Last month Lovells announced its third international merger in 18 months. John Pheasant, Lovells’ international partner, explains the rationale behind the global law firm
I am sometimes asked whether our international expansion is the result of a conscious choice (a strategic move) or whether we at Lovells have been mere followers of a general trend. It is very much the former.
The international business community continues to consolidate as corporates and financial institutions manoeuvre to defend, and increase, market share in an increasingly global economy.
The internationalisation of commerce and communications, together with the liberalisation of markets, gives rise to challenges and opportunities for law firms.
The law itself is gradually globalising, particularly on the regulatory front, and familiarity favours the use of English or New York law on international transactions.
Yet there is a lingering discontent among some in the profession. As the trend towards internationalisation gathers pace, many firms struggle over whether to be international or to remain independent.
In my view, this is largely because partnerships sometimes have difficulty in grappling with the business disciplines required to make strategic decisions at this ‘big picture’ level.
The legal marketplace is sufficiently large and sophisticated to accommodate a variety of firms, from the niche players focused on one or a limited range of practice areas to the full service firm, and from the domestic firm to those whose international network of offices runs well into double figures. And there will always be a demand from clients for services at various points on both spectrums.
As law firms we do not all have to become international, any more than we all have to be full service, to succeed in this environment. But the intensity of competition compels us to choose where we are heading, and to be clear about the firm’s objectives.
A firm must, without sentiment, identify its core strengths and be realistic about its opportunities, having regard to its existing and potential client base and the skills base it has and wishes to develop.
Having analysed its strategic options, a law firm must also take account of its partners’ appetite for change: there is no point agreeing a strategy if the partnership does not have the will to implement it. Law firms wishing to be international players need not only the ambition, but also the commitment, to make it a reality.
None of this is easy. It helps to recognise that a law firm, like any business, needs to be clear about its strategic objectives. At Lovells, we have no doubt that a full-service capability and an international practice are what our clients want, and what we can deliver. Our market positioning is clear and reflects the fact that our clients seek to achieve in an international context what they have accomplished in their domestic market.
We are also prepared to embrace change: our positive experience of a mixture of organic growth, growth by lateral hire and growth by merger, reinforces confidence in our strategy, which includes all three.
We have strong views about the most appropriate structure to offer a mix of local and international legal services. We do not believe that the model of the accountancy firms, with separate entities in each jurisdiction redistributing a percentage of their costs and revenues through an umbrella structure, is the best model for an international law firm.
We have reservations about the model adopted by some of our competitors, who favour referrals between ‘best friends’ or alliances. We believe clients will not receive the uniform quality of service they need unless we operate as a single firm, managed through international practice areas. The single-firm ethos gives partners an overriding economic incentive and a profound cultural predisposition to co-operate in serving their clients and to train their people. The benefits have a far-reaching impact on client relationships and standards of client care.
In the last two years, we have paid a great deal of attention to the establishment of a genuinely pan-European firm. Increasingly, clients require a seamless service from a single provider: in our experience they simply do not want to manage half-a-dozen separate firms on a single transaction; nor do they want their lead lawyers to contend with the same situation in managing local firms.
Looking forward, I expect attention to focus on the US. It is difficult to see how the international law firm of the future can succeed without a dual – European and US – legal capability in banking and finance, as well as M&A, which requires a commensurate capability in, for example, antitrust, tax, employment and IP.
It is hard to predict how the legal market will respond. Various models (organic growth, lateral hire and merger) may be tested. Five years from now, how many genuinely international business law firms do I expect to see offering clients a consistent quality of product evincing the firm’s brand values and equal to the best in its ‘home’ base or bases? No more than 10 to 15.
No-one has achieved this ambition yet, although there are some obvious contenders. At Lovells, we have the ambition, but also the strategy and the commitment to succeed.
