Do Global Law Firms do Better than National Law Firms?
Michael Goldhaber at the Amlaw Daily is unconvinced. Drawing from some of the data discussed at last week’s ASIL-Harvard Law School conference on Globalization of the Legal Profession, Golhaber summarizes the presentations at HLS, crunches the numbers, and looks at the dangers lurking (or already arrived) for firms staking their futures on emerging markets:
James Jones, who chairs the Hildebrandt Institute, cited Citi Private Bank data from earlier this year, drawn from about seventy law firms that do their banking with Citi. These data for the first time show that global law firms (which they define as firms with at least a quarter of their lawyers outside their home jurisdiction) were outperforming their rivals. However, as Jones admitted, as the meltdown goes global, it may only be a matter of time before the data shows every firm bottoming out.
We’re with Jones on his afterthought. If one thing has emerged in the past month, it is that emerging markets will not save the world economy. We don’t mean to be a rude guest, but two institutions that have learned that lesson hard are Harvard University (whose endowment has lost big emerging market bets) and Citigroup Inc.
Peter Kalis, the impresario of K&L Gates, tried to prove the triumph of global firms with good old-fashioned Am Law surveys. Over the decade ending in 2007, he noted, the Global 50 outperformed the Am Law 100, which in turn outperformed the Second Hundred, on both headcount growth (73 percent to 67 percent to 32 percent) and revenue growth (217 percent to 176 percent to 110 percent). We’ve made similar arguments–but we had the excuse of writing on deadline.
The first thing to realize is that this analysis compares the top x firms of 1998 with the top x firms of 2007; these are not the identical firms. So these numbers principally measure the rate of consolidation among large and midsize firms. To be sure, Second Hundred firms are lagging, most importantly in profits. But these include some regional sad-sacks (the group from which Kalis is to be congratulated for elevating K&L Gates). It doesn’t bear on the strategic contests between Linklaters and Slaughter and May, or between Sullivan & Cromwell and Cravath, Swaine & Moore, which are being waged entirely within the confines of the Global 50.
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Whether or not the global law firm has triumphed, the question remains: How far has it progressed? Jones again cited Incisive Media numbers on this score. Since we’ve been charged with writing up many a survey, we feel obliged to help with their interpretation.
This time Jones draws on the National Law Journal’s NLJ 250 surveys. In 1987, he notes, 57 U.S. law firms operated 148 overseas offices with 1,331 lawyers. In 1997, 101 U.S. law firms operated 368 overseas offices with 4,271 lawyers. And in 2007, 106 U.S. law firms operated 551 overseas offices with 15,231 lawyers. Now, 15,000 is an impressive raw number, and we were interested to see eight U.S. branches in London with a critical mass of 150 lawyers, a dramatic change from when we covered London in 2001–03.
But remember that the growth starts from a low base–and the pool is large. The NLJ 250 covered 128,213 lawyers in 2007. So the overseas corner represented only 12 percent. That’s still pretty provincial by the standards of U.K. law firms, or other U.S. industries. Compare, for example, Clifford Chance (59 percent of revenues overseas) or IBM (63 percent of revenues overseas). Even by Citi’s rather low benchmark for a “global” law firm (25 percent headcount outside home country), the NLJ 250 is less than halfway there.