‘In the course of the last 30 years, a lot has changed in the legal world but a lot has stayed the same,’ observes Chris Saul, the former senior partner of Slaughter and May. Four months before the first-ever issue of Legal Business hit desks in January 1990, Billy Joel released the song We Didn’t Start The Fire – essentially a list of major world events chronologically since his birth in 1949. This review of 300 issues is more than just a simple list of the main protagonists of global legal practice over the last 30 or so years. But a long list of names have certainly come and gone: Frere Cholmeley Bischoff; Turner Kenneth Brown; DJ Freeman; Wilde Sapte; Landwell; Garretts; Halliwell Landau; Cobbetts; Dewey & LeBoeuf; Dundas & Wilson; Tods Murray; SJ Berwin… We certainly didn’t start the fire, although we lit a few metaphorical ones over the years.
Legal Business arrived after the Big Bang – the 1986 de-regulation of London’s financial services market and subsequent boom, which was followed swiftly by City law’s own big bang – the 1987 merger of Coward Chance and Clifford Turner – a key landmark for law firm globalisation that set the tone for much of our coverage over the past 300 issues.
Before the launch of LB’s parent directory The Legal 500 a few years before, independent information about London’s law firms was rarer than hen’s teeth. Recalls David Patient, managing partner of Travers Smith since 2015: ‘My 30-year anniversary at the firm was last September. When I was deciding which law firm to join, there was next to no information about law firms. There was a tiny entry in The Legal 500, which had been launched in 1988, saying that CC, which had just merged, and Travers Smith Braithwaite were the firms that were going places, and that’s why I went to Travers.’
In 1990, we stood on the precipice of technological advances that resulted in a bona fide revolution. While we still mutter about the promise of AI and machine learning changing the game, the arrival of the GSM digital mobile phone, the internet and email at the start of the nineties changed our lives forever. And that is the most-cited development for many veterans we spoke to for this piece.
Says Louis Flannery QC, who was admitted the year LB was born, now a partner at Mishcon de Reya: ‘The biggest thing to hit the profession in that time is the advent in 1993 (but widely used in 1994) of the medium of communication by which this is written [email]. I remember seeing a French-Canadian physics professor in his lab in Montreal in June 1993, sending a message to a colleague in Paris and getting a reply within two minutes. It was astounding.’
Adds Saul: ‘In the early 90s we would be sending faxes, marking up “travelling drafts” by hand and spending our days in meetings with “the other side”. Transactions took a while to get done but there was craft and theatre in the process. Over the years email, sophisticated word processing tools and know-how systems, conference calls and now Teams/Zoom have massively speeded up the process of lawyering. While one may mourn the decline of the traditional face-to-face meeting, so helpful in relationship building and adding fun to the day, these changes have brought new efficiency and dynamism to the practice of law.’
But, as our look back on 300 issues shows, there was good and bad to come from this revolution.
The 1990s – Things can only get better
The first decade of LB began in an environment that became familiar ground – periodically – over the next 30 years – doom, recession, cash calls, lawyer culls and law firm collapses.
As David Pester, who was managing partner of TLT for almost 20 years and is now head of strategic growth, notes: ‘While there have been many legislative, technological and societal developments, it is the periods of economic disruption that have triggered the most significant change in the industry. Whether the dotcom bubble bursting, the banking crisis or the current Covid-19 pandemic; all have transformed what clients need and expect from their lawyers.’
Ed Braham, senior partner at Freshfields Bruckhaus Deringer between 2016 and 2020, says: ‘As ever, the economy has been the biggest driver of change over the past 30 years. The deep recession in the UK during the early ‘90s triggered the segmentation of the UK legal market. Globalisation and the growth of multinationals drove the internationalisation of the leading firms, as they expanded their global footprint to match their clients’ needs.’
Scott Simpson, the Skadden M&A veteran who moved to London from New York in 1990, paints the picture: ‘The legal industry in London and across Europe has been impacted by significant regulatory developments and reform in the US. For instance, as of the end of the 1980s and the beginning of the 1990s, the US SEC adopted Rule 144A and Regulation S. The combination of these US regulatory reforms recognised, accommodated and advanced the internationalisation of the securities markets – facilitating access to the US capital markets by non-US companies as well as the investment by US institutional investors in non-US companies.’
He notes that the legal profession in London responded to these developments initially by developing the skills and expertise necessary to handle cross-border capital markets transactions and then expanding that skillset to handle the securities law issues arising in the context of cross-border and transatlantic M&A. During the 1990s, significant momentum developed fuelling cross-border activity. In fact, the largest corporate transaction ever completed was and remains the $199bn Vodafone acquisition of Mannesmann announced in 1999.
