Around the world in 365 days

The year has seen a flurry of activity across worldwide markets as law fims set up new alliances in the bid to go global. The Lawyer reviews the hits and misses of 1999

Australia

This year finally saw the end of talks that would have created the first UK-Australian law firm merger when, as revealed in The Lawyer, Clifford Chance pulled out of its on-off courtship of Mallesons Stephen Jaques in July.

Clifford Chance has now launched an aggressive recruitment campaign down under, perhaps hoping to lure some of the Mallesons banking lawyers that were its main target in the first place.

Over the last year, the Australian legal profession has generally been more concerned with putting its own house in order. Firms have switched from a loose state franchise structure to a partnership model. Deacons Graham & Jones is one of the last major firms to merge its affiliated offices and expects to be a fully integrated partnership early in the new year.

The profession also faced aggressive, disruptive expansion by the big accounting firms. In August, top 10 firm Middletons Moore & Bevins lost a quarter of its Sydney-based partners after it turned down a merger offer from a big accountant. And earlier this month PricewaterhouseCoopers acquired Dunhill Madden Butler.

But Minter Ellison struck a blow for local firms by poaching Andersen Legal managing partner Phil Kapp and two other partners. Mallesons' talks with Clifford Chance – though now dead – are a pointer of the future for Australian firms. Minter Ellison London partner Robert Henley told The Lawyer there are two reasons why firms are looking to expand internationally.

“One is positive – things are becoming more global. Our Australian clients are moving around the world, so it is no longer enough to have the ability to act for a client solely in its home jurisdiction. The negative reason is that the UK and US law firms are becoming more international and we want to make sure we defend our primary practice areas – Australia and the Asia-Pacific rim. We want to make sure they do not start taking our clients.”

North America

Clifford Chance's merger with Rogers & Wells is one of the big stories of the US legal profession this year, but the historic link-up did not get the same coverage in the US it received in the UK. Many US lawyers failed to get excited about the creation of the new global giant.

This summer, a London managing partner of a New York firm said that at a recent meeting with his US colleagues the merger had not been mentioned, even in idle conversation. And another recently complained he could not get his US colleagues to understand the significance of Clifford Chance's move.

Clifford Chance's elite US counterparts remain indifferent to a UK merger. But plenty of firms just outside the top 10 in New York now see a UK union as the way to compete in the global economy, and the new year is likely to bring more transatlantic marriages. Lisa Smith, consultant with Hildebrandt International, says: “There are other discussions going on and if they are successful that will make people pay more attention to it.”

One reason for the US' relative indifference to the merger is that there was plenty of other things going on to keep people occupied, with about 50 mergers taking place during the year.

The biggest was Baltimore's Piper Marbury union with Chicago's Rudnick & Wolfe, which with 750 lawyers makes the firm the 11th largest in the US and has significant expansion plans that include the UK (The Lawyer, 8 November).

But the merger of Toronto's Tory Tory DesLauriers & Binnington and New York's Haythe Curley did not go as smoothly as the marketing departments may have wished.

David Haythe, the new firm's proposed managing partner, quit just days after the merger celebrations, where his “inappropriate” behaviour offended a number of female lawyers. As well as forcing a name change, Haythe's resignation robs the new firm of one of its top billers.

The merger was just one of a rash of marriages in Canada, where firms are forming cross-province practices to meet demand from clients for one-stop service.

In November, Toronto's Fasken Campbell Godfrey and Montreal's Martineau Walker formed a 370-lawyer firm, and Ottawa's Gowling Strathy & Henderson joined with Calgary's Code Hunter to create a 450-strong practice.

Other significant US link-ups included Wahington DC's Covington & Burling and New York's Howard Smith & Levin, and Pittsburgh's Reed Smith Shaw & McClay and north Virginia-based Hazel & Thomas.

Outside the merger mania, firms continued to consolidate and move to take advantage of new and emerging markets. North Virginia continued its growth as a centre for telecoms and internet service providers, prompting top California firms Wilson Sonsini and Brobeck Phleger & Harrison to set up shop there.

California's own hi-tech hotspot, Silicon Valley, continued to boom, but the established technology firms are now facing stiff competition from New York's big hitters. Davis Polk & Wardwell and Skadden Arps Slate Meagher & Flom were among the firms to open this year, with Davis Polk luring the Wilson Sonsini partner who had been masterminding the firm's proposed London office.

At the same time, the Silicon Valley firms' brain drain continued, with talented lawyers going in-house, often to the new start-ups rushing towards their IPOs, lured by the promise of instant fortune through share options.

As in the UK, the question of multidisciplinary partnerships (MDPs) loomed large in the US during 1999. In June, an American Bar Association (ABA) committee recommended that law firms should be allowed to share their profits with other professions, causing debate to rage within the major state bar associations.

