Tale from the right bank
7 May 2001
14 October 2013
27 February 2013
25 July 2013
22 April 2013
25 November 2013
Storm clouds may be gathering over the Arc de Triomphe, but their origin is a matter of debate among law firms in Paris. UK and US law firms would have us believe that they are closing in on the Paris market, snatching work from under the noses of their French counterparts. Law firms in France, however, paint rather a different picture, blaming a trickier market on the US economic slowdown rather than on Anglo-Saxon law firms.
The French capital is an attractive prospect for international firms, and in the past two years the market has been particularly active as increasing numbers of UK and US firms try to break in. The latest is CMS Cameron McKenna and Hammond Suddards Edge, which have both recently announced a Parisian alliance and merger respectively, and S J Berwin, which has hired top private equity partner George Pinkham from Salans Hertzfeld & Heilbronn to found an office there.
But most French companies seem remarkably unfazed by the recent chain of events. The M&A boom that began in 1999 with a number of high-profile deals, including the Elf Aquitaine/TotalFina and BNP/Société Générale/Paribas tie-ups, and most recently saw Vivendi's $40bn (£28bn) acquisition of Seagram, has meant there has been more than enough work to go around.
Rather than culling the French market, the Anglo-Saxon interest has led to the rise of the niche firm. General corporate practices Gide Loyrette Nouel and Jeantet & Associès, which have traditionally been at the top of the pecking order, have been surpassed by boutique firms Bredin Prat and Darrois Villey Maillot Brochier, together with specialist firm Rambaud Martel.
Rather than competing with Anglo-Saxon businesses on an international level, these firms provide domestic services that are tailored to the needs of their clients. Most French lawyers agree that there is a place for niche firms in the market. The question is whether these firms can retain the best lawyers or whether the lure of the large international practices will prove too tempting.
Both Gide and Jeantet have been hit heavily by partners departing for Anglo-Saxon firms and this has cast doubt over their future. Both businesses claim to be in good shape, but much of their former glory has been lost. Failed merger attempts between Gide and Allen & Overy (A&O), and between Jeantet and both Linklaters & Alliance and then White & Case, have left both firms determined to remain independent. Not big enough to compete with the international firms but too small to cry niche, they have tried to reinvent themselves.
Gide partner Gérard Tavernier says it will continue to operate as a full-service firm, claiming its quality of service will be its saving grace. "We have good relationships with the best firms in each jurisdiction," he says. However, others are doubtful whether Gide can compete internationally with Anglo-Saxon firms when it is relying on referral relationships in the UK and the US.
Jeantet has opted for a different approach and downsized both in terms of size and service. Between 1998 and 2000, the firm lost about 10 partners, closed its Eastern and Central European offices and started refocusing on M&A and litigation. In other words, it has started copying the strategy of its niche rivals.
Bredin Prat and Darrois are consistently involved in France's biggest deals. In the $19.9bn (£13.9bn) merger clash between BNP, Société Générale and Paribas, Bredin Prat advised BNP and Darrois advised Société Générale. In the $59bn (£41bn) TotalFina/Elf Aquitaine deal, Bredin Prat advised Elf Aquitaine and Darrois advised TotalFina. Last year, in the $45bn (£31.4) France Telecom/Orange deal, Darrois advised France Telecom, and when Vivendi acquired Seagram for $40bn (£28bn), Bredin Prat advised Vivendi.
Bredin Prat, which was set up in 1965 and now has 20 partners, specialises in M&A and securities. Name partner Jean-François Prat says that niche firms have a unique function. "Anglo-Saxon firms want to offer all services, but this is not what we want to do," he says. "We're specialist. We know the French market very well, and because we're small clients know all the lawyers and they can choose their own teams."
Veil Armfelt Jourde La Garanderie has also raised its profile in the past few years. Traditionally known as a litigation firm until M&A lawyer Henri Brandford Griffith joined from Gide in 1995, the firm has advised TotalFina in its bid for Elf Aquitaine, BNP in its merger clash with Société Générale and Paribas, as well as Allianz in its offer for AGF.
Griffith believes boutique firms such as Veil are in a better position to adapt to changing market conditions. He says he found it difficult to develop his team at Gide because the partners were not receptive to teamwork. "Today my team's acting for 14 or 15 industrial groups, seven banks and three or four stock exchange companies. They're working as individuals who are known to their clients," Griffith explains.
