Managing partners are in agreement that the changes seen over the past 10 years have been unprecedented in the legal industry.
Clifford Chance managing partner David Childs says: “What a decade it’s been. Ten years ago we bet on the belief that there’d be a fundamental change in the legal landscape that would see the growth of an international law firm model that mapped to an increasingly internationalised client base. Today that’s the reality that underpins the strategy of most of the world’s leading firms, not least Clifford Chance.”
Olswang managing partner David Stewart agrees, pointing out that a major driver of this has been a surge in the dominance of English and New York law in international transactions.
“A really powerful legal industry has been built with the English firms at the forefront of international commerce,” he says. “The scale and pace of change over the past 10 years has been astonishing.”
On the back of massive expansions law firms have spent the latter years of the decade reassessing exactly how they want to position themselves in foreign markets. Some firms have even decided to retrench, with the likes of Clifford Chance and Linklaters closing offices in Eastern Europe, while firms such as Thacher Proffitt & Wood in the US and Fox Hayes in the UK succumbed to the global recession and folded completely.
Shearman & Sterling London managing partner Anthony Ward sums up the feeling among firms on either side of the Atlantic when he says his firm has come to realise that it does not make sense to try to be a full-service outfit in as many countries as possible.
“I think the demand for a firm that can cover all the bases is no longer relevant,” posits Ward. “US firms thought this was necessary when they moved to the UK years ago. Now firms realise you need to cover the major bases, but you don’t have to be everywhere and you don’t have to be as big as you are in the US. To be able to meet client demand in key jurisdictions and have the right legal capabilities is what counts now.”
It is not just private practice lawyers whose roles have changed over the past 10 years, with in-house counsel seizing positions of real power within their organisations.
Janet Hood, head of legal for BII Scotland, comments: “We’ve become more involved in the business rather than just there for legal advice only. There was a time when in-house lawyers felt like they were just stuck in a cupboard and only spoken to when there were purely legal issues to deal with. The past decade has seen a rise in in-house lawyers who are plugged in to the business and have an impact on how it’s run.”
Of course the past 10 years have not been all about growth, expansion and empowerment, with the dotcom boom at the beginning of the decade and the financial meltdown of the past two years proving to be major setbacks. The latter event in particular caused law firms across the globe to seriously question their strategies.
As Brad Karp, chairman of US firm Paul Weiss Rifkind Wharton & Garrison, says: “One lesson I’ve learnt as managing partner is that one never should predict. Who could have conceived of a decade where century-old financial institutions, auditing firms, corporations and yes, even law firms, disintegrated overnight?”
In the UK the most visible impact of the recession on the high end of the legal world was Clifford Chance’s dramatic ousting as the largest firm in the world in revenue terms. At the end of the last financial year the firm, which was forced to carry out a major restructuring, saw its average profit per equity partner (PEP) almost halve at the same time as being overtaken by Linklaters in the revenue stakes.
As Clifford Chance general counsel Chris Perrin says of the collapse of Lehman Brothers: “The impact on work levels was almost immediate and we were more affected than most firms.”
Childs adds: “I certainly hope I never have to live through another financial crisis of the magnitude of the past couple of years.”
While the legal market appears to have stabilised from the rocky spot it was in at the beginning of 2009, there are still few managing partners who are willing to predict a return to normality in 2010.
Still feeling the wounds of the recession, law firms are focused on getting their houses in order to face futures that remain uncertain.
Steve Gartner, co-vice chairman at Willkie Farr & Gallagher, says: “The past 12 months have been characterised by a much greater focus on the business of law. Firms have shed the pretence that this is a profession and that the business was ancillary. Every firm has had to focus on costs and firms have become much more open about that fact. The cloak came off this year.”