2014 saw US firms continue to build on a solid home base but extend their reach in Europe, Asia and Africa. As clients seek to consolidate their law firm panels internationally, the Global 100 continue to slug it out.
‘The last 18 months have seen clients increasingly want to internationalise panels – not just country panels, but want to review which firms they are using in each country and assess whether this can be streamlined to use [fewer] firms that can cover more jurisdictions,’ says Hogan Lovells chief executive Stephen Immelt. ‘Rather than have ten different firms, they want five, so they can have greater consistency and more leverage in terms of pricing.’
This perspective suggests increased client support for the global law firm model – something that has been assumed but not always proven – particularly in areas where clients themselves are investing: Asia and Africa. In mature markets, US firms in particular have looked to become the go-to firm for their clients on either side of the Atlantic.
And after a few relatively quiet years, appetite for global expansion is back on the agenda. With a quarter of Global 100 firms reporting a total of 48 new offices during the last year, the standout firm in terms of expansion was Clyde & Co, which opened seven offices in 2014/15 in Asia, Africa and the US, adding to six openings the previous year, which makes the firm the most prolific in terms of office launches over the last two years.
The internationalisation of Global 100 firms is comprehensive. While a significant tranche of the firms are domestic US operations, eight out of the top ten firms have well over half of their lawyers located outside their home jurisdiction, with only Skadden, Arps, Slate, Meagher & Flom and Kirkland & Ellis exceptions to the rule.
But while a number of US firms continue to try to break the UK firms’ hold on the London and European markets, the most active battlegrounds remain Africa and Asia.
| GLOBAL 100 EUROPE HEADCOUNT (EXCL. LONDON) | |||
|---|---|---|---|
| Rank | Firm | No. of lawyers in region | % of lawyers in region |
| 1 | CMS | 2,022 | 73% |
| 2 | DLA Piper | 1,655 | 42% |
| 3 | Garrigues | 1,427 | 97% |
| 4 | FIDAL | 1,357 | 100% |
| 5 | Clifford Chance | 1,252 | 42% |
| 6 | Baker & McKenzie | 1,240 | 29% |
| 7 | Freshfields Bruckhaus Deringer | 1,118 | 48% |
| 8 | Linklaters | 1,066 | 41% |
| 9 | Allen & Overy | 995 | 39% |
| 10 | Eversheds | 889 | 65% |
| 11 | Pinsent Masons | 848 | 56% |
| 12 | Hogan Lovells | 801 | 31% |
| 13 | White & Case | 750 | 39% |
| 14 | Bird & Bird | 672 | 64% |
| 15 | Taylor Wessing | 491 | 52% |
| 16 | Squire Patton Boggs | 435 | 32% |
| 17 | Norton Rose Fulbright | 415 | 12% |
| 18 | Cleary Gottlieb Steen & Hamilton | 369 | 28% |
| 19 | Jones Day | 331 | 13% |
| 20 | Latham & Watkins | 312 | 15% |
| GLOBAL 100 LONDON HEADCOUNT | |||
|---|---|---|---|
| Rank | Firm | No. of lawyers in region | % of lawyers in region |
| 1 | Linklaters | 1,014 | 39% |
| 2 | Clifford Chance | 867 | 29% |
| 3 | Allen & Overy | 864 | 34% |
| 4 | Herbert Smith Freehills | 833 | 36% |
| 5 | Freshfields Bruckhaus Deringer | 768 | 33% |
| 6 | CMS | 719 | 27% |
| 7 | Slaughter and May | 638 | 91% |
| 8 | Hogan Lovells | 630 | 24% |
| 9 | Berwin Leighton Paisner | 536 | 76% |
| 10 | Pinsent Masons | 519 | 34% |
| 11 | Norton Rose Fulbright | 519 | 15% |
| 12 | Clyde & Co | 507 | 40% |
| 13 | Ashurst | 495 | 30% |
| 14 | Simmons & Simmons | 457 | 54% |
| 15 | DLA Piper | 389 | 10% |
| 16 | Baker & McKenzie | 370 | 9% |
| 17 | King & Wood Mallesons | 363 | 15% |
| 18 | Reed Smith | 361 | 21% |
| 19 | White & Case | 360 | 19% |
| 20 | Taylor Wessing | 358 | 38% |
Singapore swing
The most prominent move of the first half of 2015 was Dentons’ combination with Chinese firm Dacheng, which is set to create a 6,600-lawyer giant – by headcount the largest firm in the world by some margin – operating under a Swiss verein structure, with more than half of those lawyers coming from the Chinese firm.
