In response to a struggling domestic market, Portugal’s leading law firms are increasingly seeking opportunities in former Portuguese colonies. LB assesses the different international strategies being employed by the country’s top legal practices
Aside from a spate of short-term privatisation work (see ‘Going private’), Portugal’s transactional lawyers continue to bemoan the demise of their national M&A pipelines. In order to bolster growth, the country’s major law firms are venturing to Portuguese-speaking jurisdictions where the legal systems are similar and investment is flowing.
Certain countries of Lusophone Africa, such as Angola, have been an obvious investment draw for Portugal’s major corporations and their legal advisers for some years. But with an economy forecast to grow by 7.5% this year, Mozambique is sparking great interest, primarily because of its recent natural gas discovery. In the medium term, the country is expected to become a serious player in this sector. It is also on the brink of a coal boom.
Meanwhile, Macau is proving to be an increasingly important link for Chinese investors into Portugal and Portuguese-speaking countries. This former Portuguese colony is also becoming a hub for companies from Portuguese-speaking countries that are interested in mainland China’s domestic market.
‘With Portugal’s law firms looking to grow overseas practices, it is crucial that their strategies are executed with care’
For example, around 60% of Abreu Advogados’ turnover derives from international clients. Since 2005, about 40% of Raposo Bernardo’s turnover has been generated outside Portugal. Caiado Guerreiro’s international practice also represents a significant portion of the firm’s revenue. It boasts a large project management practice that advises clients on significant projects in Africa. ‘Year on year, our international practice is becoming even more important for the firm,’ says partner João Caiado Guerreiro.
With more and more of Portugal’s law firms looking to grow overseas practices, it is crucial that their strategies are executed with care. Such expansion may also trigger financial investments and expenses that some law firms are currently unable or unwilling to withstand. Furthermore, with increased competition and routine fee undercutting, both the established players and new contenders need to ensure that they maintain the same service levels that clients would expect from the Lisbon headquarters.
Client leads
Unsurprisingly, the law firms go where clients first fear to tread. Portuguese companies were once happy just exporting overseas, believes Domingos Cruz, a partner at CCA Advogados, but those same companies are now planning to be more present in foreign markets, and to canvas new clients abroad more actively. ‘There has been a significant move on the part of Portuguese companies to expand internationally over the last two years,’ says Miranda Correia Amendoeira & Associados’ (Miranda) managing partner Rui Amendoeira. ‘Every large Portuguese company has an international plan!’
According to partner Pedro Pais de Almeida, Abreu identified a triangle of economic interests connecting Portugal, Brazil and Angola some years ago. Consequently, it launched its international expansion plan for Portuguese-speaking countries in 2000. Duarte Garin, a partner at Iberian firm Uría Menéndez – Proença de Carvalho (Uría Menéndez), says that Uría Menéndez’s international strategy was also designed and set up several years ago. ‘We realised how important it was to have either a direct presence or very close ties with leading firms in other countries.’
PLMJ is also an established international player. The firm has built up a solid network of partnerships in Portuguese-speaking countries through the PLMJ International Legal Network (ILN), and in the main Portuguese investment target markets.
‘This network provides cross-border legal services with cost-effectiveness, knowledge of local markets, know-how, and a high level of specialisation,’ says partner Jorge de Brito Pereira.
Others have tested foreign waters in response to the crisis. Lino Torgal, an executive partner at Sérvulo & Associados, says that his firm implemented a strategy that aimed not only to diversify its lines of service, but also to establish an international practice, mainly in Brazil, Angola and China, which it considers to be the three most promising markets in terms of Portuguese investment.
Into Africa
Africa – especially Angola and Mozambique – remains the most profitable market according to Nelson Raposo Bernardo, managing partner at Raposo Bernardo, as it is where Portuguese law firms can undertake activity of a certain size. ‘The African market is where the involvement of Portuguese law firms is more significant and where the fees can ultimately reflect their leading positions in these markets,’ he says.
