Top firms in for rude awakening

Asia Pacific will grow its own law firm giants and the present global pecking order will change, big-time

The global legal market, now worth around $820bn, is very fragmented. There is little differentiation within groupings of firms other than by
personality or service delivery. However, this is beginning to change.

Given that the growth of legal services follows that of the business economy, significant regional differences in growth rates will lead to differences in the growth of legal markets. By 2020 global market revenues will be around $1.3bn. 

The North American market will continue to grow but its market share will fall from 48 per cent to 42 per cent. Western Europe’s market share falls from 21 per cent to 15 per cent. The largest increase is in Asia Pacific, with a market share rising from 13 per cent to 20 per cent, becoming the second-biggest region for legal services. And Latin America increases its share from 12 per cent to 17 per cent. These trends have important implications for flows of cross-border work.

Asia Pacific will have an international capital market centre that rivals New York and London. Firms  not competitive in the region will lose a significant share of cross-border transactions and other work, and will slip down in the market. The same will apply to firms that  cannot compete in Latin America. 

Asia Pacific will generate two or three credible competitors to the present leading US- and UK-originated international firms, whereas Latin American firms are more likely to link up with major US or UK firms.

The top end of the market will restructure. There is no assured place for any of the existing leaders. The top end will be similar to that in the investment banking market, with around 10 firms dominating the  large and complex deals sector, probably some of the present transaction specialists plus international business firms focused on providing larger international clients with higher value law services on a global scale competing for higher value cross-border work.

Some of the existing leading transaction firms will slip out of the top group due to their inability to build a competitive capability on a wider geographic focus. 

There will be a second tier of international firms, competing more for mid- to low-value cross-border work at an operational level. Around 12 to 15 firms will be in this group. There will be room for three or four more specialist high-value firms at the top, probably New York and London-based, competing for high-value work that does not require extensive geographical coverage.

There will be a significant reshaping of local markets, with few firms being full-service in the present sense. Firms will be focused on practices and client types, many with a strong industry focus. More specialist firms will emerge. Some will have a global capability within their specialism. There will be a place for smaller local firms, but they will offer distinctive quality in service delivery and client relationships. Many firms will disappear, either through merger or, unfortunately, collapse.

Firms that succeed will be bold and guided by a clear strategy.