Client-lawyer relationships are particularly important in France, and small French firms have an advantage over their international rivals. The chairmen of French companies tend to want lawyers who they know personally and who can provide strategic advice.
Rambaud Martel, which was set up in 1977, is a full-service firm but, because it specialises in management crisis, it claims to offer a niche-style service in that segment. Name partner Jean-Pierre Martel says that because Anglo-Saxon firms create service standardisation, specialist companies are valued for a personalised service. "We don't ever sell the same product twice," he says.
However, the downside to the personal approach is that the client relationships tend to revolve around the name partner. Griffith says the main challenge for niche firms is to move away from the image of the figurehead. The future of the specialists lies in a generation of partners who, despite being talented, are often relatively unknown and frequently work in the shadow of the managing partner.
Here Martel is ahead of the game, and five years ago he set up a management committee to run the firm and to prepare for his succession. Other firms have been slower off the mark and, at Bredin Prat and Darrois respectively, Jean-François Prat and Jean-Michel Darrois are still very much at the helm.
There have been several high-profile moves in the market over the last past 12 months, two of the most noticeable being Sébastien Prat leaving Jeantet to join his father at Bredin Prat, and Dominique Bompoint leaving Bredin Prat to join Clifford Chance. Clifford Chance also lured Marcus Billam and Frédéric Peltier from Darrois Villey.
Prat's move is unsurprising and no doubt he is being groomed to take over from his father. But it will be fascinating to see whether Clifford Chance becomes more visible in the M&A market following Bompoint's move.
Bompoint, who says he moved to Clifford Chance because it was becoming more difficult for niche firms to be the sole company on a deal, says that the challenge for international businesses is to combine a personalised service with a strong capability to come up with "a winning formula".
In Paris, UK firms are perceived as being aggressive. Most UK practices are full-service and tend to be run from London, whereas US firms are smaller and often have French lawyers and a French client base.
Cleary Gottlieb Steen & Hamilton M&A partner Pierre-Yves Chabert opted for Cleary Gottlieb because it is like a French firm but with an international network. "Darrois and Bredin Prat are trying to develop US links, but you need more than just US capability - you need strong practices in other major countries, especially in Europe" he says.
To date, we have not seen any successful mergers between top French and Anglo-Saxon firms. The French capital is hard on the heels of its German neighbour in terms of M&A activity, and both countries are an attractive prospect. But whereas Germany has relatively few independent German law firms left, most of the major French firms have failed to merge. Talks almost always dissolve.
The possibilities are endless. Gide has referral relationships with Cravath Swaine & Moore, Simpson Thacher & Bartlett, Brown & Wood, Sidley & Austin and Kirkland & Ellis in New York, and with Slaughter and May, A&O and Linklaters in the UK. Bredin Prat has a best friends relationship with Slaughter and May and Hengeler Mueller Weitzel Wirtz. Darrois has a close relationship with Wachtell Lipton Rosen & Katz, Cravath and Freshfields.
Rambaud Martel has a best friends policy with Wilmer Cutler & Pickering, Warner Cranston and Linklaters, while Veil has relationships with Simpson Thacher, Shearmans and Macfarlanes.
A number of the New York firms, including Wachtell Lipton, Cravath and Davis Polk & Wardwell, still lack a significant presence in Europe, and for many French firms a merger with a US firm is more prestigious than a UK link-up.
"The big question is what the New York firms are going to do," says Darrois partner Olivier Diaz. "There's less anxiety about the US firms and I think we have a lot to learn from them in terms of financial structuring."
French companies have less financial power and less organisation than UK and US firms. Griffith says this is one of the reasons that the successful French businesses remain small. The cultural differences between French and Anglo-Saxon companies are enormous and it is doubtful whether a centralised niche practice would be able to, or even want to, attempt an international merger.
For the moment, French law firms are safe and there remains a place in the market for them. However, what has become apparent through the downfalls of Gide and Jeantet, is that the French formula for creating an international practice does not work.
The individualistic nature of the French lawyer, which is steeped in the country's republican history, is not conducive to expansion. So there are two options available: revolution or long live the niche.