In August, the ABA indefinitely postponed a divisive vote on the issue, but by November it appeared that events were running ahead of the authorities. Big five accountants Ernst & Young raided two tax partners from Atlanta's King & Spalding to set up its own Washington DC firm, McKee Nelson Ernst & Young.

Ernst & Young is financing the new firm and it will be housed in the accountants' offices to offer legal advice to clients – an MDP in all but name. Hildebrandt's Smith says the other accountants will follow suit next year, with MDP status a formality to be dealt with later.

As in the UK, the US market is consolidating, with profitable work increasingly going to the top firms while others suffer. “We have seen more distressed or troubled firms this year than in any other,” says Smith. As the income gap between the top firms and the rest increases, talented people are moving to the elite firms, creating a vicious circle of decline for many practices.

For some US firms it may not be a happy new year, but 2000 looks like being an exciting one on the other side of the pond.

Europe

1999 was the year when having a European alliance was the law firm accessory de mode. After Linklaters & Paine set the mood at the back end of 1998 with the unveiling of Linklaters & Alliance, in 1999 law firms at every level followed.

Cameron McKenna formed its CMS alliance in April with members in Germany, Austria, The Netherlands, Belgium, Denmark and Sweden. Less than a year later, its Danish partner Schluter & Hald has merged twice and all but one of the lawyers at its Swedish member firm Tisell & Co have decided to join forces with Ernst & Young.

Dibb Lupton Alsop has been scouring Europe for like-minded law firms. In June, the firm found its first member, small Brussels practice Price & Partners, but waited until September to announce the alliance's title as D&P and its other two members in Barcelona and Paris.

On the other side of the divide Slaughter and May continued its “best friend” policy with Hengeler Mueller Weitzel Wirtz in Germany, a relationship that is increasingly looking like an alliance in all but name as the two firms share marketing, training and billing. In October, Slaughter and May signed up Uria Menendez as a new “best friend” in Madrid, while earlier in the year Travers Smith Braithwaite went on a European tour trying to convince firms to remain independent, in a bid to preserve its links with referral firms.

Paris continues to be a battleground between the Anglo-Saxons and the French. Gide Loyrette Nouel continued its stand-alone stance, bitterly complaining that the Anglo-Saxons were offering salaries that the French could not compete against. The firm continued to lose partners, with Linklaters, Freshfields, and Allen & Overy poaching from its ranks. To add insult to injury, former Gide partners threatened to sue the firm for the return of their share capital.

The French capital continues to be a sticking point for UK-based alliances, with Cameron McKenna's CMS alliance, SJ Berwin and Pinsent Curtis all searching for a Paris link-up without success. Anglo-Saxon firms now account for 15 per cent of legal fees earned in the country.

The fashion for alliances and mergers has still not caught on in Paris to the same extent as this side of the channel, although Moquet Borde formed pan-European alliance BBLP with members in Switzerland, Germany and Italy in May.

The German market has exploded this year, with traditionally reticent firms beginning to accept the idea of an alliance. For most of the year, various London firms held talks with the same small group of German firms. Boesebeck Droste was briefly courted by Clifford Chance before settling down with Lovell White Durrant. Bruckhaus Westrick Heller Lober also talked to CC in addition to Shearman & Sterling but are now believed to be considering Freshfields which in turn pondered Gleiss Lutz and agreed to merge with Deringer Tessin Herrman & Sedemund. CC finally settled down with Punder Volhard Weber Axster in a headline-grabbing tripartite merger with US firm Rogers & Wells. US firm Coudert Brothers snapped up Schurmann & Partners in September.

In Italy things have also been hotting up. Linklaters signed up Gianni Origoni to the alliance, Clifford Chance merged with Grimaldi, Brosio Casati e Associati linked up with Allen & Overy, and Grippo e Associati formed an alliance with Simmons & Simmons.

In The Netherlands Loeff Claeys split in three. The Rotterdam office of the tax expert opted to join Loyens & Volkmaars, the Belgian partners split off to form their own firm, while the remaining mostly Amsterdam partners joined Allen & Overy.

Freshfields became only the second UK firm to set up an office in Amsterdam by poaching partners from Stibbe Simont, while PricewaterhouseCoopers and Arthur Andersen joined forces to take the Dutch bar to the European Court of Justice over its ban on MDPs. PwC also became the first accountancy firm to set up a notary law firm. Eversheds has recently announced that it is to merge with Boekel de Neree based in Amsterdam.

Spain saw SJ Berwin, Dibbs, Jones Day and Linklaters enter the market. After scouting around without success for suitable merger partners, Linklaters finally bit the bullet and opened a one-partner office in Madrid that was originally designed to attract a Spanish mate but is now being built up with lateral hires.

