20 September 2010 | By James Swift
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With senior lawyers quitting the muscle outfits in France to do their own thing, the trend towards boutique firms is gathering pace, says James Swift
The top 50 French firms’ financial figures were published this month and they were not a cause for celebration. But neither were they as disastrous could have been and, with M&A making a tentative return, partners are optimistic about the year ahead.
But for some this year has brought only more worries; after the worst financial storm in recent history, lawyers are choosing 2010 as the year to jump ship.
In 2010 Lèfevre Pelletier & Associés lost almost half (15 out of 33) of its partnership, with defections to former referral firm Wragge & Co, Salans and new boutique Quadridge. However, Lèfevre has since hired three more partners, bringing its partnership up to 21.
And while Lèfevre Pelletier has been the starkest example, it is not the only firm to suffer losses. Statistics compiled by consultancy Day One show that there were 114 lateral partner moves in France in the first half of 2010 (74 in the first quarter alone) - a 41 per cent rise on the same period last year.
“There’s a lot going on in the market and what we hear from other firms and headhunters is that the market’s reaching record levels of movement,” says CMS Bureau Francis Lefebvre (CBFL) managing partner Pierre-Sebastien Thill.
A number of lawyers made the leap from one established firm to another, such as the nine-lawyer Freshfields Bruckhaus Deringer team that defected to Willkie Farr & Gallagher in May, or the five-lawyer team that left Norton Rose for Stephenson Harwood in September. But by far the biggest driver for the shake-up in the market has been spin-offs.
So far in 2010 at least 10 new firms have launched in France, and more than a third (37 per cent) of the 114 partners who left for greener pastures went to spin-offs.
Most of the firms set up in France this year were small, domestic boutique outfits, such as Cabinet Noir & Associés.
Lyon-based Cabinet Noir was set up by Julia Noir in March 2010. Noir has worked for a number of law firms in France, including Gide Loyrette Nouel. She believes that French law firm culture relies too heavily on superstar partners and offers associates too few opportunities, although she names Gide and CBFL as exceptions.
“In the US and UK you can climb steps and be identified as a future partner,” she adds. “In France it doesn’t work like that, so when lawyers get to around 40 they want something else. That’s why many build up their own businesses. At the firm I was at I was supposed to be a partner, but I wasn’t - I didn’t have the power to decide anything.”
It is also generally accepted - perhaps unfortunately for firms trying to keep hold of more senior lawyers - that the Paris market is much more supportive of small practices than other jurisdictions.
“The boutique model has more opportunity to succeed in the French market than the UK,” says Richard Pearson, managing partner of Stephenson Harwood’s Paris office. “Clients recognise this as good value. Smaller law firms are more common in France and boutiques offer a more hands-on, partner-led service - like we do.”
According to Oliver Chaduteau, director of Day One, spin-off boutiques in France are nothing new and have been rife in the past five years, following clients’ desire to work with niche experts at lower rates. But the downturn has exacerbated the trend and Chaduteau says the ferocity with which in-house lawyers are pursuing fee cuts has brought about a “paradigm shift”.
“When you’re making money things are easy, but it’s difficult to manage a firm in a crisis,” says Gide managing partner Christophe Eck. “Global revenues were down last year in the market and this increased tensions between partners in some firms. There were questions about strategy and the next generation.”
A strategic issue that has been at the root of more than one split is the desire to shed non-core practice areas. Scotto & Associés, which emerged out of Wilinski Scotto & Associés in June, is one such firm.
“We wanted to get rid of practices outside the areas the market thinks we’re the best for,” says partner Jean-François Louit. “Clients say we’re best for corporate tax and labour law and we wanted to focus on that.”
In France larger firms have been on the decline for some time. A decade ago there were around six big French firms, but now there are just two or three that managed to overcome succession issues and no longer look in real danger of diminishing.
In the past larger firms maintained critical mass by merging with successful boutiques, but now there is less appetite for that, and it could be that the future of the French legal market belongs to one or two large firms surrounded by a community of boutiques.