24 January 2000
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Last year saw a great deal of movement in the Spanish legal market, with a flurry of mergers and alliances with both South American and Anglo-Saxon firms. Abigail Hansen reports.
In summer 1998, Spanish firm Uria & Menendez made waves in Europe with its controversial decision to pull out from a planned merger with Linklaters. It was a declaration of independence which flew in the face of what had been a flurry of activity in the territory - the establishment of large Anglo-Saxon firms, a spate of mergers and alliances, and the poaching and lateral transfer of local partners and associates.
Uria & Menendez, which maintains a "best friends" relationship with Slaughter and May, merged on 1 January with Figaredo & Associados, a leading firm in the maritime law, transport and logistics sector, and with Bayano Carames Estefania Saras, a prestigious Bilbao firm. These mergers have left the firm with more than 200 fee-earners.
Uria & Menendez has continued to develop its presence in Latin America, forming associations in Argentina with Marval O'Farrell & Mairal, Philippi Yrarrazaval Pulido & Brunner in Chile and Demarest e Almeida in Brazil. The firm has a similar association with Morais Leitao J Galvao Teles & Associados in Portugal. In Peru, Uria & Menendez formed the firm Trazegnies & Uria. It is also close to opening an office in Mexico City in association with a prestigious local firm.
Partner Romana Sadurska says: "The Spanish economy is growing above the European average and many of our clients are among the leaders of the market. We wish to accompany them in this development, adapting our service to their needs. We consider the globalisation of the Spanish legal market and the arrival of the foreign firms good for competition which, when fair, is beneficial for the clients and the profession at large."
But Uria & Menendez is not the only Spanish firm making an impact. Cuatrecasas, founded in 1917 and one of the largest law firms in Spain, has offices in most of the larger Spanish cities and also in Brussels.
Managing partner Emilio Cuatrecasas says: "Our most remarkable achievement in 1999 was that, despite the increasing competitiveness in Spain, we have been able to maintain steady and constant growth in all areas of practice, as well as expansion of our territory and revenue, while maintaining the motivation, ambition and cohesion of our almost 400 lawyers."
Cuatrecasas reinforced its traditional areas of practice, and also began to form new practice groups, according to the new demands of the market.
During 1999 it integrated the former Spanish offices of Loeff Claeys & Verbeke in Barcelona and Madrid, which brought in 15 lawyers. It also increased the number of lawyers by more than 50, including top-quality lateral-hiring at partner level. Cuatrecasas strengthened its new offices in Zaragoza, Lleida and Alicante, consolidated its established offices in Girona, Valencia and Brussels and gave a larger dimension to its offices in Bilbao, Madrid and Barcelona.
In 1999 Cuatrecasas focused on future international expansion, and developed a strategic alliance with Machado Meyer Sendacz e Opice in Brazil, Perez Alati Grondona Benites Arntsen & Martinez de Hoz in Argentina and finalised merger talks with Goncalves Pereira Castelo Branco e Associados in Portugal. This has resulted in one of the largest and most powerful legal organisations in the Spanish and Portuguese-speaking world. One of the immediate benefits of this expansion will be the joint office to be opened in New York in March. These combined movements have resulted in a 35 per cent growth in revenues for the fifth consecutive year for the firm.
In 2000 Cuatrecasas is engaging in talks as it continues to look at other Spanish firms to form alliances with. But despite these movements, Cuatrecasas insists that he is interested in keeping the firm's independence and does not envisage entering into talks for what he describes as a "fashionable merger" with any of the big accounting or Anglo-Saxon law firms. The firm's long-term goal is to be a leading international law firm in the Latin-American area, while maintaining its independence from accountants and MDPs in general.
Cuatrecasas anticipates that in 2000, the major accountancy firms and some of the Anglo-Saxon firms will continue their corporate raids on Spanish firms.
He says: "In my opinion the globalisation of the Spanish legal market has two faces. On one side it is undeniable that the pressure of competition will continue to put mid-size law firms in special difficulties, and on the other Spanish entrepreneurs are increasingly investing abroad, which will permit us to follow the trend of the Anglo-Saxon firms, opening offices where our clients establish their businesses.
"The Spanish market has a higher growing potential than any other in Europe and legal work will grow accordingly. Local firms have a competitive advantage in increasing their quota of local legal work. That may not be the case in the very sophisticated and concentrated financial world, but will certainly be the situation in most other fields of practice.
"In my opinion, the attractive salaries presently offered by the newly-established Anglo-Saxon law firms in order to recruit talented lawyers and gain market share will become a serious burden for their profitability in the short run. I therefore think that many foreign firms will fail, some shall maintain a reduced presence in a very exclusive field of expertise, and only some will succeed. The turmoil, however, will stimulate the concentration and entrepreneurial approach of the Spanish law firms."
Cuatrecasas says that the future success of the accountancy firms will depend on the reaction of the market and institutions to what he considers an undesirable mixture of accountants and lawyers under the same roof.
The 1997 merger which created Garrigues & Andersen has become the vanguard of recent movement in the legal sector. At the time there were less than 500 lawyers and tax experts in the firm. Today it has more than 700 professionals, including 90 partners, and is still growing.