Quinn Emanuel Urquhart & Sullivan is also looking to launch in Shanghai targeting Chinese enforcement work with the hire of Kirkland partner Samuel Williamson, and Pillsbury Winthrop Shaw Pittman launched in Beijing in August 2014, hiring two partners from Paul Hastings.
But despite the waves made by Dentons’ audacious China move, many remain unconvinced by the strategy and fit of an unwieldy and unprofitable union with a Chinese firm. Bakers, which boasts three Chinese offices and has been in the country since 1993, is unconvinced that a merger is the way into China. ‘We don’t need to find a new firm to provide us with a reputation in China,’ says Eduardo Leite, chair of the executive committee.
Singapore remains the most popular destination for new office launches in Asia by some margin. A host of firms bulked up in the city state this last year, including King & Wood Mallesons, which filled the gap in its Asian network in May after it announced earlier this year that it will open in Singapore having received a foreign law practice licence by Singapore’s Attorney General’s Chambers. The office will focus on international funds, energy and resources, and trade with China.
Global 100 Lawyers by region
And as the region continues to develop into a commercial law and arbitration hub, Morgan, Lewis & Bockius tied up with local outfit Stamford Law Corporation in a bid to build a disputes practice across Asia-Pacific, with an additional focus on transactions for clients investing in Singapore and the wider Asian marketplace. Dechert hired O’Melveny & Myers partner Dean Collins to lead its Singapore office, which launched last summer.
Meanwhile, White & Case was granted its renewal for its Qualifying Foreign Law Practice (QFLP) licence up to April 2019, having been one of six firms to originally receive the first QFLP licences issued by the Singaporean government in 2009. Herbert Smith Freehills, on the other hand, chose to give up its QFLP in the city state to enter a best-friend agreement with a Singapore law firm.
According to Allen & Overy (A&O) global managing partner Wim Dejonghe, US law will become more important in Asia, so firms wanting a presence in this region will have to offer US law eventually.
‘Not only do we want to build dispute resolution in the US, we want to build US dispute resolution in Hong Kong and Singapore,’ he says. A&O currently has around 44 partners and 150 US-qualified lawyers in the US, with its US practice contributing less than 5% of the firm’s top line.
Aside from Singapore, a few firms also noticed a revived interest in India as Shearman & Sterling senior partner Creighton Condon sums up: ‘India has been a strong market. There has been increased outbound investment by the firm’s Indian corporate clients over the last six to nine months, driven in part by anticipated changes in government policy. We work in partnership with a number of the major local firms on these transactions.’
Australia’s energy and resources sector – the cycle turns
It was a surging market that attracted a glut of investment in Australia over the last six years by international law firms but now it appears to have run its course. Some key indicators point to Western Australia’s boom times being over. Investment in major energy projects has seen its peak while plunging iron ore prices have melted away the state’s tax revenues.
Companies have started implementing cost-cutting programmes and unemployment has jumped from 4.8% in 2013-14 to an estimated 6.25% in 2014-15. This trend is exacerbated by the exceptionally low oil price, currently sitting at just under $60 per barrel, down from $105 in June 2014. The Perth legal market used to generate significant work from the energy and resources sectors, both of which are now underperforming. ‘The downturn in commodity prices has had a major impact on the Western Australian economy,’ concedes Robert Merrick, the Perth-based co-head of the global energy group at Herbert Smith Freehills, adding that: ‘It is clear that the sector is adjusting to a new oil price paradigm.’
Western Australia’s legal market had seen decades of nearly uninterrupted growth, mostly fuelled by the energy and resources industries. Perth’s reliance on these two key sectors has served it well, creating employment and indirectly leading to a population increase from 1.2 million in 2006 to over 2 million in 2014. But now a different, more diversified picture emerges.
Work is still to be won but it’s a different type of work. ‘There has been an increase in construction disputes as projects sanctioned during the boom years near completion and we have seen an uptick in restructuring work, particularly among projects that are highly leveraged,’ says Merrick. For the time being, the continued investment in infrastructure projects and large-scale developments such as the New Perth Stadium have also provided additional cushioning.
