Will Dutch courage make sense for Eversheds?
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9 December 2013
Eversheds' move into The Netherlands has been met with surprise by the legal profession. Dearbail Jordan asks why the firm has chosen to go Dutch when it has yet to make its mark in the more lucrative German market
Eversheds is in a predatory mood.
Its recently announced merger with Dutch-based Boekel De Neree (BDN) is just one step in a major strategy to become a pan-European player and Eversheds is already set on further expansion into both the German and Italian markets.
UK law firms have been aggressively expanding across Europe throughout the year.
So why then is Eversheds' decision to embark on a Dutch merger causing reactions that range from polite bemusement to downright puzzlement?
It is certainly not the first UK firm to stake a claim in The Netherlands.
Clifford Chance has had an Amsterdam office for over 15 years while Linklaters & Alliance has a long-standing alliance with local firm De Brauw Blackstone Westbroek.
Freshfields opened its own office in The Netherlands in May this year and in October Allen & Overy unveiled plans to merge with 32 partners from the Amsterdam office of Loeff Claeys Verbeke and four partners from the firm's Luxembourg practice.
But observers are questioning Eversheds' motive for merging with a Dutch firm before it has gained a foothold in the increasingly important German market.
Peter Wakkie, managing partner at De Brauw Blackstone Westbroek, says: "I was surprised. I do not see the logic. From a UK perspective my first target would be Germany.
"Holland is a much more mature market than Germany, where there are a large number of private enterprises going to the stock market and it is a much bigger territory."
There is also a question mark hanging over the timing of Eversheds' decision to enter a territory which, over the last year, has become increasingly cutthroat with the influx of ambitious UK magic circle firms.
Bert Westendorp, managing partner at Loyens & Volkmaars, says: "Eversheds is not a name that is well known by too many lawyers here."
Although Eversheds is a highly-respected middle-tier firm in the UK and has chosen to align itself with BDN, a 125-lawyer practice which, by Dutch standards, is also in the middle tier, it seems unclear whether there is room in The Netherlands market for the merged practice.
Peter Bayliff, managing partner at Clifford Chance's Amsterdam office, says: "I doubt that they are looking at the same work as us in the corporate finance area. Our aim is to work on a global network and also with Dutch multinationals. I don't know if Eversheds wants to do that."
But Eversheds argues that there is a place for its services.
Victor Semmens, international director at Eversheds, stresses that the firm is aware of the current climate in The Netherlands. He says: "I think that the UK firms out here are aiming for a different market to us - purely transactional work.
"We will not be chosen for this type of work. We expect to be there after the closing of the deal."
But to do what, and with what skills? Dolph Stuyling de Lange, secretary to the partnership at Loeff Claeys Verbeke, says: "BDN is well known for its real estate practice. It is building up its corporate and banking department, which they probably hope this merger will build up and speed through."
Semmens says: "I personally believe in property being a very large area, it is becoming internationalised."
However, lawyers remain sceptical about the merger. One describes the move as "highly opportunistic". But it seems a little unfair to accuse Eversheds of this.
Firstly, the prising open of the Dutch market, which has been a relatively untouched area until this year, is not simply down to the sudden onslaught of UK lawyers.
Els Swabbe, managing partner at BDN, says that the shift in the Dutch legal profession from a localised market to an international outlook began two or three years ago when the big accountancy firms in the region began lobbying the Dutch bar to allow multidisciplinary partnerships. She says this made people more aware that The Netherlands is part of Europe.
Bayliff says: "Local lawyers are looking to see if they can be part of globalisation. They are asking 'Do you want to be part of a large international practice or part of a 'best friends' policy?'.
"It has created turmoil in the small community... through partners going to different firms and practices splitting up."
But with change comes resistance which might explain why there has been such a mixed reaction to yet another firm staking a claim in The Netherlands.
Swabbe says: "The changes are exciting and a challenge. The good lawyers aren't scared but not all good lawyers want to go for international work."
Westendrop argues that any bad feeling about opening up The Netherlands to competition has come from regional lawyers rather than the country's larger firms. He says: "Most lawyers working in the international area are not surprised or scared. The reaction has come from the broader law community like the lawyers in the regions."
The larger Dutch firms have shown that they are committed to growth. Both Nauta Dutilh and Trenite van Doorne opened offices in London three years ago while others have forged alliances or "best friends" policies with firms in both Germany and the UK.
But Sietze Hepkema, senior partner and member of Loeff Claeys Verbeke's managing committee, says: "Reaction is mixed. We watched it from our own backyard happening in places like Paris and Brussels. Now it is happening here."
Eversheds already has offices in both France and Brussels as well as in Monaco and Moscow and associated offices in Denmark's Copenhagen and Bulgarian capital Sofia.
But what about Eversheds' lack of a strong foothold in Germany, an area where most of the top firms are already aligned or merging with other UK practices?
Has the firm got its international strategy back to front?
As Stuyling de Lange says: "People are most surprised that The Netherlands is important enough for UK firms to move into, even before the other markets have been tackled."
However, Semmens says: "The practical answer is that you can only marry people who want to get married."
For its part, Eversheds has taken steps to service clients in Germany by setting up a German desk of six dual qualified lawyers at its London office.
Semmens says: "Germany is a prime marketplace but it is not the only marketplace. It is most important to find the right partner."
A number of lawyers say that it was an easier step for Eversheds to find itself a Dutch partner since the nationalities are culturally similar and there has been an established relationship between the two countries for some years.
Bayliff says: "Dutch firms have a strong referral process with both the UK and the US."
And Alan Peck, chief executive at Freshfields, adds: "Most corporate groups are based on the Dutch user-friendly corporate law. It is also a tax neutral or tax friendly place."
A number of companies have for many years recognised these tax breaks and have a "mixer" company in the region which allows them to shift finances through that market rather than through a country where it would incur a large tax charge.
Westendorp says: "There are a lot of cultural similarities between the UK and the Dutch. Both of them are more internationally-oriented whereas Germany is more domestically-oriented. The UK and the Dutch have always had an international outlook."
Swabbe says: "The Dutch are an attractive partner with attractive work and our stock exchange is growing fast. It is better to go Dutch."
Also, the fact that The Netherlands boasts such attractive potential clients as Shell and Unilever is only going to increase its pull and local big-hitting firms have recognised this.
Hepkema says: "There has been a preparedness of Dutch firms to give up their independence and work together much more so than in Germany."
So does Eversheds' topsy-turvy strategy make sense?
Hepkema is not so sure: "Germany is a more important market and it has one of the biggest economies in Europe. But even though there are more fish swimming in the pond, there are less fish to catch now."