Monday, 5 December 2011

International Law Firms - Asia and Australia


Australian Law Firms
Invitation to Internationalise

The authorDr Stephen Moss, Chairman of Eaton Square, is an international law firm advisor and strategic consultant. He has worked with a number of Australian, UK, US and Asian based law firms on their international strategy and introduced a number of mergers over his 25 year track record in the legal services sector.

One thing is for certain: the legal services sector is in the early stages of a seismic shift. Law firms that do nothing in the face of this changing landscape, do so at their peril.

Let me describe the context of the changing international face of this industry. First I will address the emerging segmentation of the top end of the law firm market, then I will talk about some of the other forces that are at play in this industry, forces that will change the sector forever.

There are two main segments emerging internationally, the Global Elite and the International Business Law Firms. The Global Elite are transaction focussed firms looking to the Fortune Global 250 and comparable companies as their core client group. Allen & Overy and Clifford Chance have entered the Australian market and Linklaters will likely enter the market within the next 12 to 24 months. The other segment is the International Business Law Firms who are focused on building a capability in locations where the Global 500 have their headquarters, hence their interest in all major and secondary jurisdictions globally. DLA Piper and Norton Rose are examples of these firms. There are several more US based international firms launching into this space, including Squire Sanders who merged recently with the Minter Ellison Perth practice. To give a feel for the market activity, there were 16 cross Atlantic mergers consummated in Q1 2011 alone with another 22 being openly discussed. These numbers do not account for the more confidential discussions that are taking place. It is common knowledge that each of the top 10 Australian firms have at least considered the international situation they are facing. A number of these firms are actively working on an international merger/combination strategy.

Other dynamics in the sector include:

  1. Larger Australian firms have “no-where to go”, they have too many partners and “full service” is no longer a valid strategy
  2. Australian firms choosing an Asia only strategy face the very real danger of becoming an undifferentiated generalist with attendant pressure on rates and margins
  3. New international entrants are taking niche positions in selected countries
  4. Mergers of mid-tier firms to target corporate base-load work are being considered
  5. New risk sharing pricing and delivery models – pushed by clients
  6. Pressure on rates and margins are growing from procurement processes – clients are less tolerant of open ended fee arrangements
  7. New models of service delivery are emerging, e.g. LPO and Advent Lawyers in Australian and Asia and Axiom Legal in the US
  8. More buying decisions are being made offshore
  9. There is an oversupply of commodity lawyers both locally and globally, and
  10. There is significant competition for top-end partners and talent.

I believe the “war for talent” in the industry is here to stay. Whilst at lateral levels candidates' decisions are largely based on reputation, work and clients of the partner and practice area, the brand also impacts on the quality of the lawyers who firms will be able to attract in the first instance. The impact of the brand is most significant at graduate level where candidates have yet to identify with individual partners or practice areas and therefore focus almost solely on the brand in determining where to apply and where to accept a job offer. Being within a large international brand will almost certainly help firms to continue to attract the best and brightest to their firm.

A major issue for Australian Managing Partners and their firms in the future is the percentage of market share their firm can retain in client spend and whether the overall growth in the market will compensate for their loss of share. Firms operating in Asia as a major focus will likely feel the pressure less, but they will also need to keep aware of the changing commercial and competitive landscape they now work in.  The commercial certainties to which law firms have been used have gone: the rules of engagement are being re-written by competition and a shifting international marketplace; clearly the relentless pursuit of chargeable time and profit per partner is at risk, especially for those firms unable to embrace change!

There is much to be won and lost in this new legal services landscape.  Firms that embrace change, become more corporate and strategically disciplined and remember that their clients are their reason for being, cross sell and remember their fellow/sororal partners and move with the inevitable globalization of their industry will likely be the winners.

I have heard a couple of firms describing the choice to go with an international strategy as a “leap of faith,” I rather tend to see it as the opportunity to take a “quantum leap”. The strategic drivers are aligned; business is becoming more aligned to Asia, a natural fit with international firms looking to Asia and a potential accelerator to strategic imperatives as a business. There are clearly risks but I believe that Australian law firms and groups of partners will continue to be of great interest to a number international firms considering their Asia strategies.

Singapore Legal Services

www.eatonsquare.com.au


Australian Law Firms
interest in Singapore

There is considerable interest from International law firms in growing their Singapore legal services presence. In this editorial I will look at the drivers behind this trend and suggest what some of the implications might be for Australian law firms in particular.

Until recently the Government has restricted entry of foreign law firms into Singapore. Many international firms have had a small presence in Singapore however the international drivers have not been as strong as we are beginning to see today. In response the Government have said they are relaxing their entry conditions and in fact will be encouraging foreign law firms to use Singapore as a base for their international work across Asia.

