DLA Piper tackles tough Spanish legal market
As 2005 came to a close, headlines in Spain carried the story of DLA Piper Rudnick Gray Cary’s takeover of Squire Sanders & Dempsey’s Madrid office. But while many saw the move as an obvious choice for DLA Piper, which sought the critical mass required for major transactions, talk focused instead on the failed approach of several US law firms in the region. Despite constant rumours of new US arrivals, many believe that the nature and dimensions of the Spanish market make it unsuited to US firms, with their reliance on major litigation and capital markets work.
Jones Day is an exception to the rule. The firm merged three years ago with a profitable standalone practice. This was at a time when some Spanish firms felt their only option was to join an international network. Over the past six months, the Jones Day Madrid office has advised France Telecom on its €6.4bn (£4.39bn) acquisition of Auna and Gas Natural on its €22bn (£15.1bn) hostile takeover of Endesa. But independence is back in fashion and it is unlikely that Jones Day would find such a partner today.
Squire Sanders’ Madrid office was in a less comfortable position before its move to DLA Piper, as it was a smaller practice with huge fee pressure from the US. However, the loss of the office leaves Squire Sanders with a huge gap in its international strategy. It recently merged with Steel Hector & Davis in Miami to become one of the major players in Latin America. Next to the US, Spain is the most significant investor in the region.
As part of the office loss, Squire Sanders’ high-profile Madrid managing partner Juan Picon, who is a regular feature of the Spanish business press, moves across to DLA Piper. Picon will replace DLA Piper’s popular leader in Madrid Kenneth Bonavia, who is taking on what the firm ambiguously describes as a “wider European role”.
Magic circle encounters difficulties
Despite the DLA Piper merger, not all UK firms are enjoying good health in Spain. The 25th anniversary of Clifford Chance’s launch in Madrid, which was the first arrival of a UK firm, has led to navel-gazing over the success, or otherwise, of the magic circle in Spain.
According to a survey of local lawyers, Freshfields Bruckhaus Deringer wins the ‘best of breed’ award for a gentle entry into the local market. Led by Madrid managing partner John Byrne, the firm was commended for its long-term approach, growing organically through an impressive client list.
Clifford Chance was applauded for developing a huge domestic practice, although in Madrid, like London, Clifford Chance ‘knocking’ is becoming a popular pastime. Global managing partner Peter Cornell remains hugely respected in Spain following his previous stint as managing partner of the Madrid and Barcelona offices, and some hope his imminent departure from New York will hasten his return.
Although Linklaters enjoys ‘best newcomer’ status, its strong entry into the market five years ago, following failed merger talks with Uría Menéndez, made some waves. Without the luxury of organic growth, a determined Miles Curley, Linklaters’ former Madrid managing partner, set about cherry-picking the best lawyers available in town. Today, Linklaters regularly leads Mergermarket’s Iberian league tables, although Curley stood down as managing partner in June 2005.
But if people are the key to success, UK firms must take note. Allen & Overy made headlines with the loss of its entire corporate team to Cutrecasas in April 2005 and others have also had significant losses.
In fact, many Spanish firms believe that the magic circle creates its own problems by continually poaching each other’s lawyers. Although well placed to advise businesses such as Banco Santander, Repsol or Telefónica as they go global, the magic circle should not overlook the needs of the local lawyers they rely on.
Bird & Bird launches in Madrid
While nobody doubts the commitment of the UK firms to Iberia (13 of the top 20 law firms now have a local presence), the recent entry of Bird & Bird into Madrid raised some eyebrows. The strategic neatness of its sector approach wins praise, although this also raises the question of how successful its telecoms and IT practice will be in this market.
There are some examples of niche success. Co-head of SJ Berwin‘s Madrid office Carlos Pazos has built a market-leading private equity practice. But whereas private equity was innovative, Bird & Bird faces competition from entrenched market leaders such as premier league Gómez-Acebo Pombo and niche specialists Ecija. It is also likely that private equity is more profitable than Bird & Bird’s chosen sector, which is more diversified and segmented.
Some niche players have responded by expanding. Davies Arnold Cooper, which used its knowledge of the London insurance markets to successfully enter the Spanish market, is now leveraging relationships through property, construction and M&A work.
But if Bird & Bird chief executive officer David Kerr is tempted towards a wider approach, he might be wise to keep an eye on Lovells, which opened in Madrid a year ago. As one of its London competitors said: “It’s too early to say whether the firm will succeed. They have quality people and quality clients, but at the moment the jury’s out.”
PFI rises up ranks in Spain
Unlike their Continental neighbours to the north, Spain has always welcomed new ideas from the Anglo-Saxon world. This includes the current boom in PPPs among lawyers, who are enjoying an open debate over who closed the first PFI in Spain.
Garrigues partner José Guardo claims to have beaten the opposition with a new prison financing in Barcelona, but Uría associate Juan Martin Perrotto, who is currently advising on the new €2.5bn (£1.72bn) Madrid ring-road, argues that Spain has been using PFI-type concessions since the 14th century. Meanwhile, DLA Piper senior assistant Israel Gómez contends that PFI is simply the UK term for PPPs.
Moray McLaren is the managing editor of Iberian Lawyer
US: 16 Jan
Europe: 23 Jan
Asia: 30 Jan
Europe: 6 Feb