‘I prefer to use the Magic Circle rather than US firms. They are, if anything, becoming better-run businesses.’
Philip Bramwell, BAE Systems
It should come as no surprise that clients on the global stage continue to demand more from their advisers. Yet, for the most part, those London-headquartered firms at the top end of the Global 100 report are delivering for clients despite the influx of international firms, particularly those based in the US, into their home market.
‘I continue to believe that the Magic Circle firms offer excellent strength and depth on big-ticket issues,’ says Philip Bramwell, group general counsel (GC) of multinational defence, security and aerospace company BAE Systems. ‘Their strength is in their gene pool – their core systems and the processes that they continue to invest in – and they are, if anything, becoming better-run businesses.’
Although BAE is heavily represented on both sides of the Atlantic in terms of the Magic Circle and US firms, Bramwell typically relies on the Magic Circle, particularly in London. ‘I prefer to use the Magic Circle rather than US firms. And we tend to use the Middle East offices of those Magic Circle firms as well. They have good multi-regional offerings in their historic places of strength but I don’t think they claim to be law firms of global reach like the big franchised firms who have dozens of offices.’
For Chris Newby, European GC at American International Group (AIG), this is also the case: ‘On the whole, the capability in the large, global, London-based firms is probably greater than in the US firms, because the US firms are smaller operations. The capabilities of an Allen & Overy, Freshfields Bruckhaus Deringer or a Clifford Chance – they have much more scale. For us, Freshfields is still our lead corporate adviser and I don’t really have any inclination to change that. I still think the expertise around UK-European issues is greater in those firms than in the US firms.’
Yet despite overall satisfaction with the upper end of the UK legal market, clients are aware of the various ways in which the global legal market is currently evolving and the challenges this presents. Felix Ehrat, group GC of pharmaceutical giant Novartis, predicts a profound impact brought about by the use of technology, which will affect the business model and service delivery provided by law firms.
‘We are currently in the midst of a huge shift in how outside legal support will be provided or how the business models of the large global firms will emerge and how services will be generated. We are still early in the process of understanding what digitalisation really means. I am convinced it will fundamentally change how we have done our jobs for decades.’
For Bramwell, consolidation of the mid-tier is likely to lead in the future to three types of firms – and less choice for some clients.
‘For me, the big story of the last two years has been the seemingly inexorable rise of the mid-market via big-ticket mergers to achieve scale. It does seem that scale is becoming a relevant issue in terms of the ability of law firms not only to spread commercial risk across jurisdictions but also to attract young lawyers. I can see a time when we will have mega firms, large firms and boutiques and the middle will have been squeezed out of existence. That will affect SME [small and medium-sized enterprise] clients more than large multinationals.’
Yet while plenty of change is foreseen, the fundamental requirements of what a company expects from its external advisers remains the same. Value, for most, is still top of the agenda.
‘Magic Circle firms are getting better at delivering value,’ says Newby. ‘They have realised it is a competitive marketplace. Across the market there is an understanding of paying for value. I don’t mind paying partner rates for complex work but there needs to be a recognition in the pricing that if things are simple, I want value on that. I don’t want to overpay for simplicity.’
With this in mind, news earlier this year that Deutsche Bank had notified pitching firms of its unwillingness to pay for trainees and newly-qualified lawyers during its last adviser review – a practice commonplace in the US for years – sent a jolt through the UK legal market. The episode reflects the drive to retain matters in-house and only use Global 100 law firms when they can really bring a new dimension to a matter.
‘For us going outside is about quality, quality, quality,’ concludes Ehrat. ‘Size per se is not something we are looking for. We are looking for quality in the broadest sense.’
kathryn.mccann@legalease.co.uk
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