Eduardo Leite ()
A year after posting declines in both revenue and profits, Baker & McKenzie more than regained lost ground this past fiscal year, reporting an 8 percent increase in firm revenues and a 13 percent surge in profits per equity partner.
Its $2.62 billion in revenues and $904 million in profits both represent high-water marks for the 77-office firm, which is also larger than ever, with 6,045 lawyers.
Baker & McKenzie’s chair, Eduardo Leite, who is passing the reins to London managing partner Paul Rawlinson in October, tells The American Lawyer that demand grew by 5 percent over the past year. The increase was spread pretty much across the board, he said, including in some tricky markets, such as the U.K. and China.
In his six years at the helm, the Uruguayan-born, Brazil-raised Leite has presided over the firm’s fastest growth in its 67-year history, increasing head count by 31 percent and opening 10 offices and a second global services center in Belfast, which now employs nearly 200 people.
Below, Leite reflects on the headwinds facing the industry and the joys of his globetrotting tenure as chair. Among his proudest accomplishments: lifting gender diversity at the firm. Last year, 40 percent of newly promoted partners were women, among the highest proportion in the industry, and 24 percent of partners are female, up from 20 percent.
The American Lawyer: Unpack the firm’s financial results a little bit. Why are they up so much, given the distressed state of petroleum and commodities markets, flattening transactional work and currency volatility?
Eduardo Leite: Last year, we did more cross-border deals than any other firm in the world, according to the league tables. Some other areas that had significant growth were international trade and commerce, and antitrust/competition, which go hand-in-hand with M&A work. There’s been a big surge in transfer pricing and tax litigation and tax structuring matters, including some major, major ticket items.
We were more impacted by the currency fluctuations last year than this one. But for global firms like us, currency fluctuations are the norm. Thirty-seven percent of our lawyers are in Europe, the Middle East and Africa; 26 percent in Asia; and 37 percent in the Americas. So currency fluctuations will continue to impact us. But the majority of our collections are in dollars and the expenses are in local currencies, so hedging strategies really wouldn’t get us to a better place.
Where do you see the market going for global legal services?
The market will continue to consolidate. Because of our longevity, all our offices are very profitable. We don’t need to subsidize markets or offices as others do. But we can see the pain or the pressure among the national firms, which maybe aren’t shrinking but are feeling the pain of not being able to grow.
I think we’ll continue to see clients moving more work in-house or outsource more work to lower-cost providers. We will continue to face the disruption of technology, artificial intelligence, cognitive and predictive computing. We need to train our lawyers to code, to learn computer language, if they want to gain an advantage in the market.
Did you just say law firms have to teach their lawyers how to code?
I did. I think it’s a must. It doesn’t mean that we’re suddenly going to develop programs for IBM. It’s just understanding how computer intelligence works, that binary thinking, so that we are able to use the tools better. We are working with the Watson technology, and we’re encouraging our people to develop small apps for their day-to-day operations.
You say you’re focused now on growth in New York, London and China. I get that you’re undersized in New York, with just 100 lawyers. But with the U.K. vote to leave the E.U. and China’s economic contraction, isn’t a growth strategy counterintuitive?
China’s economic situation has changed dramatically. But we still need to grow and we are eager to grow there. Two years ago we were granted the first license to work in a joint venture with a Chinese firm, FenXun Partners, in the Shanghai Free Trade Zone. They have the license to practice Chinese law, we have the global operation, and we’re all in the same building. We like the fact that we are license number 001. That puts us in a very nice market position. The Chinese justice bureau is putting this forward as a model for the internationalization of Chinese law practice.
In London, our financial results were very good, better than the previous year in Pounds Sterling. The Brexit has an impact, but it most deeply affects firms concentrated on the U.K. market. Our London office does a lot of work with the Middle East, Europe, and Africa, as well as the Americas and China. Because of that, I think we’re better insulated.
What’s been most challenging about the job for you personally?
I didn’t expect to travel so much—two-thirds of my time! That’s a lot of time in the air.
But I like it, I must confess. I like to walk the aisles, to see what’s happening in a country, not to rely on reports only. It’s so powerful, say, to sit down with the governor of the central bank of South Africa or Azerbaijan and get the flavor of the economy, the position of the country in the region. Or with clients from Indonesia to Colombia, That’s very, very richly rewarding professionally, and it’s a rich experience personally too, because I’ve seen a world that in six years that has changed a lot.
What are your plans after October?
I don’t have clear plans yet. But generally, I’m not thinking about going back to Brazil to my old practice. Perhaps I’ll contribute on client relationship and growth initiatives. It’s a huge firm. There are too many panels—67 new big panel appointments this past year alone—and too many areas where we need senior people with gravitas and with knowledge of who’s who in the firm. But Paul and I haven’t had the time to sit down and talk about it yet!