By Ben Holmes, managing director of Invest In Law
It’s difficult to pin-point the exact moment when the world shrank. It started perhaps with the voyages of discovery, then with the circumnavigation of the world, proving once and for all that the earth was connected. Legal documents had a part to play with letters of credit and bills of lading facilitating international trade where traders could not deal face-to-face.
Advances in banking technology mean that funds can be beamed almost instantly to remote parts and, thanks to the internet, Invest in Law can contact you from the comfort of our offices on Chancery Lane.
They call it globalisation: an exchange of world-wide products, views, ideas, knowledge, people, language and culture and the development of the infrastructure, transport, technology and education to allow this interplay to happen. The further globalisation reaches, the smaller the world feels. ’Connections’, ‘networks’, ‘relationships’, ‘contacts’ and ‘links’ have become the buzz-words of our little planet and sizeable funds are made available to the pioneers of ‘business development’.
When did law firms go global?
In 2000 Clifford Chance merged with New York law firm Rogers & Wells and Germany’s Pünder Volhard Weber & Axster, forming the world’s largest and most international law firm. Clifford Chance’s then senior partner commented: “We’re leading the way. Others will have to follow.”
At the time, very few followed. For reasons of competition, diversification and meeting their client’s needs, Weil Gotshal & Manges and Baker & McKenzie decided to extend their overseas presence, but on nothing like the same scale as Clifford Chance. Some accountancy firms began to offer legal services overseas, but with limited success which was followed by a subsequent retrenchment. Other firms, like Slaughter & May, began to develop an informal network of referral and non-compete relationships.
International law firms began to grow slowly and organically, and usually in response to the needs of their clients, who were increasingly involved in cross-border transactions, particularly in Europe. It was vital for those clients to shore up their legal positions with the same certainty, clarity and transparency that they had come to expect from their usual retained lawyers.
Certain legal areas were particularly demanding of cross-border expertise, including environment, shipping, anti-trust, intellectual property, international arbitration and corporate governance.
Today we are faced with the emergence of an international legal marketplace. International presence, if not dominance, seems to be on every firm’s agenda. Even niche firms, who had hoped to rely on their pre-eminence in a specialist area, have begun to broaden their outlook.
Looking back, it was perhaps unrealistic for large and medium-sized law firms to intend to remain ‘local’ when their most lucrative clients were striving to become increasingly global in their reach. ‘Catch-up’ is now the name of the game.
Consolidation of the UK domestic legal market
In a legal market which is becoming stronger, more efficient and more competitive, globalisation and consolidation go hand in hand.
In the UK, the Legal Services Act 2007 has of course allowed UK law firms to seek outside investment. It is also possible for alternative business structures such as bank subsidiaries, insurers and foreign registered companies to be licensed by the Solicitors Regulatory Authority.
Since 2010 Invest in Law has been heavily involved in this area, overseeing a number of law firm mergers and acquisitions. Some of those consolidations were driven by investors and others by UK law firms looking to strengthen their practices through merger.
The Legal Services Act was dubbed ’Tesco law’ (suggesting that legal services could be added to your supermarket trolley) and whilst intended to be a slur, firms who intend to cater solely for the domestic market will have to adopt a model of scale and low cost, and to standardise their legal offering as if it were a commodity. In the future we expect to see many more consolidations in the UK and an increase in the use of lean consultants advising domestic firms on how they can become more streamlined.
Singapore, of all jurisdictions, is always looking for a competitive edge. It might be said that ‘kiasu’, a Hokkien word that means ‘fear of losing out’, is integral to Singaporean culture, with the success of the country being built on hard work, commerce and self-determinism. Following the current trend, it is perhaps of no surprise that we are currently witnessing a consolidation of Singapore’s legal market: mergers and alliances between local and international firms and the growth of larger local firms overseas.
One of Singapore’s ‘big four’ law firms, Rajah & Tann, has already expanded into new areas. With offices in Shanghai (China), Ho Chi Minh City (Vietnam), Bangkok (Thailand), Kuala Lumpur (Malayasia), Jakarta (Indonesia), Phnom Penh (Cambodia), Yangon (Myanmar) and Vientiane (Lao), it is probably the fastest growing firm in the region. The firm’s strategy is to build a pan-Asian law firm that can compete with the international contenders.
If the world has become a smaller place, then, at only 710 km², Singapore is comparatively tiny. However, the clout of the country should not be underestimated. The strategic, geographical, financial and linguistic positioning of Singapore means that it is a obvious gateway to Asia. Since 2010 a Trans-Pacific Partnership (TPP) has been under negotiation with Australia, Brunei, Chile, Canada, Malaysia, Mexico, New Zealand, Peru, Singapore and the United States.
The TPP is one of the most ambitious free trade agreements ever contemplated and, if signed, would make Singapore an even more attractive trading hub which would bring further revenue to the economy.
Where to go from here?
It seems clear that the globalisation and consolidation of law firms is set to continue. To discuss any of the issues raised in this article or for advice and assistance on how to explore opportunities for your own firm, please contact me.