Independent Law Firms In Europe 2007With so many firms looking to recruit new lawyers, the Europe-wide war for talent shows little sign of abating, despite recent turmoil in global finance markets. This in turn will put the pressure on independent firms to market themselves as an attractive employer in terms of both quality of work and pay. Legal Week’s survey of 83 independent firms in 25 countries goes some way in benchmarking the ambitions and strategies this growing band of law firms have up their sleeves.
Surprisingly, eight in every 10 firms (86%) described themselves as ‘full service’, with only 14% saying they have a focused legal offering. This result may go against the common perception that independent firms tend to offer niche services and suggests a trend of independent firms broadening their offerings to include all the commercial legal advice a client would typically need.
However, there is no universal definition of full service. Some firms dispute whether a law firm with no tax practice qualifies for the ‘full service’ label, while others will define full service within the commercial context: a firm that can offer corporate, finance and related litigation advice may be considered as ‘full service’ in this case.
Of those firms that said they did not offer a full-service practice, there was a clear focus on corporate, M&A and private equity when they were asked to list their main practice areas. Real estate was also a popular practice area to list as a ‘main practice’, a reflection of the current importance of real estate practices’ contribution to law firms’ bottom lines.
Plans for expansion
A significant minority (38%) of the law firms that responded to the survey plan to launch a new practice area in the next 12 months (see New business boxes). This figure is slightly up on previous years’ surveys: last year 28% of respondents said a new practice area was part of the firm’s strategy, while in 2004 32% of firms said they had plans to launch new practices the following year.
While a tiny proportion are keeping their exact plans under wraps, only conceding that they are planning a new launch (Luther in Germany, Juridia in Finland and Morais Leitao Galvao Teles Soares da Silva in Portugal), the remainder were willing to talk about their blueprints. Administrative law was the most popular area for a new launch in, with energy law also proving popular.
Independent firms revealed their guarded optimism for 2008’s business prospects, setting out their plans for growth in the coming months. A resounding 98% said ‘yes’ to the question: ‘Are you planning to increase the number of lawyers at the firm in the next 12 months?’ It will be interesting to see whether in 12 months’ time, all of the firms who said they planned to recruit more lawyers have actually managed to do so.
The results of the survey showed law firms were most likely to be planning a 5%-10% increase in headcount; forty-one percent of respondents identified this category as the one into which their growth plans fall. Thirty-six percent of law firms said they are planning on increasing headcount by 11%-25%, while 16% of respondents cited a modest 5% or less as the proportion by which they want to grow their business.
Few firms have major plans to expand in the coming year, with only 7% revealing plans to take on 26%-50% more lawyers (although this does not necessarily rule out expansion through a merger).
These results contrast with Legal Week’s annual US Law Firms in
This disparity could be for several reasons. Firstly, the market in
The more obvious reason is that, despite a decade of heavy investment, the majority of
A country-by-country breakdown of law firms’ growth ambitions shows the most optimistic markets are
Two to three years ago Romanian law firms went through the growth phase
Among the more mature Eastern European markets, law firms in the Czech Republic plan to take on around 5%-10% more lawyers in the coming year — perhaps a sign of the maturing of Prague’s legal market, or a slowing down of the initial rush to invest in the country. Leading independent Glatzova & Partners chose the 5%-10% category to describe its expansion plans for the coming year, while fellow
Market share
Independent firms in
These results jar with the individual firms’ responses to their own plans for growth (99% said they plan to increase the number of lawyers at the firm in the next year). If firms largely expect their market share to stay the same or grow slightly, not all the individual firms’ growth ambitions will be realised — or worse still, they may have to lay off lawyers once they realise their own growth plans were not justified by market conditions.
In the Western European legal markets, respondents were most likely to predict a ‘no change’ situation for the independent firms’ market share. Portugal’s Morais Leitao Galvao Teles Soares da Silva and Vieira de Almeida & Associados both expect the market to stay the same, while six-partner firm Neville de Rougemont is slightly more optimistic, opting for the ‘grow slightly’ category. Austrian, Danish, Norwegian and Swedish firms were unanimous in their views of the independent firms’ prospects for 2008-09: ‘no change’ is the story from these markets, where independent firms have dominated for some years and where new entrants into the market — be they global players or independent firms — are rare.
Among Czech firms — despite their own conservative growth ambitions — there was a noticeable optimism about the strength of the independent firms’ positioning. All the respondents predicted growth, with Havel & Holasek and Vejmelka & Wuensch both saying indie firms’ share will ‘grow significantly’.
Once the focus of intense activity on the part of the global firms,
Among the firms that think the independent firms’ market share will decrease is
Just last month, London’s Field Fisher Waterhouse announced a Paris launch with seven partners from alliance partner Dubarry, leaving the local firm with just five partners (it is unclear as yet whether they will continue practising together). In September, US firm Proskauer Rose announced a takeover of private equity boutique Schmidt Gicqueau Dumas Mull-Jochen while magic circle firm Allen & Overy signed an exclusive referral agreement with boutique Santoni Paccioni & Associes in July this year, to boost its restructuring capabilities in the French capital.
With three independents effectively being taken out of the market in the past four months, Veil Jourde appears justified in its pessimism conservative although for the few remaining full-service independent firms in
Merger question
The question that most law firms will do their best to avoid, or evade, is the merger question. The law firms surveyed were asked two merger questions. Firstly, ‘Would you consider a merger with another independent firm in Europe (excluding
Respondents showed themselves to be slightly more open to the idea of merging with a fellow independent, with 18% of law firms polled saying ‘yes’ to the idea of a merger, in theory. The idea of merging with a
Firms that are open to merging with a fellow independent were from a spread of countries, from
While there were many firms that are open to a merger with either a fellow independent firm or a US/UK firm, there were some that made a distinction in the kind of merger they would consider.
In markets with a much weaker UK/US firm presence, firms were less likely to distinguish the kind of merger they would accept; for example, Luxembourg’s Chevalier & Sciales, Romania’s Voicu & Filipescu and Ukraine’s RULG. This could be because these firms feel less threatened by the presence of the Anglo-Saxon rivals in their market. For their part,
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