Boutiques bloom as the legal market adapts to a sluggish economy
Although the eurozone crisis has in the main swerved the Netherlands, things have taken a turn for the worse recently. The eurozone’s fifth largest economy has had its AAA credit rating slashed to AA+ by Standard & Poor’s on the basis of its poor growth prospects. GDP is expected to shrink by 1 per cent in 2013, an about-turn from a May estimate of 0.8 per cent. Growth in 2014 is estimated at just 0.2 per cent, down from a previous estimate of 0.9 per cent.
As a result of the struggling economy, clients are becoming more critical of the legal market.
“The market is maturing and becoming more specialised,” says Van Campen Liem partner Marcello Distaso. “Clients are not just going for a big brands anymore but are looking at factors such as quality of service and the people.”
Room for a little one?
However, a stumbling block faces boutiques trying to compete with bigger firms in a crowded legal market. There are more than 4,000 lawyers in Amsterdam and it seems a bold and risky move for more firms to enter.
“Although we are a small firm we can compete with the big brands,” says Distaso, who co-founded Van Campen Liem in February 2012. “For example, if a big firm is working on an area we specialise in, the size of our team is going to be substantial against the size of theirs. In this respect we are even able to compete with the magic circle.
“If a client comes to us on an area we don’t specialise in, we’ll team up with other niche firms.”
On the other side the big firms are adamant they will continue to have a strong presence, especially in higher-end work.
“More firms means more competition, which is good, but the big firms still have a strong position at the higher end of the market,” says De Brauw Blackstone Westbroek managing partner Martijn Snoep.
“There are quite a few niche firms in IP that we feel competition from, but that is not so much the case in litigation and corporate,” adds Snoep.
Some lawyers believe one of the weaknesses of the boutiques is that what partners are selling is the fact that they used to be partners at big firms. However, they lack the strength in depth a big firm can offer.
“I have a lot of questions,” says Stibbe M&A head Allard Metzelaar. “I’m sceptical. It’s too early to say it is a success. There are a lot of challenges, but I have a lot of respect for people who try something new.”
Competition with the big firms may be tough but there is reason for boutiques to be hopeful in entering a crowded market, with few new international entrants. Jones Day was the most recent arrival, opening just over a year ago.
“Having spoken to many lawyers and firms who don’t have an office here, the Netherlands isn’t at the top of their priority list – the big firms are focusing on emerging markets such as Brazil and Africa,” says Distaso.
Nauta Dutilh managing partner Michaëla Ulrici says the state of the economy could put potential entrants off.
“I’d describe the Netherlands, and the Benelux in general, as a mature market,” says Ulrici. “It’s an open market with a strong international orientation and international business environment, and it’s also a market with well-established players, substantial competition and moderate growth opportunities. Trying to launch here is risky, with other markets showing higher growth rates and less maturity, and thus lower barriers to entry.”
Snoep agrees. “Amsterdam is a second-tier priority in Europe,” he says. “The top targets for US firms are London, Germany, France, Italy and then maybe Amsterdam.”
“It’s not so easy to come in,” adds Metzelaar. “There’s a strong landscape of Dutch firms and that is not going to change any time soon.”
Whether boutiques could be a viable long-term model remains to be seen. Battling for work at the higher end is something they will have to consider. But what is certain is that this is a new development in the Dutch legal market.
“In the 1980s firms in the Netherlands were beginning to grow,” says Distaso. “Over 20 years later, the pendulum is swinging the other way, with a stronger presence of smaller firms. The market has gone from very dispersed to collective.”
Recent spin-offs, and who formed them
Firm: Ivy Advocaten
Launch: January 2012
Partners: DLA Piper Amsterdam office managing partner Robert Broekhuijsen and Houthoff Buruma corporate crime specialist Jacqueline van de Bosch
Firm: Van Campen Liem
Launch: February 2012
Firm: Rutgers & Posch
Launch: February 2013
Partners: DLA Piper Amsterdam litigation head Gerard Endedijk, DLA Piper employment partner Dirk Jan Rutgers, Houthoff Buruma corporate partners Matthijs van den Broek and Bas Visée, Freshfields Bruckhaus Deringer principal associate Hendrik Jan Schimmel
Key figures: Netherlands
Life expectancy at birth: 81
Source: World Bank, Statistics Netherlands