On the back of this success came increasing rewards. In 1990, former Stevens & Bolton managing partner Ken Woffenden was a corporate partner at Simmons & Simmons. He recalls: ‘30 years ago, the financial performance of big UK law firms was a huge mystery. Concepts such as profitability, leverage, return on investment and lockup were at best murky and at worst – which was more often than not – non-existent. Even within large City law firms, meaningful financial information was confined to a few key people within those firms and very little was divulged even to partners, let alone other members of the firm. Comparisons with competitor firms were virtually unheard of.
‘The deep recession in the UK during the early ‘90s triggered the segmentation of the UK legal market.’
Ed Braham, Freshfields Bruckhaus Deringer
When Legal Business first came on the scene, there was a rapid transformation. For the first time, league tables started to be published showing the relative turnover and profitability of all the big firms. Many law firms reacted very negatively at first – but there was no going back.
In 1993 – the first year that a full Legal Business 100 was published (the first list in 1992 featured 35 firms) – more than 20,000 lawyers in the UK grossed £2.68bn. In 2020, just over 75,000 fee-earners at the top 100 firms amassed £27.82bn – more than a tenfold increase in revenues in less than 30 years (DLA Piper grosses £2.11bn on its own). The average firm in 1993 had 200 lawyers billing around £27m; last year that average was 750 lawyers and £278m. Average revenue per lawyer at an LB100 firm, nearly 30 years apart, is £370,000 now compared to £134,000 back in the day.
Adds Woffenden: ‘Ill-informed gossip and speculation were replaced by far more sophisticated reporting and analysis. Poor performing firms – more specifically their senior management – came under pressure either to turn things round or hand over to others better placed to do so.
‘For the first time, detailed financial analysis cascaded down to individual practice groups and offices, so relative performance in each group could be far better managed and necessary remedial action taken. Strongly performing partners and aspiring partners could take better informed decisions as to their future careers – should they stay where they were or seek to move to better-managed firms? And clients, who traditionally had no idea as to how their law firms were doing financially, soon grew to appreciate this additional background which helped them better evaluate their key relationships.’
The largest firm by revenue in 1993 was Clifford Chance (CC), with 1,200 lawyers collectively pulling in £210m. Such was its status, it was probably the single most significant legal merger of the post-War era in terms of global influence – CC from 1987 to 2000 was the definitive global law firm, re-writing the rules of the game. It was ambitious and widely copied in its drive to remake the law firm in a global context. But for a long time, there were questions being asked about whether CC would even be able to succeed in its ambition to build an international firm. When the firm’s partners were subject to a cash call after it moved into new premises in the Little Britain area of the City in 1992, during the depths of recession, market rumour was rife that it would fail.
Spreading wide
Although the 1990s started painfully, law firms were buoyed by the wealth they enjoyed in London after the Big Bang. The Magic Circle in particular, as the firms’ relationship with the all-conquering major investment banks deepened, were rampant in the latter half of the decade. In July 1990, the Pritchard column read: ‘The 1990s will be remembered as the time of international strategic alliances and groupings between firms.’ And so it proved.
‘In the early ‘90s firms started going global – either by having full-service offices in a range of jurisdictions or by working much more closely with firms in other jurisdictions (the approach at Slaughter and May). Cross-border working is now at the heart of commercial law,’ observes Saul.
Maurice Allen, who spent time at CC, Weil Gotshal & Manges, Freshfields Bruckhaus Deringer, White & Case and Ropes & Gray, says: ‘The creation of global law firms was one of the most important events in my legal world over the last 30 years. Clifford Chance and White & Case led the way. It was only in the early 1990s that any law firm felt the need to operate outside their home markets in any significant way. They were derided for doing so.’
In terms of comprehensive international spread, up until the 1990s only Baker & McKenzie and White & Case had really taken charge. In 1990, the majority of UK lawyers based overseas were in Hong Kong, Brussels and Paris. Then began the race to establish the first truly global firm; one that would have a leading presence in all of the world’s key financial centres, as well as a balanced division of labour across multiple continents. It is that race that defined the upper end of the legal market over 20 years and one that still hasn’t been won today. The global financial crisis of 2009 tempered the vaulting ambitions of many and no single firm has managed to achieve the arguably unobtainable – being the go-to firm in every continent.
Baker McKenzie partner Samantha Mobley, a member of the London office management committee, recalls: ‘In the early 1990s, most law firms were national and in fact quite derogatory about Baker McKenzie’s network of offices, dubbing the global model as a franchise bound to involve patchy quality around the world. The truth is that our firm has spent the last three decades honing the model and now operates a truly globally connected business. Laterals comment that homegrown partners like me don’t realise just how international their psyche is – it’s in our blood.’
