US firms limber up in London
22 July 1997
The first necessity for a US firm which is looking for global capacity is a London office, according to Francis Quinlan
As the financial markets and multinational corporations put their arms around the world, the management consultancies and Big Six accountancy firms servicing them are following.
It is a trend which is now beginning to affect corporate lawyers and it is no surprise that many US firms are now setting up in London.
The international legal services which are emerging fall in to three categories:
those services that are tied to specific jurisdictions but benefit from cross-jurisdiction management. Examples include EU employment law, or the protection of intellectual property rights across jurisdictions;
matters that are jurisdiction-free but require support from local firms or local offices. Such work might include advice connected with international acquisitions or disposals, where local laws must be taken into account; and
work that is now free of specific jurisdictions, for example, raising capital and moving money may be done under any suitable legal system recognised by relevant countries.
Particularly in the last category, but to an extent in all of them, multinational clients seek a supra-national or even a global perspective from their advisers. And because they set themselves high standards for service consistency around the world, they also expect it of their suppliers.
Other organisations, particularly investment banks and accountancy firms, have responded to these demands and are working hard at providing a quality and consistency of service not previously attained.
Inevitably, clients now expect their lawyers to perform to a similar level. A firm may be capable of providing excellent service to a Global 1,000 company or a financial institution in the first two of the above categories without a London presence.
But given London's strength as a global financial centre, it increasingly stretches credibility to claim financial markets expertise without London credentials.
There are other, mainly technology-based markets, with a strong global dimension but where London is just another city. However, in segments of these such as entertainment and media, legal issues cross international borders as a matter of course, and several firms see London as a centre where they need a presence, or at the very least know who best to work with.
Such firms will recognise that to flourish as suppliers to global clients in these market sectors, they must focus their efforts. This gives them just one of three routes to success:
focus on a few work types, such as intellectual property, and develop leadership in these fields across a wide market;
focus on a few market sectors, such as insurance or energy, and develop leadership by providing a wide range of legal services to these sectors; or
focus on a limited number of work types in a few market sectors to achieve leadership. For example, Beaumont & Sons is well known for its expertise in legal issues arising from aircraft accidents and it mainly serves the aviation insurance market.
Being a leader means being perceived as having the strength-in-depth in particular fields to take on any competitor. A few firms have achieved this on a broad platform of services, but they are exceptional and most firms must choose a more specific route to global renown.
This strategy must bring ambitious US players into the London marketplace. For example, mid-sized US firms making a bid to become leaders in specialist sectors where the London market is important and innovative, such as in futures and foreign exchange instruments, may well need to develop a presence here as a defensive move against larger firms at home.
For historic reasons, many of London's law firms have the ambition to pursue an international strategy. Proportionally, fewer US firms have the same policy, partly because of the strength of their domestic market. However, the sheer size of the US corporate and institutional market, coupled with the international reach of many US organisations, means that US firms may well be better placed to achieve international leadership positions than their European competitors.
As a result, US firms are attractive partners in evolving global networks for European firms. It is when the major US firms perceive this opportunity, and build close relationships with non-US firms, that the legal market will begin to consolidate in a way that echoes what has happened with the major accounting practices.