The recent trend in the Portuguese legal market is to become larger. Being in the top five law firms by number of lawyers has become an aim in itself and rapid growth is pursued not through lateral hiring anymore, which is deemed too slow, but through mergers – the more the merrier.
Indeed, after a five-way law firm merger in 1999 (surely a Guinness world record, not only in that category but in the speed of its downfall – six months), a mid-sized firm, Abreu & Associados, has announced it will merge with three Portuguese law firms, aiming at a top three ranking. Looking at the local rankings, Abreu’s shortfall is still large (around 70 lawyers), but nothing that another quick merger or two cannot fix.
At a different pace, certainly to protect the quality label of its brand, Sérvulo Correia has also announced a merger with a mid-sized firm with academic recognition, Ferreira Pinto & Associados. Several other players are openly or discreetly following the same route.
But what is driving this growth frenzy?First, the ego of the partners, which although seamless among lawyers, has a particular Latin accent. Being the largest, the biggest and ‘up there’ (by number of lawyers), in a male partner-dominated law firm community is a sign of virility and power. Quality in itself comes a distant second, being treated as the cherry on top of the sundae or left for the smaller firms to boast as an excuse for not making the ‘big boys’ size charts.
Second, an interesting argument is made that growth is the only way to create opportunities for incoming younger lawyers, who otherwise would be barred from the partnership tracks. If I were a young associate in a firm growing from 60 to 120 lawyers in six months, I would have to try really hard to find new opportunities now that the associate ranks have trebled, as well as the number of promises and expectations.
Third, it is said that major deals tend to ‘fall’ into the lap of the largest firms. Setting aside some US clients’ preferences 10 years ago, in which sheer size was the criteria, since it was difficult to access any other information from legal directory Martindale-Hubbell, clients have moved on. With readily available information, it is naive to think that clients will shop based on size alone.
In fact, the well-established top three independent Portuguese firms – PLMJ, Morais Leitão Galvão Teles Soares da Silva and Vieira de Almeida – will continue to win the main deals, not because they are large, but because they have been there for 40 years, have sterling contacts and are responsive. And since they are likely to be conflicted out of many good deals, the question is, will they refer work to wannabe large firms or to smaller, quality firms?
As in all cycles, some law firms and individuals are trying to anticipate what will follow the frenzy. Teams of unhappy lawyers, in some cases even name partners, are fleeing from the ‘fast-growing’ firms. The alternative strategies, focused on more manageable numbers to facilitate quality controls and provide a more personal and consistent service, are being nested. Hence, Portugal is one of the most attractive markets for new projects, with top-notch lawyers raised in well-known law firms – the likes of Abreu, Linklaters and Abreu & Marques – who are eager for new challenges.
Meanwhile, the rock-solid undisputed largest Portuguese firm PLMJ (300-plus lawyers) has announced its first-ever demerger, with six partners and their teams leaving to start an independent project.
Is this the beginning of the counter-cycle? Nothing is certain in Portugal, with one exception – the tiny size of its legal market.
Pedro Cardigos, partner, Azevedo Neves Benjamim Mendes Bessa Monteiro Cardigos & Associados