Square Mile

Nick Holt is London managing partner at Weil Gotshal & Manges..

In recent weeks this column has been the place for that "new millennium" look into the future – the "what's going to happen next" bit.

Although I propose to continue in that vein, I think we can learn just as much about what may come by looking at what has gone before.

Picture this. A profession in turmoil. A cosy closed shop (old school ties, comfortable partnerships, civilised hours) with ever-hungry foreigners clamouring for change. A regulator that doubles as a trade association, ridden with internal turmoil and seen as out of touch with its members. And a government that sees some political mileage in pushing through change.

Sound familiar? Is it the legal profession at the start of the new millennium? No, it's the Stock Exchange in the early 1980s – but for 'Stock Exchange', 'jobbers' and 'brokers' simply read 'The Law Society', 'barristers' and 'solicitors'.

And students of 1980s English history will remember what happened next. The Stock Exchange's Big Bang in 1986 – when dual capacity was introduced and foreign companies allowed to be members – resulted in radical changes in the industry.

Within a matter of months the trading floor at the Stock Exchange Tower was effectively closed, as companies which until then had pledged their faith in "face to face" dealing, retreated behind their rows of screens.

Some of the old established merchant banks, jobbing and broking partnerships disappeared, swallowed up by large financial services conglomerates. The Americans, followed by the Germans and Swiss, steamed in, and some 14 years later, there are hardly any English securities houses left.

Warburg and Barclays have already thrown in the towel. This week's announcement that Schroders is selling its investment banking business to Citigroup sees only Cazenove, Rothschild, Fleming and Lazards left. As the Financial Times last week observed: "Barring a few special cases, the London securities industry is now wholly under foreign control." And to top it all, the London Stock Exchange is considering demutualising and becoming a public company.

So what price The Law Society Plc? Unlikely, I know, but something positive coming out of Chancery Lane for once would make a change.

As to law firms, most of the fun is still to be had. The legal profession's Big Bang has been gradual but no less radical, and the big prizes are yet to be won as London remains supreme as the financial centre of Europe.

We will see larger cross-border law firm mergers. These will bring problems of their own. Some mergers will unwind – human capital is very mobile. And the partnership structure, where the roles of shareholder and director are combined, means not every merger will suit every partner.

Firms with a clear strategic vision, the appetite to invest, to take risks and move forward, will be the winners in the legal Big Bang.

There is evidence to suggest that a number of UK law firms, having seen what happened to their merchant banking and stockbroking cousins, are taking steps to avoid the same outcome.

The hiring of US lawyers in London and New York and expansion in Europe, both through organic growth and merger which the US law firms have so far been slow to emulate, show this strategic resolve.

It will be interesting to see if history does indeed repeat itself.