 was a much better year in Spain,’ enthuses Fernando Vives, managing partner at Garrigues.

Subject to a new Socialist-led government, Portugal can claim a third successive year of rising GDP and, despite last December’s inconclusive ballot, Spain’s economy also continues to recover, pushing 3% growth ahead of the 26 June election that may yet relieve the political impasse.

‘We are quite confident in the economy,’ says Rafael Fontana, managing partner at Cuatrecasas. ‘The forecasts for this year and next are probably among the highest in the EU. But the politicians have to help us.’

‘The Spanish market is mature and very competitive. We are getting growth in Latin America; this is where we see more potential.’

Luis de Carlos, Uría Menéndez

Like Uría, Cuatrecasas is part of a pan-European grouping – an alliance with Chiomenti, Gide Loyrette Nouel and Gleiss Lutz, which is ‘being consolidated in business terms’. Unlike Uría, its relationships do not extend to a UK member but Fontana does accept the potential need for one.

‘We may have to have somebody with a UK capability,’ he says, ‘but we haven’t yet spoken about having a UK law firm.’

However good the Spanish recovery may feel, it will be ‘very difficult to return to the golden years, the first years of the 21st century’, according to Vives. New battles between the three leading independent Spanish players will be fought less on European turf but further afield. For Spain’s legal conquistadors, Latin America is the new El Dorado. ‘A firm of our size, practising law in the premier league, needs to develop international strategies,’ argues Vives. ‘We are very big for just the Spanish and Portuguese markets.’

To understand this drive for overseas expansion, it helps to look at what is happening domestically. Spain had a very difficult crisis, made worse by a catastrophic property bubble. National unemployment still languishes at 20%, although legal work has picked up significantly, reflected by a sharp increase in demand for trainees.

‘Because foreign investors trust the Spanish economy, there are very good opportunities to invest in the country,’ says Fontana. ‘The atmosphere has changed completely.’

Last year’s revenues for the three strongest Spanish firms confirm his view, albeit with marked differences: Garrigues, the largest firm by some distance, saw revenues increase by just 1% to €339m; Cuatrecasas was up 4% at €265.7m; and Uría was the fastest growing, up 9% to €210m, more than double its 2014 growth rate.

One key factor was strong deal activity. While Freshfields Bruckhaus Deringer and Linklaters dominated many of the largest transactions in Spain, and the Big Four accounting firms fought hard for smaller deals, local independent firms still secure substantive roles on major transactions.

Garrigues and Uría both advised on the €24bn formation of Coca-Cola European Partners, while Garrigues also acted for Iberdrola in its $4.1bn energy merger with UIL and Uría advised Grupo FerroAtlántica on its €2.7bn merger with Globe Specialty Metals. In contrast, Cuatrecasas’ major mandates were regulatory: not least advising Volkswagen subsidiary SEAT over the emissions scandal and Pemex on energy reform projects in Mexico.

The Euro Elite: Iberia	Country	Total lawyers	Total partners	No. of offices
Garrigues	Spain	1,410	285	34
Uría Menéndez	Spain	555	128	17
Cuatrecasas, Gonçalves Pereira	Spain	970	213	25
PLMJ	Portugal	260	56	8
Morais Leitão, Galvão Teles, Soares da Silva & Associados	Portugal	192	50	3
Gómez-Acebo & Pombo	Spain	219	59	9
Vieira de Almeida & Associados	Portugal	161	37	11
Pérez-Llorca	Spain	145	30	4
Abreu Advogados	Portugal	190	26	3

But more deals, supplemented by a strong recovery in real estate, only tell part of the story. The real action did not happen in Spain, but in Portugal, where the three large Spanish independent firms have maintained a sizeable presence for more than a decade. ‘In 2015, half of our firm’s growth came from Portugal,’ confirms de Carlos. This arose even though only 90 (16%) of Uría’s lawyers are based in Portugal, the same percentage as Cuatrecasas, which has 150 lawyers while for Garrigues only 70 lawyers (5% of its total) are based there.

Spain’s fourth-largest independent firm, Gómez-Acebo & Pombo, also benefited. ‘Portugal has been important: our Lisbon office grew most last year,’ says new managing partner, Juan Carlos Rueda. Of his firm’s 219 lawyers, 32 (15%) are in Portugal.