National pride
During the 1990s, while the attention of many major London firms was drawn to foreign markets, there was major consolidation and ambition apparent among major regional players too. Firms based in Birmingham, Manchester and Leeds began to sow the seeds of what became national (and later international) giants – Addleshaw Goddard, DLA Piper, Eversheds Sutherland, Gowling WLG, Pinsent Masons, Osborne Clarke and Squire Patton Boggs. In September 1993, a Pritchard column talked about how a group of ‘brash Yorkshiremen’ at Dibb Lupton Broomhead, led by a certain Nigel Knowles, were shaking up the legal establishment by spending £1m on marketing. ‘Who will have the last laugh?’ We asked. The firm built up strength in London while retaining its dominance in Yorkshire. Then came global expansion and a tie-up in the US. By 2009, DLA Piper was the largest law firm by revenue in the world. Eversheds Sutherland is our current Law Firm of the Year, following Pinsent Masons in 2019.
Leslie Perrin, now chair of disputes funder Calunius Capital, was managing partner of Osborne Clarke throughout the ‘90s and recalls: ‘One of my big issues 30 years ago was to try to improve the image and standing of regional law firms, from which process the modern international image of Osborne Clarke was created and developed long after I had gone. As an active litigation funder these days, I am delighted to see regional firms continuing to express their competitive strengths.’
‘The creation of global law firms was one of the most important events in my legal world over the last 30 years. It was only in the early 1990s that any law firm felt the need to operate outside their home markets. They were derided for doing so.’ Maurice Allen, Lawyer Talent Network
American dawn
And, while the Magic Circle was rampaging across Europe, a trend began closer to home in the 1990s that had huge repercussions for City law today: the arrival of the Americans in London in earnest. As Simpson notes: ‘As the 1990s began, with some exceptions, the Magic Circle focused on English law and the Wall Street firms in London concentrated on US law. By the middle of the 1990s, however, Wall Street firms led by Skadden saw the opportunity to launch English law practices to offer clients a coordinated approach to governing law and corporate transactions.’
In 1994, Michael Hatchard quit Theodore Goddard for Skadden in one of the earlier and certainly most successful transfers from a City practice to a top US firm, and demonstrated what a talented professional at a US platform could do. It was the start of something big. In 1996 Maurice Allen left CC for Weil, Gotshal & Manges. Says Allen: ‘Weil became the first US firm in London to invest significantly in English law capability. I remember Bruce Buck at Skadden asking me why we were doing it.’
Allen was joined by former CC colleague Mike Francies, who now heads up Weil’s London branch, in 1998. Another CC alumnus, Andrew Wilkinson, quit for Cadwalader, Wickersham & Taft the same year. The floodgates were open.
The UK firms weren’t paying enough attention. It was the late ‘90s, the era of New Labour and Cool Britannia, and there was plenty of work to go round. They began a decade-long, heady run that saw them at the peak of their powers albeit with a blip in the middle caused by the bursting of the dotcom bubble. With £1 worth around $2 and AUS$3, the Magic Circle dominated the Global Elite. The warning signs were there, as London rainmakers continued to jump ship to US start-ups in the City while the Magic Circle seemed distinctly unconcerned by their largely failed attempts to do anything meaningful Stateside as they rampaged all over Europe. It was a decade dominated by hubris, both globally and within the legal profession, as over ambition and frothy markets caused a complacent march towards the Global Financial Crisis.
Y2K – Empire state of mind
2000 was a watershed year for law firm mergers, but the union of City blueblood Freshfields with German leaders Deringer Tessin Herrmann & Sedemund and Bruckhaus Westrick Heller Löber was truly a milestone for a globalising legal industry. While CC’s tripartite merger with Germany’s Pünder, Volhard, Weber & Axster and New York-based Rogers & Wells was more ambitious, Freshfields’ attempt ultimately proved to be more fruitful. It remains the most significant legal merger across borders in Europe and itself redefined the region’s legal industry.
CC’s US tie-up was undermined, partly because of a mismatch that saw Rogers & Wells lacking the credibility to offer a successful Manhattan transactional practice. The union leveraged CC’s antitrust and litigation capabilities but attempts to integrate Rogers & Wells’ eat-what-you-kill remuneration system into CC’s traditional lockstep ultimately proved disastrous.