The growth in Singapore last year was 20% + and there are few if any signs of this growth slowing down. Singapore itself is a boom economy.  Added to this much of the growing corporate and commercial work from China and India is being done now in Hong Kong and Singapore. The number of IPO’s and other financial services work being done in China is rapidly increasing and Singapore is seen as a more stable political and financial environment to settle such work. The international market’s concern about China’s lack of traditional rule of law is driving this work to places like Hong Kong and Singapore. Also firms that have long practiced in India are tending to operate out of Singapore as well, and this trend is also growing with the growing demand for legal services across Asia. Singapore is politically stable, financially strong and for Australia, geographically close.

The other growing trend, and driver of growth for the Singapore legal services sector, is in Singapore becoming recognised as the Alternate Dispute Resolution (ADR) center for Asia. The Singapore Government is a strong proponent of ADR. In the early 90’s they established the Singapore International Arbitration Centre (SIAC) closely followed by the establishment of the Singapore Mediation Centre (SMC).

Although more than 150 law firms around the world have a presence in Asia with more than 350 office establishments there are currently only 3 large local firms in Singapore, but over 1,000 smaller law firms. An environment ripe for consolidation and restructure. With Allen & Overy’s recent announcement of “tie-up talks” with the largest of the 3 Singapore firms Allen & Gledhill, the other two firms will be natural targets to be acquired. There will also be ex-pat partners from the larger firms who are unsettled and open for approaches. Also there will be a consolidation of the smaller corporate specialist firms. All these changes represent opportunities for the Australian (and other international) law firms to get a stronger foothold in the region.

Major international business law firms are interested in Australian firms, but not for the Australian market in its own right, but rather for the Asian markets they service and our natural foothold in the Asian region. Singapore is a key and growing market in Asia, and the opportunity is at Australian firm’s doorstep to strengthen their Asian presence and attractiveness to the international market through Singapore. 
www.eatonsquare.com.au


Australian Law Firms
interest in Singapore

There is considerable interest from International law firms in growing their Singapore legal services presence. In this editorial I will look at the drivers behind this trend and suggest what some of the implications might be for Australian law firms in particular.

Until recently the Government has restricted entry of foreign law firms into Singapore. Many international firms have had a small presence in Singapore however the international drivers have not been as strong as we are beginning to see today. In response the Government have said they are relaxing their entry conditions and in fact will be encouraging foreign law firms to use Singapore as a base for their international work across Asia.

The growth in Singapore last year was 20% + and there are few if any signs of this growth slowing down. Singapore itself is a boom economy.  Added to this much of the growing corporate and commercial work from China and India is being done now in Hong Kong and Singapore. The number of IPO’s and other financial services work being done in China is rapidly increasing and Singapore is seen as a more stable political and financial environment to settle such work. The international market’s concern about China’s lack of traditional rule of law is driving this work to places like Hong Kong and Singapore. Also firms that have long practiced in India are tending to operate out of Singapore as well, and this trend is also growing with the growing demand for legal services across Asia. Singapore is politically stable, financially strong and for Australia, geographically close.

The other growing trend, and driver of growth for the Singapore legal services sector, is in Singapore becoming recognised as the Alternate Dispute Resolution (ADR) center for Asia. The Singapore Government is a strong proponent of ADR. In the early 90’s they established the Singapore International Arbitration Centre (SIAC) closely followed by the establishment of the Singapore Mediation Centre (SMC).

Although more than 150 law firms around the world have a presence in Asia with more than 350 office establishments there are currently only 3 large local firms in Singapore, but over 1,000 smaller law firms. An environment ripe for consolidation and restructure. With Allen & Overy’s recent announcement of “tie-up talks” with the largest of the 3 Singapore firms Allen & Gledhill, the other two firms will be natural targets to be acquired. There will also be ex-pat partners from the larger firms who are unsettled and open for approaches. Also there will be a consolidation of the smaller corporate specialist firms. All these changes represent opportunities for the Australian (and other international) law firms to get a stronger foothold in the region.

Major international business law firms are interested in Australian firms, but not for the Australian market in its own right, but rather for the Asian markets they service and our natural foothold in the Asian region. Singapore is a key and growing market in Asia, and the opportunity is at Australian firm’s doorstep to strengthen their Asian presence and attractiveness to the international market through Singapore. 

Legal Services - International, Australia and Asia

http://eatonsquare.com.au/wp-content/uploads/2011/11/Australian-Legal-Affairs-publication-11.11.11.pdf
www.eatonsquare.com.au