Reed Smith’s managing partner for Europe, Middle East and Asia, Roger Parker, discusses international expansion, Chinese law firms and trying to get more corporate work.
Are law firms feeling more restraint when it comes to international expansion?
There is a more conservative approach from law firms partly reflecting a concern on dilution and partly more focused execution on strategy. Similarly, when assessing physical presence in markets. There are examples of firms pulling back from strategic markets, being more business like where there is a limited business rationale or justification to be in a certain location.
There is more definition and precise application of business principles and the international pullback is a sign that not all firms have the business and the history to operate in particular locations. There is more hesitancy about opening new offices in the industry – we have moved away from the mood of the 2000s and wide spanning networks across the board. For us for example in the Middle East, we remain in Abu Dhabi and Dubai but we haven’t gone into other Middle East jurisdictions at this stage.
One cannot make real progress strategically with partial or uncertain openings. You have to go in with some scale, if you’re one person and a secretary, you’re less likely to succeed than if you go in full blooded.
How worried should international law firms be by Chinese firms?
The Chinese law firms are underestimated but their ambition and scale should not be. They have the resources to grow outside of China and look at where they are already established or looking to be geographically, they will be a big challenge for the Western law firms. One reason, why some firms have begun to hesitate about investing further in China, is license restrictions and so international firms should have existing clients and business rationale behind them.
Are law firms business minded enough?
More so yes. With time and evolution the quality of management at law firms has grown and to some extent that is a consequence of size. The Magic Circle firms have for example had a strong position in the London market and maintained it. For our own part, we have a financial models that we apply to expansion. With our recent openings in Singapore and Houston for example, we take a three year view and more.
What has been your biggest achievement in the last three years?
We’re market leaders in commodities, shipping, media and energy. In the last few years we’ve turned that into a much broader business, focusing on renewable energy and transactional work. We are now strengthening those areas in Asia.
Post Reed Smith merger we’ve filled any gaps in our offering, we’ve grown and have developed our bench strength. We’ve invested in our financial services offering in complex finance and that’s spread to other related areas, such as real estate and leveraged finance. We’re noticing that our competitors and the nature of the firms we compete against are different in this market than they were five years ago.
Five years ago, if you look at transactional practices, we were very much competing in the mid-market space. We’re now competing more against the UK silver circle, with firms like Simmons and Simmons, BLP and KWM SJB.
We’ve done that because we’ve invested and developed our transactional practice and we have a strong international flow. Our global reach and one global partnership approach helps us more than some other firms. The quality of transactional deal is going up, but as soon as that is achieved there is a need for greater bench strength which requires more investment. It’s a circle.
What would you have liked to achieved, but haven’t?
We haven’t moved as fast as we would like in recruiting in the corporate space, bearing in mind our objective of achieving a sustainable position in the silver circle, which means we need to shift our positioning in relation to the corporate market generally to win more FTSE 100, FTSE 250 and FTSE 350 clients. That’s a very challenging thing to do. We have achieved this in financial services, although we’ve got further to go. In financial services we have more of a defined sectoral play and we’ve had success with people we’ve brought in.
We’ve built our reputation for doing transactions in certain sectors, such as the media industry and the energy sector, so we are more likely to be approached for transaction work. This applies also to our corporate practice, where we have strong sector strength and we’ve seen strong results. However, the corporate market doesn’t always work on a sectoral basis which sometimes means when there’s a big transaction GCs are looking for people with experience and not sectoral focus and that is something we need to consider.
How did the financial crisis affect your push in the financial services space?
When we talk about financial services we’re talking also about funds and financial sources that have grown up since 2008. One reason we’ve been able to make this progress is because we’ve been in that space, with the challenger forces, private equity and venture capital firms and funds.
These emerging financial services markets in the City are a big opportunity for London, which has created huge opportunities in the professional services space and we’re riding on that.
What is your biggest bugbear?
There is a lack of coordination between the City law firms to sell the financial and legal services sector internationally and to promote the talent and ease of doing transactions here. There could be more initiatives to tell international companies about this and the wider world about the amount of pro bono work done by the City’s law firms, for example.