Amid all that came a failed push by CC to expand on the West Coast of the US, taking a team from Brobeck, Phleger & Harrison, which contributed ultimately to the dissolution of the US firm and a rash of bloody lawsuits. CC wound its West Coast practice down two years later. The sustained problems in the US drained CC of much of its once-unstoppable momentum. The failure of any of the Magic Circle to achieve anything notable in New York has been a persistent storyline ever since. The real threat to the Manhattan elite came from California and Illinois – Kirkland & Ellis, Latham & Watkins, Sidley Austin, Gibson, Dunn & Crutcher, as well as a handful of others outside the City.
Rise of the accountants
The start of the 2000s brought to a head the first stage of a rumbling saga that has emerged with regularity since the mid-1990s – the ongoing turf war between lawyers and accountants. The accountants had built up their practices only for them to fall into obscurity, with Arthur Andersen forming Garrett & Co in 1993 – its first foray into the multidisciplinary partnership (MDP) world, followed by Coopers & Lybrand in 1997, with Tite & Lewis. But then came the ultimately failed takeover talks between Andersen and a drifting but respected finance shop Wilde Sapte in 1998 that could have created something memorable.
Andersen led the way for the accountants in pushing its legal services capabilities in the 1990s, but largely struggled to gain traction with Garretts. However, its tie-ups with Dundas & Wilson and Spanish giant Garrigues showed it had the wherewithal to attract quality outfits and it even flirted with Simmons & Simmons.
‘The advance and retreat of accounting firms from high end legal advice has been a real story. They were viewed as the main invaders when I made partner in 1998.’ Kevin Ingram, Clifford Chance
Two years later after the failed merger talks with Andersen, Wilde Sapte fell into the arms of Denton Hall. In retrospect, Andersen did those remaining Wilde Sapte partners a huge favour: the Enron collapse took out Andersen Legal and the US Sarbanes-Oxley Act accounted for the rest, giving rise to a memorable LB cover piece, ‘Just Williams’ in June 2002.
However, the true significance of the episode is that it was the first reverse in the seemingly unstoppable momentum of the accountants, which were in the mid-to-late 1990s looking a hugely potent threat. Instead, the moment passed as galvanised City law firms raised their game. CC finance partner Kevin Ingram says the impact of accountants has been a continual narrative throughout his career: ‘The advance and retreat of accounting firms from high end legal advice has been a real story. They were viewed as the main invaders when I made partner in 1998.’
Says Tamara Box, managing partner – Europe and Middle East at Reed Smith: ‘The early 2000s saw the chickens of the “Greed is Good” generation come home to roost. The fall of Enron revealed the depths of corruption that could be enabled by lax regulation and a willingness to be complicit in ignoring misdeeds so long as money is being made.
‘The Sarbanes-Oxley Act attempted to put safeguards in place to protect investors, opening up a whole raft of legal work in compliance and regulatory matters. However, it also put paid to the early attempts at multi-disciplinary legal businesses started by all of the Big Five (as it was back then) accounting firms; as I was in one of those at the time, it was a shame to see that grand experiment come to an end – at least for then.’
But the impact on law was much more pervasive than that. Sarbanes-Oxley made tapping the US capital markets more expensive and burdensome, underwriting a fresh boom in London as it cemented its position over New York as the world’s global finance centre.
The introduction of limited liability partnerships came at a time when global trust in professional advisers was at a low ebb. The new partnership model started to take hold for law firms in the UK in 2001, and coincided with the bankruptcy of Enron. The chief differentiation from the traditional unlimited partnership under the Partnership Act 1890, in which each partner had joint and several liability, is that one partner would not be liable for the misconduct or negligence of another.
A more ambiguous change for firms was that the LLP meant more financial transparency, and obligated firms to prepare and file accounts with Companies House, as well as have its accounts checked by registered auditors. Since then, the release of law firm LLPs is widely monitored and financial results are published by the legal press on an annual basis.
The Americans back again
The bursting of the dotcom bubble in 2001 led to a lean period for a few years and put some pacey City firms, who had over-extended themselves in the late ‘90s, at risk. Many firms that focused on transactional work in the digital business sector rode the late-1990s dotcom boom and became expansive, only for the early-2000s tech slump to ravage their practices. Magic Circle firms reached their profits nadir in 2003 and 2004. Freshfields’ PEP, for instance, hit a low of £675,000 in 2004, while CC dropped to £562,000 that year. Meanwhile, Linklaters was struggling to bed down a series of troubled European mergers spawned from its ambitious Linklaters & Alliance amid the dotcom bust.
