There is a story doing the rounds of the Dublin legal market at the moment about the price bid for a recent deal on a beauty parade. A firm pitching for the work, the securitisation of a tranche of loans, bid what it considered a “competitive bid”. It lost, but was astounded to discover that the winning firm’s price was 10 times lower, at under €10,000 (£6,800).
“I would almost say I am disgusted,” says the managing partner of the firm that lost out, who preferred to remain unnamed. “We’re competitive on fees. All the leading firms are competitive on fees. This quote is ignorant, bordering on reckless.”
The price would at the very least appear to show a lack of appreciation of risk in financial transactions. The word in Dublin is that the documents for a previous deal of this type were forwarded to the winning firm to be used on the current transaction. “But no two deals are the same,” says the disgruntled partner. “You can’t take a precedent out of a book. I’m almost speechless. I have a sense of shock bordering on fear, dismay and disgust.”
Competition is a highly topical word in the republic at the moment. The Irish Competition Authority is currently reviewing, Clementi style, the market with a view to increasing competition. But on current evidence, the leading firms do not need anybody to make their market more competitive.
“It’s a bit hard to take when you read in the paper that we’re not in a competitive environment,” says William Fry managing partner Brendan Cahill.
Stories about the ferocity of pricing abound in the Dublin market. McCann Fitzgerald banking and finance partner John Cronin revealed that his firm won work on a securitisation two weeks ago, “but we had to go down to where we’d prefer not to go down.” Matheson Ormsby Prentice is understood to have discounted its rates for longstanding client BT, although on condition of a guaranteed volume of work.
But the story of the €10,000 bid illustrates not only the level of competition, but the aggression of smaller and mid-tier Irish firms in buying market share. And the current demand for specialist lawyers suggests this is a trend that will only continue.
Despite some aggressive hiring from the mid-tier in the past couple of years, the Irish market remains dominated by the big five firms: A&L Goodbody, Arthur Cox, Mathesons (known to all as ‘Mops’), McCann Fitzgerald and William Fry. But the financial services sector is becoming the most competitive of all the major markets, with a rapid specialisation into areas such as securitisation, collateralised debt obligations, and all varieties of structured finance. “Specialist banking lawyers are in severe demand, particularly with multijurisdictional experience,” says Eamonn O’Reilly of HRM Legal Recruitment. “But there’s also a huge demand for commercial property and corporate. Pretty much every area is buoyant apart from personal injury.”
With such an appetite for talent, the Dublin legal market is fast becoming a number’s game. The leading firms are crying out for new blood, with another recruiter making the point that, “any lawyer with a six-month seat at a Clifford Chance or a Linklaters would be offered a job on the spot.” That might be over-egging it a touch, but the idea is clear.
Dublin, of course, was the heart of the Celtic Tiger, the boom years of the late 1990s and early 21st century in Ireland. Law firms built out during those years, fuelled by a growth rate that touched 8 and 9 per cent. That animal took a breather for a couple of years, but is now back on track, with projected GDP growth currently running at around 5 per cent. In little over a decade, Ireland has gone from a country largely dependent on hand-outs from the EU to a net contributor and a member that is likely to see its take from Europe slashed at the next budgetary round in 2007. The demand for quality lawyers is reflective of that.
But despite its health, the Irish corporate market remains small, as do the firms themselves. The largest firm, A&L Goodbody, still has only 172 lawyers. The rapid growth will inevitably bring more lawyers onto the market in the next few years. Many will find a home at one of the increasingly voracious mid-tier firms, such as BCM Hanby Wallace, Eugene F Collins and Mason Hayes & Curran.
The arrival of more lawyers into the mid-tier firms, either from overseas or from the big five, means that the current expertise gap between the leaders and the next tier will close. This will bring even more pressure on fees. Commercial lawyers with strong business acumen, common law experience and a yen for travel could do worse than give RyanAir a bell.
See The Lawyer’s special report on Ireland in next week’s issue