Mozambique, in particular, has Portuguese law firms flocking in. In 2011, PLMJ invited Maputo-based firm Gabinete Legal Moçambique (GLM) to join ILN, while Abreu Advogados established an exclusive association in Mozambique with Ferreira Rocha & Associados. As for Morais Leitão, Galvão Teles, Soares da Silva & Associados (MLGTS), it enjoys an association with Mozambique firm SCAN – Advogados e Consultores, which is part of the MLGTS Legal Circle of associated firms. According to CCA Advogados’ Cruz, his firm hopes to open an office in Mozambique in 2012, starting with an association and progressing to an office.
‘Mozambique is now a fashionable destination for foreign investment and Portuguese investors are ahead of the game,’ says Abreu’s de Almeida, who is one of the heads of the firm’s Mozambique desk.
Angola has offered terrific opportunities to Portuguese firms for some time.
Standout deals involving Portuguese law firms in Mozambique include the 2011 Banco Espírito Santo (BES) E7.1bn acquisition, through its subsidiary BES Africa, of 25.1% of Mozambique’s Moza Banco from transatlantic venture capital firm Geocapital. This was the first time that a Portuguese law firm led an M&A acquisition project for a Portuguese bank investing into a local Mozambique bank that also involved the acquisition of existing shares and share capital. Led by Pedro Cassiano Santos, BES Africa was advised by Vieira de Almeida & Associados (VdA), with the support of its then Maputo partner Furtado, Bhikha, Loforte, Popat & Associados. Linklaters’ Lisbon-based partner António Soares advised Geocapital.
Angola has offered terrific opportunities to Portuguese firms for some time, whether for banking work such as leasing; or roads, hospitals, housing programmes and general infrastructure. Major Portuguese investors include the Sonae Group, a leading distribution group in Portugal, which recently announced it would be opening in Angola. MLGTS acts for Banco Comercial Português (BCP), Banco Português de Investimento (BPI) and Energias de Portugal (EDP), as well as international players like Vale and Rio Grande, on Angola matters.
Examples of law firm tie-ups in Angola include Gabinete Legal Angola’s membership of PLMJ’s ILN; Sérvulo’s 2012 partnership with general practice law firm António Penelas & Associados, a firm that advises on transportation, real estate and IT matters; and Abreu Advogados’ exclusive association in Angola with FBL Advogados. MLGTS has a strategic alliance with Angolan law office ALC – Angola Legal Circle Advogados (ALC Advogados).
Going east
As an investment gateway for Portuguese-speaking businesses into China, and a bridge for Chinese investments into Portuguese-speaking countries, Macau has prompted Portuguese law firms to establish their own links to China. Macau practice DSL Lawyers joined PLMJ’s ILN in 2009, MLGTS has a formal alliance with Macau-based MdME, and in 2012 Abreu Advogados agreed an exclusive association with Macau-based C&C Macau Lawyers.
In addition, PLMJ has headed straight for mainland China. It formed a partnership with Dacheng Law Offices, China’s biggest law firm. Likewise, in response to the growth seen in this part of the world, Sérvulo established an agreement in April 2012 with Shanghai-based firm Cenlaw & Partners. Cenlaw’s focus includes managing international investments into the construction and real estate sectors, as well as complementary areas of law such as finance, capital markets, corporate, employment, IP, litigation and arbitration. China is also proving lucrative for CCA Advogados, which has had a presence in Shanghai since 2010, and the country has played an important role in Uría Menéndez’s international strategy. It set up an office in Beijing at the beginning of 2010, which often acts as a bridge between Asia, Iberia and Latin America.
But not all lawyers are getting overexcited about China. Nelson Raposo Bernardo believes that apart from the recent large-scale Energias de Portugal (EDP) and Redes Energéticas Nacionais (REN) privatisations in Portugal that involve Chinese players, the Chinese market for Portuguese law firms is still virtually non-existent.
Latin links
Like Angola, Latin America has been a favourite destination for Portuguese law firms for some time, particularly Brazil. In 2004, PLMJ entered into partnership with Brazil’s TozziniFreire Advogados, which continues today, and Iberian firm Cuatrecasas, Gonçalves Pereira opened its São Paulo office in 2001. ‘It acts not only as an entrance door for clients willing to start operating in Brazil,’ says Lisbon co-managing partner Diogo Perestrelo, ‘but also as a bridge for Brazilian companies willing to invest in Portugal and in other Portuguese-speaking countries.’