‘The fall of Enron revealed the depths of corruption that could be enabled by lax regulation and a willingness to be complicit in ignoring misdeeds so long as money is being made.’ Tamara Box, Reed Smith
There were further moves from the US and notably not from the most expected protagonists. In a further sign of the clout of US firms globally, Jones, Day, Reavis & Pogue, Reed Smith and Mayer, Brown & Platt effectively took over Gouldens, Richards Butler and Rowe & Maw respectively, starting with the Mayer Brown/Rowe & Maw tie-up in 2002. Although these deals were all billed as mergers and face-saving firm names were agreed upon, all three combinations reverted to the US original more or less within a few years – a clear indication of where the power base lay. While the fate of the UK players involved in these transatlantic tie-ups had they not succumbed to US advances could be debated long and hard, what is true is that Jones Day and Mayer Brown are among the 25 largest firms in the world by revenue – something that it is hard to argue Gouldens and Rowe & Maw would have achieved without US assistance. In the transatlantic tussle, conceding that the US is the dominant market and swallowing pride is something the upper tiers of City law failed to do.
And pride comes before a fall, as the cliché goes. Top-tier US firms continued to take many of the rainmakers that caught their eye in London. Graham White and Raymond McKeeve quit Linklaters for Kirkland & Ellis in 2006. While Simpson Thacher & Bartlett’s move for CC private equity star Adam Signy three years later proved there were more successful transfers in the buyout market to come, this dual hire more than any other demonstrated the conviction with which US advisers would target private equity.
Crashing down
However, there is little debate over which single event had the most profound effect on global law in the last 30 years – intensely cited and vividly fresh in the mind is the largest bankruptcy filing in US history – the collapse of Lehman Brothers in September 2008 and the subsequent global financial crisis.
Box reflects: ‘While Sarbanes-Oxley improved transparency, certain financial transactions were still being driven by greed—to the point where, in some cases, prudence was thrown out the window and “buyer beware” became the excuse for blanketing the capital markets with rafts of subprime mortgage securitisations, many of which had, shall we say, “misleading” assessments of risk. By August 2007, the failure of two Bear Stearns hedge funds foreshadowed the full-blown credit crisis, taking the entire financial world into a spiral that generated mounds of legal work in some disciplines even while decimating others.’
For many firms, this redefined their businesses and for some practitioners working on the subsequent Lehman restructuring has been a career highlight.
The event simply divided the world into two clear distinct eras: before Lehman and after Lehman. The financial year 2008/09 was transformative for the global legal services market, which went from seeing double-digit revenue growth for five years running to flat revenues and plummeting profits.
The subsequent downturn changed how firms structured their practices and businesses forever and continues to redefine firms today. It set the tone for de-emphasising the dominance of transactional practices, a return in focus on disputes, and led to the ever-increasing demand on regulatory and compliance lawyers, on the back of rising pressures from European regulatory bodies.
2010s – Stronger (What Doesn’t Kill You)
The global financial crisis was always going to have its casualties and so it was that, nearly two years on from the initial shock, the UK saw its first major law firm collapse in the shape of thrusting Manchester outfit Halliwells. Despite being one of the most-upwardly mobile LB100 firms through the 2000s (with former managing partner Ian Austin even picking up an LB Award in 2006), a toxic mix of a £20m payout to equity partners linked to a property deal, coinciding with the global recession and a major increase in rental costs, saw the firm collapse amid repeated threats to sue its critics.
Similarly the May 2012 implosion of Dewey & LeBoeuf saw a firm that at its peak turned over $1bn brought to its knees by the disastrous merger of successful insurance and energy player LeBoeuf, Lamb, Greene & MacRae with the fading New York royalty of Dewey Ballantine, exemplifying a sad indictment of poor governance practices. By far the largest legal collapse in the world, Dewey shone a light on the extent to which some firms banked on hiring mobile stars, increasingly offering $5m-plus packages to secure the biggest names.
While Dewey was far more extreme than any peer in its excesses – it was a shocking indictment of the culture and governance standards that existed at some major firms. The 2014 winding up of Bingham McCutchen, as partners fled mainly to Morgan Lewis & Bockius but also to Akin Gump in London, was another notorious law firm failure of the 2010s.
There are clear parallels to be made with the ‘new normal’ of today’s coronavirus world and that which engulfed the legal market post-Lehman. Then as now, necessity was the mother of invention as Allen & Overy (A&O) and Herbert Smith Freehills responded to clients’ heightened demand for value and efficiency through launching offshoring ventures in Belfast in 2011. It is now a path well-trodden by many firms, with Freshfields opening a support services hub in Manchester in 2015 and then a legal tech space in Berlin in 2019 to service mainland Europe.
There are clear parallels to be made with the ‘new normal’ of today’s coronavirus world and that which engulfed the legal market post-Lehman. Then as now, necessity was the mother of invention.
