Global law firms are racing to find new ways to build revenue. This isn’t really surprising. They know times have changed. The hot deal market that drove last year’s record revenue and profits has cooled. Crippling inflation, Russia’s invasion of Ukraine, continued uncertainty about China and fears of a recession have all hampered global business.
This explains why law firms have been launching new offices all over: In the past week alone, U.K.-based Watson Farley & Williams opened in Seoul—its fifth office in Asia; Nagashima Ohno also established its fifth office in Asia, launching in Indonesia, where Japanese clients have pledged to invest billions over the next few years; DAC Beachcroft opened offices in Milan and Rome, hoping to expand its insurance offering and provide regulatory advice to clients in Europe; and Clyde & Co merged with a U.S. boutique, gaining a stronghold in Boston.
We don’t know if all these offices will gain traction in the pursuit of profit. But we do know that the Clyde & Co merger was one of several that took place last week in the U.S. And it was especially important to the U.K.-based firm, which believes the merger will enable it to expand its offering across the Northeastern United States—a region that is home to insurance, biotech, healthcare and professional services companies.
Clyde & Co may be taking a page from Freshfields Bruckhaus Deringer’s playbook. In its last financial year, Freshfields’ U.S. revenue grew 29%—outstripping its growth in all of the other regions in which it operates around the world. Freshfields has made a substantial investment in the U.S. over the past few years, launching an office in Silicon Valley, poaching top talent from elite law firms, and paying competitive associate salaries. But those moves demonstrate the importance of the U.S. market to the firm’s growth strategy.
The other potential merger that’s on everyone’s mind is Shearman and Hogan Lovells. Once again, the merger dance rests on a determination of whether the combination would maximize opportunity for growth for both firms. Shearman’s global offices need to leverage off each other if it wants to grow its international network and increase business. Hogan Lovells already has such a network, but it wants to grow in the U.S.
Is that enough to make the merger happen?
On the other side of the globe, KPMG in December acquired the Southeast Asia network firm ZICO Law. Jessica Seah talked with KPMG’s global head of legal services, Stuart Fuller, about the Big Four firm’s move, which in one fell swoop gave it almost 280 additional lawyers across the Asia Pacific and a large number of new clients. In case traditional firms still aren’t paying attention to the Big Four, this means KPMG is now operating in 12 jurisdictions across Asia, including in some of the world’s fastest-growing emerging markets—countries that have become more attractive to foreign investors.
U.K. firms may also want to take heed. Evidently, they’ve been losing market share in Asia—mostly to U.S. firms. U.K.-headquartered such as Freshfields, Allen & Overy and now Clyde and Co haven’t abandoned Asia, where they all have offices. But they seem to be betting on the U.S. for growth.
While mergers are the fastest way to grow and gain market share, profitable law firms also have been rapidly adding and relocating partners in specific practices, all in the name of growth. Last week, for example, DLA Piper hit the ground running with a trifecta—in Asia, Latin America and Europe. In Asia, it added a tax partner in Singapore and a cross-border M&A partner in Tokyo. For Latin America, It hired two New York-based corporate partners known for guiding large, cross-border M&A deals involving the region. And in Europe, the global co-chair of its life sciences practice will now split his time between the firm’s office in Rome, where he has been based, and Brussels, considered the capital of the European Union, with the intent of ramping up its capabilities in the city that hosts one of the world’s most powerful regulatory bodies.
Speaking of the EU, the “Brussels Effect” appears to still be alive and well. The term, coined in 2012 by a Columbia University law professor, describes the European Commission as the de facto “global regulatory superpower” whose rules and directives ripple out far beyond the EU’s geographic borders. But Linda Thompson writes that now, lawyers say the EU seems to be on a deliberate mission to export its rules worldwide.
Deliberate or not, law firms and their clients are scrambling like never before to comply with regulations—not just those set by the EU but also by governments around the world. Stay tuned for more on this: Law.com International will be hosting a webinar on March 9 focused on how global regulatory issues are taking center stage for law firms and their clients. We’ll bring you more details soon.
Meanwhile, other firms have continued to make bold moves in new markets. U.S.-based Cozen O’Connor, for example, which has made a huge push in Canada—a country where most law firms south of the Canadian border have dared not tread—hired a four-lawyer team from a midsize Toronto firm, affirming its stated intent to become a full-service firm in Canada.
Many of the recent lateral hires demonstrate that firms are looking to strengthen practices that played second fiddle to M&A while that practice was going gangbusters. Ashurst, for example, hired a partner in Munich who specializes in tech, data, blockchain, cybersecurity and AI. And Spain’s ECIJA hired a partner in Mexico who focuses on sustainability and environmental issues. Some lawyers still think such practice areas are niche and don’t offer much opportunity for growth. But that’s not the case in Australia, where Chris Niesche writes that law firms are seeing strong demand for lawyers with experience in decarbonization efforts and expect the practice to provide opportunities for large numbers of lawyers for years to come.
Of course, a law firm’s success is not just dependent on growing in the right places. Firms also have to be managed well. The inner workings of large organizations with many employees can be messy, and once in a while, that messiness becomes public. That’s what happened to Baker McKenzie last week when a Belgium-based lawyer announced she was quitting the firm with an all-staff email detailing her experiences of inappropriate and racist behavior.
This wasn’t Baker McKenzie’s first scandal involving professional misconduct. And it’s unclear whether there is a systemic problem in how the large firm, structured as a Swiss Verein, trains management and staff. But as Rose Walker wrote last week in The London Lawyer, the firm, to its credit, responded pointedly and without hesitation. It swiftly issued a public apology to the lawyer and launched an investigation, and a few days later announced that its Belgium managing partner had stepped down.
But it’s hard to believe Baker McKenzie is the only firm where inappropriate and unacceptable behavior occurs. How many others are out there? I suspect quite a lot. Law firms can push into new countries and markets all they want. But eventually, workplace mismanagement and a toxic culture can get in the way of growth.
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