President Antonio Garrigues says: "The synergy between the two firms has been just perfect. Only one partner left the firm and the process of integration of two strong and different cultures was reasonably smooth. Initially, this process created some significant difficulties. Merging two law firms is not a game for amateurs. It is indeed a very complex task and we are proud of the way we have done it."
In 1999 Garrigues & Andersen signed a cooperation agreement with well-known Catalonian law firm Bufete Ribalta. Garrigues believes the agreement is working very effectively. "We are not planning more mergers or alliances in 2000, although this possibility is in no way eliminated," he says.
Garrigues anticipates changes in the management of the firm due to its national and international responsibilities, and its plans to adapt to e-business and the internet.
Garrigues says: "Virtual law firms will be a reality in the short term - we are convinced that the future is advancing in this direction. This will undoubtedly be our main concern in the short and medium-term. Meanwhile, we will continue our policy of controlled growth, we will add new departments to the professional practice, and will open new offices in addition to the 17 we have in Spain."
As for other firms, he says: "Practically all Spanish firms, whether they are large, medium or small-sized, are in a permanent process of defining their strategy. They are all aware of the need to adapt to national or international changes, but as yet no significant operations have been carried out.
"I have the impression that this year will at last be a year of mergers and alliances but I cannot and do not want to make specific predictions. I think that the Spanish legal profession, which has developed spectacularly in recent years, is prepared for globalisation and I also think that it is prepared to a higher degree than any other European country, excepting Holland and the UK."
Garrigues believes that globalisation will affect the legal profession in the same way it affects other professional and industrial sectors.
"We will end by having a limited number of firms, say between 15 and 20, with the status of global firms. The large majority of these firms will be the result of agreements between US and UK firms. Andersen Legal will be, without any doubt, one of those global firms. We are progressing very rapidly in our worldwide expansion," he says.
As for the UK, Clifford Chance, which has had an independent Spanish presence since 1980, increased its Spanish operations in 1999, bringing the number of lawyers in the territory to 90. The firm anticipates passing the 100 mark in 2000, having already recruited some high-profile local and international lawyers.
Despite its relatively small size, in 1999 it was ranked number one in Spain by the European Legal 500 in the areas of company and commercial, banking and capital markets, project finance and environment,
Peter Cornell, Clifford Chance's European managing partner, says: "We will continue to grow organically but I don't think I'll be looking at the acquisition of another firm, nor any alliances. We consider ourselves a Spanish office now."
Cornell predicts that there will be other alliances and mergers. He says: "There are a number of reasons to acquire critical mass to get together. There has been a lot of this kind of movement in the last two or three years and I do not expect it to stop - it's really reflecting what has been going on in the rest of Europe."
He believes there has been a change in firm culture. "Spanish firms are more alive to the possibilities than they were. As their clients become more international, they need to serve them, and respond to market pressures, which they are doing pretty successfully. This movement is a reflection of the economy, which in Spain is pretty robust. These are exciting times, with a lot of activity," he says.
SJ Berwin, a recent UK import which opened its Spanish office in May 1999, has experienced a tremendous growth both in terms of the number of lawyers, and of work completed and in progress. No mergers or alliances are planned for 2000, as the firm's energy is currently devoted to coping with the outstanding level of work flow.
Carlos Pazos, head of the Spanish office, says that the firm's long-term corporate strategy is to become the leading firm in Spain for high added-value transactional work.
He says: "Although initially Spanish law firms seemed to cope with the globalisation vertigo and appeared to be willing to remain independent, they are now giving up. In fact, the major players were performing very well and managed to keep foreign competitors away, with the exception of Clifford Chance and Freshfields.
"All of a sudden a merger fever spread and now it looks like all major Spanish players are talking to potential foreign partners if they have not closed deals already. 2000 will certainly bring eyebrow-raising deals between big established Spanish firms and Anglo-Saxon big players, mostly from the UK but also the US."
Barcelona-based firm Bufete Mullerat & Roca, which consists of seven partners and 40 lawyers, became Bufete Mullerat Advocats Associats in 1999. This resulted from its perceived need to adapt to the changes taking place in the majority of European law firms. As a result of the restructure, some of the partners left to join PricewaterhouseCoopers, leaving the others to continue as an independent law firm. Two new departments were set up, and the firm now feels that it has a complete range of services for its national and international clients.
There are no immediate plans for further restructuring, but the firm would consider the possibility of integrating into a global structure if necessary.
Managing partner Ramon Mullerat says: "British firms are setting up their own offices or alliances with local firms, as well as de facto MDPs being set up by the big five, despite the opposition to them by the Consejo General de Abogados.
"US firms are also beginning to make their presence felt. Spanish lawyers are becoming increasingly involved in networks, associations, joint ventures and best friends arrangements but many of these are being entered into hurriedly and thus their future must be in doubt in some cases."
Mullerat observes that the ever-increasing reliance on information technology facilitates modernisation and international alliances.
Other mergers or takeovers which took place in Spain in 1999 included Estudio Legal by PricewaterhouseCoopers, Bufete Ribalta Y Associados by Arthur Andersen, Jimenez de Parga with Baker & McKenzie, and the Melchor de las Heras team which joined Allen & Overy.
While there are numerous rumours circulating of other mergers planned for 2000, discussions remain furtive, and for the moment official names are yet to surface.