This was also the decade that law firm leaders started to think beyond traditional partnership structures as a way to access capital, including through initial public offerings (IPOs). In Australia Slater and Gordon may have become the first law firm to list in the world in 2007 but Gateley paved the way in the UK in 2015 followed by Gordon Dadds and Keystone Law in 2017, Rosenblatt and Knights in 2018 and DWF’s landmark float in 2019 to become the UK’s largest listed law firm. IPO sceptics would come to say ‘I told you so’ as Slater and Gordon ran into trouble with the UK arm splitting from the Australian parent in 2017 and shares hitting rock bottom in early 2018, while DWF was plunged into difficulty on the back of a volatile stock market as coronavirus swept the world last year. Then there was new law pioneer Axiom abandoning its planned IPO in favour of a 2019 cash-injection by private equity house Permira. However, there are other ways to skin a cat. ‘Investment is key to support tech advancements and greater scale and reach. It doesn’t necessarily mean more private equity investment or IPOs; firms should retain part of their profits to build up investment,’ says Osborne Clarke’s former managing partner and outgoing chief executive, Simon Beswick.
There is no question that one of the most fundamental changes to the profession since Legal Business launched has been the dramatic expansion in size, sophistication and influence of in-house legal teams. Reflects Charles Martin, former senior partner of Macfarlanes: ‘When I became a partner in Macfarlanes in 1990, only the very largest companies had a general counsel (and only 3i amongst private equity houses). The effective client would be the managing director, the finance director, company secretary or non-legal deal-doer. Today’s client is a lawyer and very much more sophisticated. That is a big and positive change in the balance of power and you see the impact of that every day.’
More is better
The 2010s was also the decade more City firms sought serious scale in the ultra-competitive US market by way of merging – with mixed results.
As Box says: ‘The decade was one of redefinition; firms merged, acquired, and reorganised into megafirms that promised efficacy by virtue of scale and global reach. Just as “greed is good” underpinned the actions of financial markets in previous decades, “more is better” seemed to be the mantra for the legal industry in the 2010s – more people, more offices, more practice proliferation.’
A trailblazing deal between Lovells and Washington DC-bred Hogan & Hartson has been broadly successful, despite the trickiness of moving from Lovells’ modified lockstep to its partner contribution-based system, though critics claim the merged firm is capable of a lot more than the steady financial performance it is turning out. The 2017 union of Eversheds and Sutherland Asbill & Brennan; the 2018 merger of Bryan Cave and Berwin Leighton Paisner and the 2013 tie-up of Norton Rose with Texan law firm Fulbright & Jaworski all proved that teething problems could be overcome.
In contrast, the decade culminating in failed merger talks between A&O and O’Melveny & Myers in 2019 showed how difficult it can be to pull off an immediate and meaningful transatlantic merging of governance, leadership and remuneration in one fell swoop. As A&O former global managing partner Andrew Ballheimer later reflected in an interview with Legal Business: ‘It’s possible to pull off a merger on an integrated basis but it takes creativity and courage and time is against you. If it takes too long, it becomes a hurdle. I’m glad we tried. We got incredibly close. It would have given us the opportunity to accelerate away from our peer firms. It didn’t hurt our business. If we had our time again we’d do it again.’
Keen observers will still remember the improbable transition of Dentons from dismissed City law brand of the 2000s to the world’s most lawyered firm through a process of unstinting acquisitions. Now with more than 10,500 lawyers, the intense globalisation of the firm, backed by expansive chief executive Elliott Portnoy and chair Joe Andrew, was even more striking given the retrenchment of many peers in the 2000s amid a series of troubled mergers, inter-firm competition and the fallout from the banking crisis. Arguably, the globetrotting firm put its sprawling verein to greatest effect with the 2019 double merger with 175-lawyer Midwest firm Bingham Greenebaum and 140-strong Pennsylvania-bred Cohen & Grigsby in what was described as a plan to ‘create the first truly national US law firm’. However, in terms of scale and ambition, nothing has matched its 2015 tie-up with Chinese giant Dacheng, which made Dentons around 2,000 lawyers larger than Baker McKenzie overnight.
Another key trend of the last 300 issues is industry stalwarts repeatedly questioning the viability of making money in Asia where foreign advisers seem forever destined to look from the outside in. However it has not stopped City leaders taking a shot. Notes Paul Jenkins, Ashurst’s global managing partner: ‘The last 30 years saw significant growth and focus on Asia. Giving us scale and increased depth of resource in Asia was one of the initial drivers of our own merger – this was transformational for us and a game-changer in the market.’