It is a challenging picture for advisers operating in Australia, which has attracted firms including Clifford Chance, Allen & Overy, Ashurst, Herbert Smith, Norton Rose Fulbright and DLA Piper in recent years largely to tap into the commodities sector and hopes of Australia developing as a key hub in the wider Asia-Pacific region. Likewise, the weakening of the Australian dollar has helped to push two leading Australian law firms – Minter Ellison and Clayton Utz – out of the Global 100, leaving just Allens in the grouping.
But though overall growth is set to slow, there might be more lucrative markets emerging, according to Merrick. On 17 June, the China-Australia Free Trade Agreement (ChAFTA) has been signed and forecasts predict that, by way of example, ‘LNG will become Australia’s second largest commodity export (after iron ore) by 2018’, according to the Reserve Bank of Australia – with the bulk destined for Asian markets. ‘Western Australia is ideally placed to deliver given its abundance of reserves, proximity to Asia and stable political environment,’ argues Merrick. Perth-based Shaun McRobert, a corporate and securities partner at King & Wood Mallesons with a focus on the energy and resources sector, seconds this: ‘What’s important to note is that we are experiencing a different phase of growth. The Western Australian economy is now in the export phase of growth, including LNG exports.’
This adds a new twist to the debate about the two competing Australian legal markets, with Sydney and Melbourne on one coast and Perth on the other. Perth does not need to compete with Sydney, maintains McRobert. ‘We see a significant potential of growth coming from the west and SEA regions. Western Australia still exports around 85% of Australia’s trade with China.’
Perth’s geographic location, easy access to key Asian markets and the shared time zone with Hong Kong and Singapore make it the prime contender for new business opportunities in Asia-Pacific, and increasingly separate from the national economy. McRobert is certain that ‘international businesses are recognising the advantages of being located here – we are becoming a major centre for global energy companies’. Just the work may come from somewhere else.
That Australia ‘has one of the least diverse export profiles among developed countries’, according to an April 2015 report of the Australian government’s Department of Industry and Science, is another story.
Andrea Leber, deputy editor, The Legal 500 Asia Pacific
Ready to rumble
As the legal market’s hottest new market, Africa’s popularity continues to grow, especially among firms with credible energy and infrastructure practices. The first half of 2015 saw Shearman prepare to launch in Egypt with plans for an international arbitration and projects practice – marking the firm’s first foray into Africa. Shearman already has a five-partner office in Abu Dhabi handling project finance and arbitration work, and aims to extend its on-the-ground presence in Egypt as investors return to the country after the revolution in 2011.
Other African movers include Dentons, which extended its considerable African network with the opening of new offices in Johannesburg and a permanent base in Casablanca; Clyde & Co, which opened in Cape Town and Johannesburg through hires from leading local outfit Webber Wentzel; and Orrick, Herrington & Sutcliffe, which opened its affiliated office Orrick RCI in Abidjan, Cote d’Ivoire.
Having merged with full-service South-African outfit Routledge Modise in 2013, Hogan Lovells is still trying to build relationships in the region. ‘We want a deeper African network,’ says Immelt. ‘There are lots of opportunities, including infrastructure and energy work, and no oversupply of law firms, but it is a complex market where many local African firms are deciding what relationships they want to have with global firms. Should they form alliances or keep themselves open to all referrals? What we are doing at this point is ensuring we understand the market – Africa is more than 50 different countries so it’s not a single market.’
But while the region comprises ample opportunity in energy and infrastructure, capital markets – particularly across the mining, oil and gas and telecoms sector – and some international arbitration work, there are some considerable risks. Orrick’s Africa head Pascal Agboyibor tells Legal Business: ‘You have to know the African laws and be able to identify regulation. You need to be able to navigate around the technical and political complexities in the region. You need the experience and the ability to read between the lines otherwise it can become extremely challenging to understand what is really going on.’