Dibbs signed up Barcelona firm Brugeras Garcia-Bragado Molinero & Asociados to D&P in September and is now in talks with a Madrid firm.

SJ Berwin opened its own Madrid office in May with a partner from Cremades y Asociados while Jones Day chose to merge with small Madrid firm Tena Munoz. Allen & Overy also thought that good things came in small packages when it merged with Sastrustegui & Asociados. And Uria Menendez was signed up by Slaughter and May to become a best friend.

Cuatrecasas formed an Iberian merger with Portuguese firm Goncalves Pereira Castelo Branco & Associados, and looked to strengthen its links with South America, a ploy that was followed by Gomez Acebo Pombo which is looking to whittle down its south American alliances to one or two per country.

Eastern Europe

While the former CIS has provided hard times for lawyers this year, the rest of eastern Europe has tempted in many UK firms hoping to gain a strong foothold in the emerging markets.

The latest seal of approval for the area came from Linklaters, which is to open offices in Bratislava, Bucharest and Budapest at the beginning of next year.

Many international firms believe that eastern Europe can only grow as a market. With many countries in the area aiming for European Union membership in the near future, their economies should remain stable and attract foreign investment.

Cameron McKenna announced plans to open in Romania in February, with predictions that once the Kosovan crisis was over, Romania would benefit from the massive reconstruction work needed. The firm also strengthened its already strong eastern European coverage by buying French firm Jeantet & Associes' Polish practice, which included offices in Moscow, Budapest, Prague and Bucharest, in March, when it also introduced a property practice at its existing Budapest office to get work in a booming market that started at the beginning of the year. Also in March, Norton Rose opened a Prague office specialising in corporate and banking work, while two months later Allen & Overy opened in Slovakia while boosting its Hungarian practice.

In Moscow, the economic crisis continues to bite and most firms with a presence in the city scaled back their operations. Allen & Overy and Linklaters both made redundancies from their Moscow offices in October, while US firm Mayer Brown & Platt pulled out completely in September. Freshfields made cut-backs in April by axing 13 junior lawyers and support staff.

In addition many offices had to change tactics, pulling lawyers out of doing banking and finance work to move to the new boom areas of litigation, insolvency and debt recovery.

However, other firms decided to swim against the tide and invest in the country. Herbert Smith opened an office in Moscow in May while Eversheds poached virtually all of the McDermott Will & Emery office in the Russian capital at the beginning of the year.

Africa

The African legal market has had a flood of activity. Alliances have sprung up throughout the continent, with UK firms now maintaining a presence in the north, east and south of the region. In North Africa, Egypt now finds itself home to two City firms, with Trowers & Hamlins following Denton Hall to the Cairo office in May. The firm cited the continent's substantial market for independent power projects as the basis for its decision to set up its first African base.

In the east, Denton Hall is boosting its presence in the continent by setting up an association with a Tanzanian firm to dominate the emerging energy and finance markets. The firm refuses to name the partner firm until the deal is finalised.

Meanwhile South Africa remains the centre of the region's legal market, and was boosted by the decision of CMS Cameron McKenna to set up two alliances there. Following in the footsteps of Stephenson Harwood the firm unveiled partnerships with Canca Inc in Cape Town and Jowell Glyn & Marais in Johannesburg.

Last month saw top South African law firm Edward Nathan & Friedland abandon merger talks with Linklaters and Clifford Chance to break legal history and sell its commercial practice to investment bank Nedcor.

With the legal arm of PricewaterhouseCoopers also linking up with South African firm Bell Dewar & Hall, Africa is increasingly hailed as a booming marketplace.

Far East

Despite Clifford Chance's announcement last week that it was to pull out of Vietnam, this year saw a resurgence in confidence for the Far East operations of Western law firms.

November saw both Freshfields and Allen & Overy boost their Hong Kong offices to gain work on the insolvency boom. In October, Dibb Lupton Alsop merged with Hong Kong firm Lui & Carey as a springboard into China, and Rowe & Maw revealed that it intends to open in the island in the new year.

Freshfields completed the biggest corporate debt restructuring since the beginning of the crisis when it advised on the $1bn-plus restructuring of PT International in Indonesia. Japan has defied economic predictions and UK firms are cashing in on the securitisation boom.

Local bar rules have continued to thwart western firms. February saw White & Case close its consultancy arm in Jakarta to carry out Indonesian work from Singapore.

Singapore has relaxed its rules, allowing foreign firms to enter joint ventures with local lawyers. It is likely to be the first of many Asian countries to do so as they face the realities of a global economy.

And the year saw the Chinese government increasingly welcoming foreign firms, with licences being granted to western firms including Herbert Smith and Holman Fenwick & Willan which opened in Beijing and Shanghai respectively.