They are all welcomed by Nuno Galvão Teles, managing partner of Portuguese independent Morais Leitão, Galvão Teles, Soares da Silva (MLGTS): ‘There is room for everybody. Fee rates is one of the positive factors of having international firms in Portugal; I love having Uría and Linklaters here because they are the only guys that match our fees, and that’s good. We would be completely deflated if they were not here.’

The only major international firm in Portugal, Linklaters is seen as a strong player, further adding to the competitive pressure on chargeout rates. PLMJ’s managing partner, Luís Antunes, asks: ‘Is it possible to charge higher rates in Portugal? Yes, depending on the subject matter. But the standard rate remains unchanged.’

This is typically €200-250 an hour and €300 for premium work, roughly half of what clients expect to pay in Spain, which had seen some decline. ‘Last year saw a recovery in rates and that remains the case,’ says de Carlos.

Akin to its larger neighbouring country, Portugal has its own big three: MLGTS, PLMJ, and Vieira de Almeida (VdA). For each of them, 2015 was also a good year. While revenues at MLGTS grew by 7% to €42.8m, and by 9% at PLMJ to €39.2m, VdA managed a remarkable 20% increase to head the pack with an estimated €43.8m. The firm’s managing partner, João Vieira de Almeida, says: ‘The crisis has been a main feeder of our growth. Some major clients, like the Banco de Portugal, came to us because of crisis-related issues. Last year was absolutely great and will be hard to repeat, although I am optimistic.’

VdA has been advising the central bank in the aftermath of Banco Espírito Santo, which collapsed in 2014, and the planned sale of its successor, Novo Banco. Meanwhile, Barclays turned to PLMJ for advice on the sale of its Portuguese business to Spanish bank Bankinter. PLMJ also advised Winterfell on the €220m acquisition of a majority stake in Efacec, while MLGTS advised Banco Comercial Português concerning its €388m share capital increase.

‘Chinese investment has been more significant in Portugal than in Spain: there will be a further wave to come,’ suggests Rueda.

Why then are local firms looking beyond Iberia? ‘The Spanish market is mature and very competitive,’ says de Carlos. ‘Uría is already a sizeable operation, so growth percentages are limited. In contrast, we are getting growth in Latin America; this is where we see more potential.’ Notwithstanding an improving domestic situation, he speaks for most of Iberia’s international independent firms: international expansion is the future.

Garrigues and Uría have already targeted the same Pacific Alliance countries: Chile, Colombia, Mexico and Peru to service Latin America, where more than a quarter of Garrigues’ clients are based.

‘We have completed the first phase of our plan,’ says Vives, pointing to new offices in each of the four jurisdictions – plus Brazil – staffed by nearly 120 lawyers. What started as a greenfield plan has since evolved into the absorption of local firms during the last 12 months: De la Calle, Londoño, López y Posada Abogados (DLP) in Colombia and Avendaño Merino in Chile.

On the back of its longstanding relationship with Pemex (Petróleos Mexicanos), Cuatrecasas also opened a Mexico office in April. ‘We may try to develop further in Latin America,’ says Fontana, who is closely monitoring his competitors before taking further steps. In 2014, Uría agreed to take an initial 30% stake in a Latin America joint venture involving Philippi (Chile) and Prietocarrizosa (Colombia). After merging to form PPU last January, the new firm’s combined revenues grew by 15% last year. This January, PPU incorporated Peruvian firms Ferrero and Delmar Ugarte, creating a combined entity of 363 lawyers across the three jurisdictions.

Portuguese firms inevitably focus on Lusophone countries. De Almeida predicts non-Portuguese revenue will exceed 20% by 2018. Until recently, like MLGTS and PLMJ, VdA had local affiliations in Angola, Brazil and Mozambique. It then opened in East Timor and last year integrated 30 lawyers from the Lisbon-based Africa specialist, Miranda, broadening its offering to 11 jurisdictions. Both MLGTS and PLMJ also have joint operations in Macau. This year, MLGTS opened an office in Hengqin, the new free trade zone bordering Macau, while PLMJ has other offices in Cape Verde, China, East Timor and Switzerland.

Rather like the great explorers before them, today’s Iberian lawyers are embarking on a new age of discovery. LB