| GLOBAL 100 ASIA AND AUSTRALIA HEADCOUNT | |||
|---|---|---|---|
| Rank | Firm | No. of lawyers in region | % of lawyers in region |
| 1 | King & Wood Mallesons | 1,742 | 74% |
| 2 | Herbert Smith Freehills | 1,133 | 49% |
| 3 | Baker & McKenzie | 1,066 | 25% |
| 4 | Ashurst | 811 | 50% |
| 5 | Clifford Chance | 488 | 16% |
| 6 | Allen & Overy | 389 | 15% |
| 7 | K&L Gates | 365 | 19% |
| 8 | Linklaters | 355 | 14% |
| 9 | DLA Piper | 253 | 6% |
| 10 | Jones Day | 237 | 10% |
| 11 | Freshfields Bruckhaus Deringer | 212 | 9% |
| 12 | Hogan Lovells | 211 | 8% |
| 13 | Morrison & Foerster | 179 | 18% |
| 14 | Reed Smith | 139 | 8% |
| 15 | Sidley Austin | 135 | 8% |
| 16 | White & Case | 134 | 7% |
| 17 | Squire Patton Boggs | 132 | 10% |
| 18 | Davis Polk & Wardwell | 113 | 13% |
| 19 | Clyde & Co | 112 | 9% |
| 20 | Skadden, Arps, Slate, Meagher & Flom | 100 | 6% |
| GLOBAL 100 US HEADCOUNT | |||
|---|---|---|---|
| Rank | Firm | No. of lawyers in region | % of lawyers in region |
| 1 | Jones Day | 1,663 | 67% |
| 2 | Greenberg Traurig | 1,563 | 89% |
| 3 | Sidley Austin | 1,470 | 83% |
| 4 | Latham & Watkins | 1,432 | 68% |
| 5 | Kirkland & Ellis | 1,354 | 68% |
| 6 | Skadden, Arps, Slate, Meagher & Flom | 1,332 | 81% |
| 7 | DLA Piper | 1,257 | 32% |
| 8 | K&L Gates | 1,255 | 64% |
| 9 | Morgan, Lewis & Bockius | 1,150 | 89% |
| 10 | Reed Smith | 1,101 | 65% |
| 11 | Gibson, Dunn & Crutcher | 1,059 | 88% |
| 12 | Holland & Knight | 977 | 97% |
| 13 | Wilmer Cutler Pickering Hale and Dorr | 966 | 90% |
| 14 | Perkins Coie | 910 | 100% |
| 15 | Bryan Cave | 904 | 93% |
| 16 | Ropes & Gray | 893 | 86% |
| 17 | McGuireWoods | 892 | 95% |
| 18 | Hogan Lovells | 833 | 32% |
| 19 | McDermott Will & Emery | 828 | 83% |
| 20 | Simpson Thacher & Bartlett | 781 | 84% |
Final bell
While Africa and Asia present new opportunities to gain market share, for many firms, the US and European markets – including the saturated London market – remain a challenge.
Our Global London report in April examined the extent to which US firms have continued their assault on the City market. The relatively poor performance from the Magic Circle is in some ways a measure of the considerable inroads by the US firms in London, although Asia remains fair game and at least one US managing partner believes Europe will remain elusive for American firms.
‘The Magic Circle firms have flags all over Europe. Sidley has a limited continental presence and it can be difficult to convince a London-based institution that proposes to do a cross-border European deal that we can do it without a large network of European offices,’ says George Petrow, European managing partner at Sidley Austin. ‘What works for us is our long history of working with independent local firms, so that if we need local support we know which local firms, and which lawyers in them, are best-suited to the engagement.’
Co-publishing features:
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Firms are relatively hopeful about the year ahead in Europe, barring a major shock to the Eurozone, although with this comes increased competition. ‘Without a doubt, it is a much more competitive market than it was before the crisis. It has turned into a buyers’ market, and firms have had to adapt to this new reality,’ says Fernando Vives, executive chairman at Garrigues. ‘Clients are in the driver’s seat and law firms need to listen to them, not just in terms of the legal work itself, but other matters that include aspects that range from pricing to staffing. Innovation is now a buzzword, granted, but it is also something that European firms are taking to heart and beginning to truly implement so as not to fall behind.’
Nonetheless, the firms that have pushed hard to bring disparate parts of the world together are starting to see the benefits. Says A&O’s Dejonghe: ‘When you look at the map you see how money flows across the globe and how the key financial hubs all connect. It is this connectivity and network that we continually build on.’ LB
jaishree.kalia@legalease.co.uk