Amid intense scrutiny over Ireland’s position in the post-Brexit world, interest in the country’s legal market is on the rise.
Since the 2016 referendum, Dublin has already welcomed firms including Pinsent Masons, Covington & Burling and Simmons & Simmons, with Fieldfisher expected to follow suit, and this week DLA Piper announced the hire of four partners for its new base, which opened on Jan. 1.
And, while the recent newcomers have favored greenfield approaches, new research suggests the next phase of movement could be driven by mergers.
Smith & Williamson’s annual survey of Irish law firms found that almost half of the country’s top 20 had been approached by U.K. firms for a merger during the past 12 months, with a similar proportion of the total 100-plus survey respondents saying they had been sounded out about a tie-up in the last two years.
While a cross-border combination between an international firm and an indigenous Irish one is clearly of interest to many, the dominance of the current market leaders presents significant challenges for international firms looking to make their mark.
Andrew McGahey, a Dublin-based insurance partner at Kennedys, which merged with Irish ally O’Hare O’Connor Walsh in 2011, cited the challenges international firms face in securing a tie-up.
“It’s very difficult to convince the indigenous firms to agree to a merger; there will be concerns that their equity will be diluted and that they may lose control or sovereignty over how they are managed,” he said. ”A merger is a very good way of quickly building up your gravitational mass, but it needs to be the right fit in many respects for both firms to work.”
Eversheds Sutherland also has a long-standing presence in the market on the back of its 2006 association with local firm O’Donnell Sweeney, which rebranded as Eversheds in 2011. The firm’s Dublin and Belfast managing partner, Alan Murphy, also acknowledges the difficulties facing new entrants.
“There’s no quick fix for any law firm—it’s difficult for an international firm to make a presence in Ireland,” he said. “Apart from anything else, a firm needs to build a brand in the region. While we are a global law firm, our genesis wasn’t to set up fresh—it was to establish a relationship with a very strong local firm. You have to build the foundations before you can get the house.”
The ’Big Six’ players in Dublin—Arthur Cox, A&L Goodbody, McCann FitzGerald, Matheson, William Fry and Mason Hayes & Curran—have a strong grip on much of the country’s business, and many in the market argue that they will not be shaken by the arrival of international firms.
However, Mason Hayes managing partner Declan Black says “no firm has the right to perpetual dominance.”
“You need to earn your right through offering better legal services all the time,” he said. “Competition is good because it pushes firms to get their own game right. The question of ‘What is your Ireland strategy?’ is a fashionable one at the moment.”
The biggest recent international entrant, DLA Piper, is taking a hard and fast approach with its launch, aiming to get 70-100 fee-earners on the ground as soon as possible, including about 20 partners. Managing partner David Carthy is keen to push back against the perception that the Big Six are unshakable.
“We are not fazed by the notion of Ireland as a semi-closed market—DLA Piper has done things in the global market that haven’t been done before by any other firm, so our actions in the past prove that we are capable,” he said. “Domestic firms give a typical response to international firms moving in, saying Ireland is a tricky market and these new firms coming in won’t be able to cause much disruption in the region. But we’ve been listening to clients and to the market, and we don’t believe this is true.”
The firm’s newly launched St Stephen’s Green base will initially focus on financial services and life sciences, with the firm intending to build up to full-service capability. The quartet of partner hires announced this week—all of who come from top Irish law firms—cover a variety of practices, including corporate, banking, capital markets, technology and employment.
Carthy says the firm is looking to put together a blend of domestic talent with local knowledge alongside more internationally focused lawyers to ensure a diverse workforce.
In contrast to DLA, the approaches taken by other firms have been more tightly focused. Covington, which launched in Dublin in September 2017, has just two food and life sciences lawyers on the ground—one counsel and one senior associate—working in tandem with the firm’s Ireland-focused team in London.
Covington managing partner Tim Hester says a merger was not of interest to the U.S. firm.
“Our vision has never been to be one of the bigger firms in Ireland. Our aim is to represent our clients with a presence in Ireland and to build relationships with Irish companies which are looking to be more global.”
Simmons, meanwhile, which opened last March, is building a team of partners focused solely on financial services. The office currently has 11 fee-earners, including three partners, on the ground in Dublin, and is aiming to reach 40 fee-earners within three years.
“Ireland gives our firm a complementary service offering to the U.K.,” said Simmons Ireland head Fionán Breathnach. “But we don’t focus on what other law firms as doing—our move into Ireland is driven by our clients and their growing needs within the EU and for us to be able to offer them cross-border legal support.”
Pinsents, which launched in Ireland in October 2017, describes itself as a hybrid of the two strategies. Since its launch, the office has grown from 10 fee-earners to 27 and now has four partners, with a further three recently recruited.
The base began with a practice mix of technology, financial services, investment and asset management and corporate and has since grown to offer employment, IP litigation and commercial litigation services, with energy, property, banking and insurance earmarked as potential future additions.
However, Pinsents Dublin head Gayle Bowen said the firm is “not looking to be all things to all clients.”
“We have five core sectors which we focus on, on an international scale. We have consciously developed our expertise in specific market sectors, making us a hybrid between the more niche, almost boutique-style international firms, and the full-service Irish firms. Our aim is to service our clients across our sectors wherever they do business,” she said.
Launching in a new market is never a straightforward endeavor, and new firms will inevitably face challenges.
“The costs of establishing in Ireland to service international clients will need to be measured against the competition that is already in the market, the levels of services that are already being provided, the hourly rates (which continue to be significantly lower than in London), and the fact that domestic business is unlikely to provide a significant income stream for new arrivals,” said Matheson managing partner Michael Jackson.
“Previous entrants who attempted to buy market share through price competition found it difficult to move from those pricing arrangements to more profitable models over time. Others have focused on niche practice areas but have struggled to achieve the scale required to make it worthwhile,” he added.
However, there are opportunities for nimble new entrants.
“Domestic firms are experiencing significant cost pressures, said Kennedy’s McGahey. “Wage inflation in Ireland is well ahead of the general inflation, and clients are always looking to keep hourly rates down. Some lines of business are becoming less profitable for local firms, with the result that they may be willing to let that work go in order to focus on more profitable work. This can provide opportunities for other firms, which perhaps have a more flexible business model, to pick up this work.”