CCA Advogados has also invested a great deal of effort in Brazil, opening a new office in São Paulo in 2011. And late last year, Sérvulo consolidated its existing relationship with Brazilian law firm Manesco, Ramires, Perez, Azevedo Marques. Sérvulo’s Torgal regards the partnership as a great opportunity for both firms to develop their practices within the two jurisdictions.
But for the moment, the traffic is unlikely to be exactly two-way. Diogo Leónidas Rocha, a partner at Iberian firm Garrigues, says that from a Portuguese perspective, Garrigues’ representative office in São Paulo helps the firm serve its Brazilian clients doing business in Portugal, rather than Portuguese clients investing into Brazil.
Brazil can also be a tough market. ‘Portuguese law firms do not have access either to large-scale operations or to premium customers,’ says Nelson Raposo Bernardo. ‘Brazilian law firms are highly developed, and Portuguese legal practices face a highly competitive and large market in which they can play minor roles, but no more than that.’
Also there are important restrictions on the amount of work that foreign firms can do in Brazil, thanks to onerous Bar rules (see Latin America – Latin Moves – May 2012).
Different strokes
Staking so much on their international practices, it is only natural that each law firm prepared to tackle the foreign markets will vary in its approach.
Different markets require different solutions, believes MLGTS partner, Rui de Oliveira Neves. ‘In some jurisdictions, we are more closely integrated than others,’ he says. For example, in Brazil, the firm enjoys a partnership relationship with Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados, but there is no level of integration.
Miranda also employs different models for each overseas office. Some are more fully integrated than others, such as Houston, Cape Verde, São Tomé and Príncipe and
Timor-Leste. In some cases the firm’s local partners are also partners of the Lisbon
office – Mozambique for example – while other offices are run more along the lines of an association. This is the case with Angola, as well as with Gabon and the Republic of Congo, where the firm opened in 2010 and 2011 respectively.
It is not always necessary for the internationalised law firm to open new offices or establish itself directly in other countries, according to Martim Morgado, a partner at Campos Ferreira, Sá Carneiro & Associados (CS Associados). Part of CS Associados’ overseas strategy is to remain independent in Portugal, and develop best friends relationships – both with international firms and practices in other jurisdictions – so that it may either cross-refer clients or work together with other firms on multijurisdictional projects.
Garrigues does not see the need to open offices in every single jurisdiction that forms part of its international practice. ‘We don’t have offices in Angola or Mozambique but the laws there are easy for us because of the historical ties,’ says Rocha. Garrigues brings in local counsel when it needs to, and when the firm does decide to open offices, such as in Brazil and China, it is because clients have driven the openings.
Winning strategy
Venturing into emerging markets does not always run smoothly. ‘Internationalisation, particularly in Africa and Latin America, is a big challenge,’ says Caiado Guerreiro’s João Caiado Guerreiro. ‘Many things that you take for granted in Europe, such as electricity and tap water are not always there. Knowing the law is not sufficient.’
According to Guerreiro, lawyers have to understand the people and culture: ‘Africa’s large energy projects are very interesting, and clients will accept high fee levels, but only if they feel secure, and we keep them out of trouble – which of course we do!’
Explaining the success of Miranda’s strategy, Amendoeira says: ‘We’ve been overseas for a long time. We know the law, the institutions, the people, and how to do business in these jurisdictions. Plus we can communicate in English, French, Spanish and Portuguese. That’s why our clients keep coming back to us.’
Working with the people in those jurisdictions, rather than exporting the work back to Portugal is paramount to MLGTS’ strategy. ‘We develop top local lawyers, training them up to European standards and ensuring that they best suit the type of work generated,’ says de Oliveira Neves.
Time will tell if expansion into other countries, either through a direct presence or through alliances and networks of a different nature, will be the panacea needed to cure Portuguese law firms’ domestic difficulties long term. João Vieira de Almeida, managing partner at Vieira de Almeida & Associados says: ‘Foreign jurisdictions are the big hope and this is true for all industries, not just the legal market.’ LB
julian.matteucci@legalease.co.uk