Ashurst’s 2013 merger with Australia’s Blake Dawson was far from plain sailing and still draws criticism for leading it in the wrong direction – for this was a City institution that famously flirted with a Sidley Austin tie-up. As ever, leadership has been key and Jenkins’ single-minded vision to overhaul the firm’s equity ladder and focus on core practice areas has resulted in a reversal of fortune. The 2012 merger of Herbert Smith and Freehills was similarly rocky with the departure of senior figures in London and shaky financial performance, though these largely equated to growing pains for a firm now boosting revenue and profit in the Asia market.
Conversely, the ill-starred marriage of SJ Berwin and King & Wood Mallesons in 2013 stands as a cautionary tale of how wrong such deals can go if badly managed and founded on incompatible cultures, lack of governance and spiralling debt. The catastrophic collapse of KWM’s European arm (which was effectively SJ Berwin, one of the City’s success stories in the run up to the Millennium) became a tragedy of hubris as legacy SJ Berwin’s partnership of colourful and sometimes selfish and bullying characters never gripped the financial and operational challenges facing the firm. Anyone who saw 10 Queen Street Place in the aftermath could hardly forget the forlornness of those hastily-deserted KWM offices with more than a touch of the post-apocalyptic about them.
US firms move the dial in London
If the 1990s and the 2000s saw US firms in London build their presence in London, the 2010s saw them assert their dominance and force influence on City institutions, especially the Magic Circle, fuelled by the massive boom in the US wheelhouse of private equity.
As A&O former managing partner David Morley notes: ‘The growth of private equity has been a big driver behind the growth of the top law firms and the success of the US firms. Private equity has been a massive driver as the fees that are generated are so huge. Private equity is having a field day in this environment. There are massive amounts of dry powder.’
Much of the attraction of US firms, especially to a deal lawyer in their prime, is a meritocracy that allows entrepreneurial star performers to rise the ranks quickly instead of the ‘dead man’s shoes’ approach of traditional law firms which have been forced to adapt, at times painfully slowly.
The ill-starred marriage of SJ Berwin and King & Wood Mallesons stands as a cautionary tale of how deals can go if badly managed and founded on incompatible cultures, lack of governance and spiralling debt.
Neel Sachdev, Kirkland’s veteran London finance partner, explains: ‘The growth of US law firms in London has completely transformed the legal industry in Europe. One of the key drivers of our success in London has been our focus on promoting and supporting the development of the most talented lawyers in the market. The accelerated and transparent path to partnership at K&E has attracted young lawyers from many different other firms, who do not have the same partnership opportunities.’
The landmark $10m transfer in 2017 of David Higgins to Kirkland from Freshfields came to define an epoch where seemingly immovable Magic Circle lifers shifted allegiance to thrusting American firms in London. CC’s 2018 loss of prized M&A partner Amy Mahon to Simpson Thacher and Latham’s luring of one of Freshfields’ most influential partners, Sam Newhouse, further drove the point home that no-one is immune from unstoppable US forces. In fact, it seems that in each of the past three decades one Magic Circle firm has been a target of choice for US firms to build up their London offerings. In the 1990s, it was CC; in the 2000s, Linklaters; and the 2010s has seen Freshfields hit harder than most.
With market confidence that private equity is here to stay, it seems logical to suppose that Legal Business will soon be heralding the first $5bn law firm, probably next year. The only question will be whether such a staggering rate of growth must eventually slow.
Holding up the mirror
This was the decade that increased regulatory scrutiny forced City law into properly reporting gender pay gaps and, looking at the still-woeful results, it is not surprising firms kept these stats to themselves. Nevertheless, what started as a cause célèbre for fair pay for women rightly prompted questions around other under-represented groups, including ethnic minorities, LGBTQ+ and those identifying with a disability. The #MeToo movement that exploded in 2017 spurred unprecedented regulation from the Solicitors Regulation Authority (SRA) on the use of non-disclosure agreements to mask institutional sexual harassment claims. Legal Business in 2019 described this crackdown on how lawyers advise clients and treat women in the workplace as ‘law’s Libor-rigging moment’ and that was no exaggeration. In the wake of embarrassing disclosures around the Weinstein NDA, inappropriate behaviour by former Baker McKenzie senior partner Gary Senior and Freshfields’ ex-restructuring partner Ryan Beckwith to name a few, it is clear that the profession will be held to account for decades to come as values have a long overdue update.
Reflecting on the key advances of the last 30 years, Patient deploys visual aids on a Teams video chat. ‘Most obviously, we have stopped using this [holds up pen] and started using this [holds up mobile phone].’ The dawn of the BlackBerry and consequently 24/7 advice to clients has not been without its hazards, most importantly the threat of burnout in the age of incessant availability. Even ten years ago, talking about mental health would at best raise a few eyebrows and at worst, jeopardise career advancement for the sufferer.
