City firms cast a net in Spain
10 November 1999
31 October 2013
16 December 2013
28 January 2014
13 May 2014
26 March 2014
After several firms announced they are merging with Spanish firms at the International Bar Association conference, Elizabeth Davidson looks at the booming Spanish market and discovers which firms have their eye on it.
Last week Spain played host to thousands of the world's top lawyers. The International Bar Association conference, Business Law International, featured 600 speakers discussing the future of the legal business.
Dibb Lupton Alsop used the event to announce that it is forming an alliance with an unnamed Madrid firm and Barcelona-based Molinero y Asociados. Allen & Overy is also planning to merge with a Madrid firm, Satrustegui y Asociados.
However, the same week, Linklaters & Alliance announced that it has stopped its search for a Spanish alliance partner after months of hunting, although the firm will continue to develop its practice in Spain via its Madrid office.
Linklaters managing partner Terence Kyle says: "We have abandoned attempts to find an alliance partner for the time being but if a suitable candidate arose we would consider them.
"We have a lot of work we have been doing over the years which involves either lending or investing in Spain which we want to deal with within the firm and not put out to Spanish firms. We are mainly doing corporate, mergers and acquisitions, international securities and banking work in Spain."
The Spanish market is a difficult place in which to operate and firms are jockeying for a position amid reports that Madrid in particular is booming.
So why is there such sudden interest in Spain? According to SJ Berwin partner Carlos Pazos, the Spanish economy is thriving, particularly in IT, telecommunications, internet-related businesses, import and export, and private equity.
Pazos says the internationalisation of Spanish businesses is providing lucrative work for lawyers advising on mergers and acquisitions, flotations, finance and corporate restructuring.
Pazos says: "We had times of tremendous growth in the 1980s and that was based on speculative growth. The type of economic growth we are having now is based on long-term investments linked to solid projects and investment in Spanish companies abroad."
Stephenson Harwood, which has a 14-lawyer office in Madrid, is currently in merger talks with several Spanish firms.
Kenneth Bonavia, partner in charge of Stephenson Harwood's Spanish operation, refuses to disclose the names of the firms involved, saying only: "We are looking for a merger partner and we are currently talking to people."
Bonavia adds: "We would consider moving into Barcelona because it would give us extra credibility and access to new clients although it is not essential - Madrid is the business capital."
He says that firms entering the Spanish market are likely to encounter difficulties "recruiting quality people, accessing lucrative local work and adopting a slightly different way of doing business".
He says: "There are some excellently qualified people about but if you are looking at the international arena there is a demand for people who speak English to a high standard and have overseas work experience, and there is not an awful lot of people about like that."
Bonavia says that the best approach for firms aiming to move into Spain is "to find someone who can head up a local firm and then make lateral hires, gradually building up the firm organically, starting with a small office and building it up over a long time".
He adds: "There is a perception that alliances are less fashionable now.
"About 10 years ago, people were more cautious and wanted to form alliances because they thought, 'I'll just try this and see if I like it first,' but now they are looking to acquire an existing practice straight away."
Dibb Lupton Alsop managing partner Nigel Knowles says that his firm formed an alliance rather than opening its own office because "greenfield starts cost a fortune and you cannot hire the best people straight away. Our ultimate aim is to have a single branded firm, which could mean a merger.
"We will both grow together and become increasingly closer".
He says: "We looked very hard. Molinero y Asociados is a good sized firm, with 25 lawyers. They are among the top three respected firms in Barcelona and they have got some super people among their clients.
"Europe is viewed now as a single region. Clients are looking to be more European and unless you have very serious European capability you will lose out when clients want to flex their muscles in Europe.
"Spain is a very important area - you don't have complete European coverage unless you have a presence in Spain."
SJ Berwin opened an office in Madrid in May with six lawyers. It aims to have 16 lawyers by the end of the year. The office took tax partner Javier Morera from Baker & McKenzie at the beginning of September, and senior in-house counsel Julio Veloso from Banco Santander in August.
UK lawyers in Madrid claim to be working in a boom-town. According to one: "The Spanish economy is going well and has been for the last few years. Corporate law, property work and finance are booming."
She believes that the reason for the sudden interest in Spain is due to "a realisation that clients are demanding a one-stop shop service across Europe".
She fears, however, that things will not be that easy. "As far as the City firms coming in now are concerned, it's too late for them to build up a business organically," she says.
Traditionally, Spain is a tough nut to crack for both UK and US firms. Its business culture places greater emphasis on personal relationships, making it hard, observers believe, for foreign firms to woo local business.
Although Baker & McKenzie and Squire Sanders & Dempsey are the only US firms with a presence in the country, Bonavia predicts that more will move into Spain but there will not be a "major landing".
He says: "The New York firms have been able to do some of the bigger privatisations here without feeling the need to move in."
Another source of difficulty is the size of Spanish firms, which, as in Italy, are family-based and tend to average about three or four-partners - although there is a top tier of seven firms which have around 90 lawyers.
Some of the accountancy firms are also heavyweights in the legal market. Arthur Andersen, for example, merged with Garrigues, a Madrid law firm, to create Garrigues Andersen.
All this means there is a limited supply of suitablysized Spanish firms for merger purposes.
As one observer warns: "From the Spanish firms' point of view, they probably don't want to get into bed with the City firms because they don't want to see themselves swallowed up."
Clifford Chance: 17 lawyers including one partner in Barcelona. 70 lawyers including 12 partners in Madrid. One of the first UK firms in Spain, anticipating the demand and opening in Madrid in 1980 and Barcelona in 1983. Main practice areas are corporate finance, commercial, property, tax, IP, litigation, dispute resolution, white collar crime.
Stephenson Harwood: 14 lawyers including three partners in the Madrid office. Opened in 1991. Main areas are corporate finance, commercial property, shipping. Looking for a merger partner, would consider one in Barcelona.
Freshfields: 41 lawyers including eight partners in Madrid, opened in 1991. Nine lawyers including one partner in Barcelona, opened in 1994. Main areas are corporate and commercial, banking, finance, tax, EU and competition.
Linklaters & Alliance: four lawyers including two partners in Madrid. Opened in February 1999. Mainly corporate and securities law. An alliance was abandoned after Spanish firm Uria & Menendez refused to join them.
Allen & Overy: 10 lawyers including one partner in Madrid. Opened in 1990. Mainly corporate finance and banking law. Is planning to merge with four-partner Madrid firm Satrustegui & Asociados.
Simmons & Simmons: Opened a Madrid office this year. The number of lawyers fluctuates as it is a project office. European law, IP, M&A, corporate law.
SJ Berwin: Six lawyers including three partners in Madrid. Opened in May. Is considering expansion into Barcelona.
Davies Arnold Cooper: Has a small Madrid office formed in 1998 as a joint venture with Spanish firm Estudio Juridico Muniz. Is considering opening a Barcelona office.
Dibb Lupton Alsop: Announced the launch of its European network D&P at the International Bar Association conference last week. This consists of alliances with Barcelona firm Molinero y Asociados and an unnamed Madrid firm.
Osborne Clarke: Formed an alliance with Osborne Clarke Europe DS in 1986 - a breakaway firm from KPMG's law firm, formerly known as Daga & Sauret - with offices in Barcelona and Madrid. This became part of a wider alliance, Osborne Westphalen International EEIG, last year. Main areas are corporate and commercial, tax, competition and IP.