The dominance of US firms; the challenges in Asia; the strategic dilemmas – leaders from the world’s elite law firms and bluechip clients give their perspective on a turbulent global market.
Opportunity knocks
‘The market is tough and is affected by resource prices, low credit growth and impaired capital markets. On top of all this, competition for work is fiercer than ever before. However, challenges create opportunities. Success will follow those with the exposure to the fastest growing economies on the globe.’
Stuart Fuller, global managing partner, King & Wood Mallesons
Stuck in the middle
‘There is always space for very high end practitioners, an example of that would be Slaughter and May. So that model is very viable. However, there’s not space for many of them. The danger is for those firms caught in the middle of being in the domestic elite and the global elite, trying to expand globally without having consolidated their position in any one market.’
Nick Buckworth, executive partner and managing partner EMEA, Shearman & Sterling
Cautious optimism
‘The global market for legal services is tied in to what happens in the real economy. I’m cautiously optimistic. But the Eurozone is not sorted and the Americans haven’t agreed a deficit reduction. You just don’t know where the next Cyprus is.’
Jonathan Scott, senior partner, Herbert Smith Freehills
Asia analysis
‘The market will grow at a different pace. China is becoming a more mature legal market. The world is becoming highly regulated hence that is where we predict growth. Asia will continue to be an engine of growth for us. The market is not going to get any easier, and competition is tough, not just from other international firms but Asia-Pacific firms. We will need to continue to adjust and adapt our strategy.’
Eduardo Leite, chairman of the executive committee, Baker & McKenzie
Profit challenge
‘Consolidation is ongoing, the firms are merging, the structural change is happening, but the quality of the higher end of the market is very good if you manage to identify the right person for the problem, for the issue that you’re encountering. The profitability of the firms, which is still very high, will come down. This will be a function of leverage, increasing pressure by the clients and probably also higher costs because of these multi-jurisdictional structures.’
Felix Ehrat, group general counsel, Novartis
Balancing act
‘2012 was a good year – our revenue was generally flat but demand for our services was up. What some firms did in 2012 was draw down on inventory to get revenue up, which we didn’t. The demand for premium legal services (top 20 firms) has stagnated or decreased over the last couple of years even since the recession. It’s becoming increasingly more competitive and puts pressure on fees. There is supply and demand imbalance in the premium legal sector. Price pressure is not easing and won’t until the supply and demand get more in balance. As long as this exists there will be price pressure.’
Barry Wolf, executive partner, Weil, Gotshal & Manges
Quietly confident
Simon Davies, managing partner, Linklaters
Consolidation beckons
‘Allegedly global legal work is worth $300bn, of which $200bn is spent by US corporates – and those US corporates are increasingly operating around the world. Our revenues are $2.5bn and we’re the largest firm in the world right now. Yet, we have not got 1% of the legal market. Compare that to accountancy firms, where the big four have got 20%. I don’t think you’re ever going to see a law firm with 20% but you’re certainly going to see one get to 1% and that means there is going to be enormous consolidation across the market.’
Sir Nigel Knowles, global co-chief executive, DLA Piper
Prudence pays
‘We had a very strong 2012 but we’re not overly confident about this year – we are aware of the challenges in the legal market. Our strength over the last few years has been due to a combination of some large cases, but the market remains competitive, and a firm like ours is subject to the ups and downs of very busy cases and less busy cases. We know how challenging the next few years will be and we know this because a lot of our clients are financially challenged.’
Thomas Milch, chair, Arnold & Porter
Verein – nein
‘We don’t have multi-profit centre accounting. I understand the theory, I wouldn’t embrace it at Sidley. I understand “let’s be everywhere”, there’s an attraction to that but there’s enough of a down-side in not being able to control the risk management. I’d be reluctant to do that, unless I could be sure of the quality of the entity and if that were true I’d find a way to merge with them.’
Carter Phillips, chair of the executive committee, Sidley Austin
Careful watch
‘When I see firms are increasing their revenue by 5% I wonder if that is because they have gained clients from overseas – in which case that is great and good for the UK – or if they are managing to extract that revenue from existing clients – in which case I doubt many of their clients are growing at that rate and it’s not reflective of economic reality.’
Rosemary Martin, group general counsel, Vodafone
False strategy
‘These mega firm mergers are often ill-conceived and dead on arrival. Oftentimes two firms that are struggling in the marketplace have a hard time competing and they think that if they join forces it will solve both their problems but instead they really just inherit each other’s defects. There are very few mergers that complement each other. The impact of this is great for people like us because there will be superstars that will be unhappy and join Quinn Emanuel.’
John Quinn, managing partner, Quinn Emanuel Urquhart & Sullivan
Staying focused
‘We have not expanded dramatically and we have no plans to in the future. At a certain point, I imagine it must become enormously challenging to maintain quality levels and to manage a firm of thousands of lawyers across scores of jurisdictions. We have a different model. We have approximately 130 partners and 800 lawyers concentrated in New York and Washington with smaller offices in certain strategic jurisdictions around the world. We deliver high-end legal services to leading global corporations in their most important matters. As long as we maintain our quality and client focus, we should be positioned just fine, no matter what market conditions we may face.’
Brad Karp, chair, Paul, Weiss, Rifkind, Wharton & Garrison
Asian doubts
Ted Burke, managing partner, Freshfields Bruckhaus Deringer