‘When I first started, I could count on one hand the number of women who had made partner. Women now starting out in law will hopefully have role models in the senior echelons of their firms.’
Tracey Dovaston, Boies Schiller Flexner
The 2018 advent of the Mindful Business Charter, established by Barclays, Pinsent Masons and Addleshaw Goddard and since signed by a host of other law firms, has gone some way to destigmatise issues around wellbeing. Work stresses added to the pressures of living in a pandemic, caring for dependants and home-schooling, have caused untold anxiety and it will be down to law firm leaders to ensure their people are supported during the inevitable fallout in the years to come.
The next 100 issues: governance reimagined
Much of the next decade and 100 issues of Legal Business will be shaped by how law firm leaders meet the need for better, responsible governance in the post-pandemic world – whether the profession will capitalise on lessons learned in lockdown. A lot of this will be around galvanising institutional changes away from archaic working practices.
Already there are signs of a greater humanity and of embracing positive change. ‘Sometimes a major global event – like a pandemic – can be the spark for a revolution,’ observes Box. ‘Already on track to reimagine office space and methods of working, the legal industry rapidly accelerated those efforts when we all started to work from home. I never thought I would wear yoga pants to work, but here I am—still looking professional in my video meetings, where I am visible only from the waist up, but definitely feeling comfy, even down to my fuzzy slippers.’
Most agree that striking the right balance between home and office working, rather than returning to a toxic culture of presenteeism, will be key. Notes Mahon: ‘While most of us are keen to return to the office, working from home may become a more frequent practice than prior to the pandemic. In a career where work inevitably bleeds into one’s personal life and time, working from home facilitates some positive blending of the personal life into the usual work day: eating dinner with family rather than at a desk in the office, taking exercise rather spending that time commuting, running a personal errand midweek rather than piling all personal administration into the weekend.’
The next ten years will require leaders to approach diversity and inclusion, not as a box-ticking exercise, but as an imperative to running a profitable business. ‘There is a greater need for people other than lawyers – project managers, data scientists and analysts – to be used on big transactions. If teams are made up of a group including people other than lawyers that will naturally be good for diversity,’ says Beswick.
Observes Box: ‘It appears that the pandemic has changed what people want from their leadership. Recent polling among lawyers indicates that a large percentage now think compassion, empathy, and understanding are the key traits of a leader—a far cry from the qualities that made previous leaders semi-autocratic, unemotional, and singularly focused on revenue. Interestingly, the traits that people say they want in their leaders today are exactly the ones they identify more readily in women than men. Maybe tomorrow’s law firm leaders will be female! Happily we have seen some nice movements in balancing leadership.’
Tracey Dovaston, a partner in the London office of Boies Schiller Flexner and former head of litigation investigations and enforcement for Barclays in the UK and EME, agrees: ‘There is a more diverse workforce. When I first started, I could count on one hand the number of women who had made partner. Women now starting out in law will hopefully have role models in the senior echelons of their firms.’
Indeed, while City law has seen senior female leaders before in Penelope Warne at CMS, Sonya Leydecker at Herbert Smith and Lovells’ Lesley McDonagh before them, Freshfields recently beat A&O, CC and Linklaters to the punch by electing the Magic Circle’s first female senior partner – Asia disputes head Georgia Dawson.
‘Understanding and acting on key responsible business issues is no longer seen as a nice to have but a must have for all businesses.’ Gareth Price, Allen & Overy
The key focus now, in terms of dispensing corporate advice and running a law firm, are environmental, social, and governance (ESG) concerns.
Says A&O’s Gareth Price: ‘Understanding and acting on key responsible business issues is no longer seen as a nice to have but a must have for all businesses. There is strong evidence that businesses that put sustainability at the core of their strategies perform better and this is now one of the fastest-growing investment segments. Sustainability is high on our clients’ agendas and these ambitions are matched by our own at A&O, in terms of our work in the ESG space and how we approach our own operations, for the coming years.’
Omar Al-Nuaimi, Osborne Clarke’s incoming chief executive and successor to Simon Beswick, says this is intrinsically linked to talent retention. ‘People coming into the law are not viewing it as a job for life any more. People need to be feeling they’re working for the common good and that they are rewarded and valued to want to stay. It’s not all about money.’
Technology will continue to play a critical part in how law firms optimise their businesses. Now we have all got to grips with Zoom and Teams, there should be less fear of embracing new technologies and a renewed desire to try what’s next. All eyes will be on how law firms use their office spaces to balance the need for much-missed human interaction, rationalising costs and the uptick in working from home. Either way, law firm leaders have got their work cut out over the next 100 issues of Legal Business. LB