Law firms should get ready for globalisation proper
Sometimes you have to look very hard to spot trends affecting the legal services market. Sometimes, like this week, you don’t. Many of the stories in this week’s issue illustrate this ill-concealed trend: Lovells launches a nine-firm China alliance; Norton Rose secures one of its largest ever corporate mandates in Asia; pre-Dewey LeBoeuf launches in Hong Kong; and Ashurst recruits for its India practice. Clearly, emerging markets, in the broadest sense of the word, matter like never before for legal advisers, particularly China, India and the Middle East.
For those who remember as far back as Russian defaults, Asian currency crises and Long Term Capital Management collapses, the contrast with today could not be starker. Back then (1997-98), such economic shocks sent the key emerging markets into a tailspin, pretty much across the board. Fast-forward to 2007 and it is the established finance centres that are struggling to digest hard-to-swallow repackaged debt, hard-to-shift leveraged loans and hard-to-repay mortgages. Meanwhile, emerging economies in Asia, Russia and the Middle East, buoyed by surging commodity prices, have largely shrugged off the impact.
This strongly suggests that we are entering a phase when international expansion will again be key to success for international law firms. After all, over the past three years, it has been as much about managing the costs and logistics of foreign networks, which is not the same thing at all. Instead, one of the main drivers of growth has been the three-year rise of the City of London as a finance centre. While no-one is writing off London, which has done a good job of plugging itself into new markets, it is hard to imagine that the Square Mile will provide quite the same impetus over the next three years. It also seems symbolic that the rise of private equity looks to have peaked just at the point when its emerging markets counterpart — sovereign wealth funds and other state-backed investment funds — are set to prosper.
What does this mean for law firms? Well, poor old Herbert Smith, despite facing much criticism in recent months, looks to be very much on the right trail and Linklaters must also be feeling a little bit smugger than usual. Slaughters may even stop faffing about and launch that mainland China branch. On second thoughts, perhaps it’s not quite that seismic.
