Camerons' eastern promise set to go West
22 March 1999
Cameron McKenna is set to follow the likes of Clifford Chance and Linklaters & Alliance into the risky game of global expansion (The Lawyer, 15 March).
This week, the firm will officially announce plans to expand its business into North America. In April it will make a second announcement which will reveal details of its planned hook-ups in Western Europe.
Senior partners, however, remain distinctly tight-lipped on the subject. Managing partner Robert Derry-Evans was heading for Hong Kong and was unable to speak to The Lawyer, and all senior partner Bill Shelford would confirm was that a deal was being done.
Shelford says: "This is premature as far as we are concerned. We are making no announcements until we have something to announce. It will be some time in April, but I can't say if it will be early or late. We just have to keep our powder dry."
Meanwhile, Dick Taylor, the partner who heads up Camerons' EC law team and is handling the European negotiations, will only say: "We are currently dotting the i's and crossing the t's."
Another member of the firm is a little more forthcoming. He says: "Next week we are making a major announcement about North America that will tie in with our strategic goals. It is our stated intention to be a leading international firm by 2002. These expansions are an essential part of the firm's strategic development."
The rumour mill has begun working overtime ahead of any formal statement, and the precise nature and form of Camerons' expansion are bound to come under close scrutiny. Indeed, in some quarters, warning bells are already ringing. One legal consultant advising several leading law firms says: "Just being a Mr Blobby international firm with offices everywhere doesn't actually give you a competitive edge."
He believes Camerons may overreach itself by attempting to take the Big Four - Linklaters, Freshfields, Clifford Chance and Allen & Overy - head on. He is sceptical that Camerons' expansion - mimicking, for example, Linklaters' pace-setting alliance in Europe - will succeed because he believes the firm may be unable to attract First Division law firms on the Continent.
Certainly, Camerons' traditional strengths in Europe have been in the East, where it got into markets such as Poland before other law firms woke up to the opportunities.
The firm has its own offices in Budapest, Prague, Warsaw, Moscow, Almaty in Kazakhstan and Tashkent in Uzbekistan, and is planning to open a branch in the Romanian capital of Bucharest. It has guaranteed work in investment projects in Eastern Europe as part of the European Bank for Reconstruction and Development, while its traditional strengths lie in energy, property and construction.
The firm also has offices in Brussels, Washington, San Francisco and Hong Kong, plus referral firms in Sweden, Germany, Denmark, Holland and Belgium.
However, a concerted push into Western Europe may not produce such rich pickings, say analysts. "I can see Camerons has a strength in Eastern Europe. But that does not mean it can move it into Western Europe," says one.
"In Eastern Europe, it got in before the market matured. In Western Europe the markets are already mature. Firms think all they need to do is hook up but making second-division hook-ups won't make first-division players.
"What Camerons is doing is reactive to Linklaters," he continues. "Firms like Camerons fear they are falling behind Clifford Chance, Linklaters and Freshfields."
A representative from Camerons refuses to be drawn into arguments over suggestions that an alliance on the cheap will produce an inferior service. "We are in negotiations with a number of people," he says. Camerons, he adds, will pick a "pragmatic path through the expansion minefield, opening offices where necessary or else choosing suitable partner firms".
But one legal insider believes that finding suitable partners could be a major problem for Camerons. He cites as an example the decision by Denton International to extend its alliance into Sweden. Dentons formed an alliance with Wistrand, a middle-ranking firm in Sweden with a presence in Stockholm but whose head office is in the smaller city of Gothenburg.
Meanwhile, Linklaters is expected to merge with Swedish big-hitters Lagerlof & Lehman in the next two years as its alliance becomes a full-blown merger.
John Griffith-Jones, head of international strategy at Denton Hall, says: "Wistrand is a top 10 firm by size and reputation in the Swedish market and that meets our criteria.
"Every firm has to work out its own requirements, its own immediate objectives and its own timetable. My personal view is that arrangements of this kind don't work without a significant degree of integration."
However, say insiders, even a looser alliance is no guarantee of quality in foreign markets, although it is not clear at this stage which model Camerons will adopt.
"Camerons could be making a big mistake if it doesn't pick its partners carefully," says one legal consultant. "There is no doubt, for example, that the first line of
German firms is being courted by Allen & Overy and Clifford Chance. So what does Camerons do? End up with a third-division player? Denton International has had problems with that.
"Camerons should be looking at the areas in which it is really strong," he continues. "I can understand why it opened in California, where it has a good energy practice, but having an office in Paris may not be right. If Camerons is going to try to take on the top four firms head-on, it will lose."
In the end, the success of Camerons' international ventures will depend on its rates of return in foreign fields. Derry-Evans said recently: "There is always a danger that merger and growth preoccupies management and partner time, with a corresponding impact upon fee income.
"At Cameron McKenna the partnership has been single-minded in its focus upon client retention and business development."
Profit and income targets, says Derry-Evans, were achieved in the first full year of operation since the present firm was formed by the merger of McKenna & Co and Cameron Markby Hewitt, and this year the signs are that "income is due to increase significantly", according to a company spokesman.
Stephen Mayson, a legal consultant and MBA course director at Nottingham Law School, says the top firms have adopted either a global strategy (Freshfields, Allen & Overy, Linklaters and Clifford Chance) or a policy of strengthening domestic practice (Slaughter and May).
Mayson says: "I have a very positive view of Camerons but if it is breaking into a more mature market it will be more difficult. The marketplace for global legal services is pretty well set and it is hard for firms not already there to break into it now.
"If being a leading international law firm means being at the top of that tree, firms will probably have to affiliate with one of the four global English firms or one of the major New York firms. It will be very difficult for another English firm without a merger to break into that group."
Successful ventures into Western Europe and North America will undoubtedly require a huge expenditure in time and money. One insider reckons that Clifford Chance partners have ploughed something like £100,000 of their individual annual profits into funding the firm's overseas expansion.
However, Clifford Chance spokesman Tom Rose scoffs at that figure. "It sounds as if it was made up in a pub one night," he says. Nevertheless, he admits the firm has made a "consistently large" investment in both time and cost. "It is all about having people and resources," says Rose. "Without that it is very, very difficult at this late stage of the game to be able to catch up with the leading group.
"We have now got one of the leading financial practices in Europe, and obviously the rapid development of the financial markets in Europe and the emergence of the Euro-based capital market is playing up to our strengths, as are the across-the-board mergers and consolidations in various industry centres."
Only time will tell whether Camerons can now catch up with its rivals. The industry is awaiting its announcement next month with keen interest - although whether the Big Four will be perturbed is another matter.