A View from South Africa

South Africa is perhaps feeling the effects of globalisation more than any other economy worldwide. Due to both its geographical location and its political past it has traditionally been “out of the loop”. The emergence of e-commerce, however, coupled with the abolition of sanctions – both of which have taken place within the past five or six years – have catapulted South African lawyers into a new and different dimension. Public interest law, which preoccupied so many of the top legal brains for so long in our country, has been replaced by multi-billion rand deals. Terms such as project and structured finance, privatisation, public/private partnerships, which were unknown in the early 1990s, are currently rolling off the tongues of big city lawyers.

Market forces have been largely responsible for the far reaching changes in the South African legal professional and there would seem to be two avenues open to the city law firm – the small, specialist and niche orientated boutique practice, or the large firm with global connections. How the latter is achieved has been the subject of much recent debate and contention.

Major shock waves were initially sent through the profession in October 1999, when Nedcor Investment Bank (NIB) took over the commercial and corporate practice of prominent Johannesburg law firm Edward Nathan & Friedland for $65m (£42.85m). The deal, which was the first of its kind in the world, was regarded as a major coup by NIB. This law/banking marriage led to much ethical debate at the time. How would such a cross-profession merger affect the independence of an attorney and is such a situation statutorily permitted? In answer to the ethical questions posed, Edward Nathan commercial lawyers have sacrificed their independence and no longer work as practising attorneys performing regulated legal work. They have instead reinvented themselves as corporate law advisers and consultants.

The precedent set by the Edward Nathan/NIB deal was followed earlier this year when a financial services company and bank, Brait, bought law firm Rabin van den Berg & Pelkowitz for an undisclosed sum, paid in a mixture of cash and shares. In this deal, the lawyers have once again accepted the role of corporate legal advisers, sacrificing their independence in return for the payment received. What these innovative deals have done is make local attorneys examine their firms from a fresh perspective. For the first time, it is possible to consider the firm as a saleable asset. Perhaps more lawyers will be seeking synergies with wealthy merchant banks to unlock the underlying wealth within the law firm.

The alternative cross-profession merger follows European trends and involves alliances between lawyers and accountants. This is preferred by those who wish to continue practising as lawyers as they can perform all regulated legal work. The first such entity evolved with the alliance between Bell Dewar & Hall and Landwell, the network of international correspondent law firms associated with PricewaterhouseCoopers.

The multidisciplinary approach has prompted as much debate and discussion in South Africa as in other parts of the world. At a seminar initiated by the Law Society of the Transvaal in March this year, (one of the professional regulatory bodies in this country), there was an overwhelming consensus in favour of multidisciplinary partnerships (MDPs) being allowed.

The MDP debate has clearly evolved as a response to clients’ needs for a one-stop shop, which has become particularly marked in this country with the return of major multinationals. Addressing the seminars, Edward Nathan senior partner Professor Michael Katz said that globalisation was a key driving force behind the demand for establishment of the MDPs. “We’ve heard of some of the issues arising from globalisation and e-commerce, but we’ve heard multinationals, in particular, want a seamless service – they want one professional firm acting across the world for them.”

In a similar way, Howard Pelkowitz of Rabin van den Berg & Pelkowitz was quoted as saying: “Today’s deal-making requires seamless delivery of best advice, technical skills, partnering and capital.”

The formation of MDPs in South Africa, and indeed Africa as a whole, makes a lot of sense given the critical lack of skills in the continent. Watch this space.

Andrew Mitchell is manager partner at Bell Dewar & Hall.