‘There isn’t much to differentiate between law firms. It is predominantly relationship-based, not on massive differentials in service.’
Chris Newby, AIG
Global law firm leaders look back over a turbulent 12 months to cite the big trends shaping the legal industry
SOFT TARGETS
‘The impact of changes in sterling FX rates has made a number of UK targets more attractive to overseas buyers. It’s no coincidence there has been an increase in M&A with UK targets. Interestingly, UK outbound investment has also been strong in recent months and M&A activity in Western Europe is set to continue at a high level for the second half of this year.’
Andrew Ballheimer, global managing partner, Allen & Overy
MANAGING EXPECTATIONS
‘The number of deals we executed actually increased as the calendar year drew to a close, so we were countercyclical in that regard. We then also had a strong run from late January until the UK General Election was called. But we are not immune from macro-political factors and our deal numbers would no doubt have been significantly higher had the general upward trajectory not been interrupted by Brexit. We’re pretty sanguine about the peaks and troughs caused by wider market environments and, when it comes to M&A; we just look at whether we are getting the deals we expect.’
Andy Ryde, head of corporate, Slaughter and May
QUALITY WINS OUT
‘Successful globalisation is increasingly difficult to pull off. My view is that it is our obligation to ensure that our clients are represented by the best possible lawyer in every jurisdiction in which they face a complex problem. And I am unaware of any global law firm, with offices in dozens of jurisdictions around the globe, that can credibly claim to have the best talent in every jurisdiction in which it has an office.’
Brad Karp, chair, Paul, Weiss, Rifkind, Wharton & Garrison
FALSE DAWN
‘It will be interesting to see if technology plays more of a part in how you source your legal advice. This will determine whether panels continue to shrink. Models will be under pressure and consolidation in the legal market is continuing, so the global reach of law firms is increasing. But I am not willing for the cost of that to be passed onto me. They have to deliver a cost-effective service and if some firms make leaps and bounds in how they connect with their clients through technology, then you will see people consolidate further. For now, there isn’t that much to differentiate between law firms. It is predominantly relationship-based, not on massive differentials in service.’
Chris Newby, general counsel EMEA, AIG
PACE-SETTERS
‘There’s absolutely no doubt in my mind that the top firms are pulling away. It used to be that there was a real continuum of firms doing different sorts of things in varying positions of strength in the market. This bifurcation was a post-recession phenomenon, but it’s picked up over the last couple of years where the strong are getting stronger and some are getting less strong. The firms that are doing well are using their market strength, that prestige, that money to attract practices from firms that are not doing quite as well.’
David Koschik, executive partner, White & Case
NEW COMPETITORS COMING
‘Traditional law firm models where people work for years to become partners will see significant modification – if they haven’t already. The younger generation is not willing to do that. It has become significantly harder to make partner in global firms, so an interesting development for us is seeing top-notch people leaving and setting up their own shops. Obviously we will always need the large, well-resourced law firm, whether it is on a large transaction or a large investigation. But the large law firms will see competition from much smaller outfits that are more flexible and are cheaper because they don’t have significant overheads but are also competitive in terms of knowhow and skillset.’
Felix Ehrat, group general counsel, Novartis
ADAPT OR DIE
‘The area that all firms are struggling with is how to deal with foreign currency and the external changes we’ve seen, like the collapse of the pound, an issue that nobody could foresee with any certainty, followed by the oil price drop and difficulties in the Middle East – all up not a great environment for law firms. US firms are also adapting in these shifting circumstances – sitting here in London we see a lot of changes. On the other side of the pond – US firms, in terms of their management and how they do things, are also experiencing changes, albeit less in compensation. UK law firms are doing a lot focused on compensation, but I don’t think if you’re a US or Chinese firm you are immune from all that.’
Mark Rigotti, chief executive, Herbert Smith Freehills
‘The great unknown is whether there will be as much US activity in London over the next few years.’
Simon Levine, DLA Piper
WORLD IN MOTION
‘The globalisation of law is absolutely sustainable. There’s no doubt in my mind that Big Law business is strong and demand will continue to grow. We are seeing more and more cross-border mandates as clients increasingly look for integrated advice for their multijurisdictional business and legal challenges. Firms that elected not to pursue a global footprint, but instead have focused on the top end of their home market, will face increasing pressure.’
Bill Voge, global chair and managing partner, Latham & Watkins
BREXIT BLUES
‘Brexit definitely has an effect on our considerations of investment. We’ve always been looking at opportunities in continental Europe and we want to continue to strengthen the platform there. There is a particular focus on our Paris and German offices in particular. There’s likely to be further consolidation over the next financial year: the Swiss Verein model is in some ways an easier model to implement, but whether you get the long-term results from it is more questionable.’
Paul Jenkins, global managing partner, Ashurst
BUYERS’ MARKET
‘Well-informed clients are driving right across the piece in terms of access to law firms’ knowledge management systems and access to an abundant supply of secondees where you have an uptick in demand for a major project and you can’t staff it internally. We expect very high standards of service and responsiveness in terms of timing and quality of lawyers working on matters now, and almost invariably we get it. We would move if we ceased to get that.’
Philip Bramwell, group general counsel, BAE Systems
UNDER PRESSURE
‘The great unknown is whether there will be quite as much US activity in London over the next few years as there has been, because clearly they are more nervous about Brexit and the world generally. If they get a little less active then the Magic Circle are under a little bit less pressure. I don’t see their lockstep change as their biggest issue. The issue is whether in a new world there is scope for a large number of corporate finance specialist firms on a global basis, bearing in mind we have some US firms with bigger balance sheets getting into that market too.’
Simon Levine, global co-chief executive, DLA Piper
CHINA CRISIS
‘It’s a generalisation, but the British firms enjoyed a very strong run for 20-30 years when they first entered the Hong Kong market. However, what they failed to see is the rise of China after the handover and the impact on the long-term business environment. Hong Kong has become much more mainland-facing – in order to do business with China you need genuine local Chinese capability. They got caught out by focusing on western models with western lawyers and that has reshaped not only the British firms but some of the US firms too. Hong Kong really is another financial centre of China.’
Sue Kench, global managing partner, King & Wood Mallesons
TOUGH MARKET
‘You’re seeing the US firms retract from Asia: we will not do that. Asia is a successful traditional offering. We’re strengthening our arbitration and dispute resolution teams; we have a new regional managing partner. The traditional capital markets work in mainland China and Hong Kong is under pressure from the Chinese local firms who go into the Hong Kong market with lower rates.’
Stephan Eilers, co-managing partner, Freshfields Bruckhaus Deringer
BEDDING IN
‘The client reaction to our tripartite merger has been brilliant. They get it. Going forward, the prospect of a US merger is the most immediate priority for the firm but for now it is a period of consolidation. We have to make sure the UK merger delivers.’
Stephen Millar, managing partner, CMS UK
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