Can the collaboration trend work in favour of the mid-size firm?

The Lawyer editor Catrin Griffiths speaks to leading figures from Clyde & Co, DWF, Macfarlanes, Mishcon, Pinsent Masons and Slater & Gordon about the growing appetite from in-house lawyers for collaborative working

martin Wright
Charles Martin

Sir Nigel Knowles’s opinion piece this week contrasted the consolidation in other industries with the relative fragmentation of the legal market. This won’t last forever, he predicts:  “The firms that emerge [..] will be either highly global or truly niche” (16 June 2014).

Not all senior lawyers take that view. I chaired a roundtable discussion the other week as part of our activities around The Lawyer Awards. It gathered together representatives from all the finalists in the Law Firm of the Year category: Clyde & Co chief executive Peter Hasson, DWF chief exec Andrew Leaitherland, Macfarlanes senior partner Charles Martin, Mishcon de Reya partner Kamal Rahman, Pinsent Masons head of risk David Halliwell, RPC chief exec Jonathan Watmough and Slater & Gordon UK head Neil Kinsella.

Amongst the general debate of culture and risk, the topic of market segmentation was discussed at length. What distinguishes all the firms on the shortlist is an understanding of the specific client markets they serve and how they govern pricing. In turn, this leads law firm strategy down particular paths. Macfarlanes’ Martin and DWF’s Leaitherland were particularly vocal about margin discipline and a refusal to over-extend.

Macfarlanes, claims Martin, has seen an increase in client preference for the pick and mix option.

“All our firms have in common is that we all found ways of turning market change to our advantage,” he said. “What comes to mind is the appetite for corporate clients to segment the work they’re doing, their willingness to work with multiple providers, internationally or domestically.  Once that mentality has settled in, that allows us to play to our strengths. They don’t have to buy a single wrapper and that has powered our international practice since the downturn.”

This isn’t a covert advert for a best friends strategy; as far as Martin is concerned, having best friends could lead to complacency amongst the favoured group of firms. While Macfarlanes picks from a particular range of international firms, there are no hard and fast agreements between them.

andrew leaitherland dwf
Andrew Leaitherland

Martin argues that the best approach is for each independent firm to treat another with as much attention as it would do any new corporate client: “It’s best to be more fluid and keep that competitive tension.”

Segmentation also applies to different parts of a transaction in the same jurisdiction. Most jobs can be parsed into low- and premium-level work; the challenge is to partner up with other firms to deliver an appropriate package.  

“If you get it right then you accept there’s certain aspects of a job or a client’s work that you shouldn’t be doing and you need to find a way of resourcing that makes sense,” says Martin, who reveals that his firm has had some success working with LPO providers. “But you need to be a bit afraid of what you wish for,” he adds.

DWF is a very different sort of law firm from Macfarlanes. It has traditionally been dominated by volume insurance litigation (a practice that still represents 46 per cent of turnover). It’s multi-site, it’s done five mergers in 18 months and trebled turnover. But Leaitherland agrees with Martin: know your market, stick to it, and maintain discipline.

His firm has built a considerable platform of operational expertise, from IT experts to a fully-fledged bid team. DWF wants to move up the food chain, but it isn’t going to go for broke – and like Macfarlanes, it’s certainly not going to be launching expensive offices abroad.

“We say, let’s stick to the domestic market, let’s have discussions in other firms, we have a breadth of resource, so let’s partner up – that type of approach is going to become more and more the norm,” says Leaitherland. ”More firms will say they don’t want that sort of investment, stick to what you’re good at.”

There is a growing recognition amongst private practice leaders that collaboration may be the way ahead. Fifteen years after Lovells (now Hogan Lovells) launched the Mexican Wave, partnering with two regional firms to handle work for the Prudential Property Investment Management (PruPim), the logic of partnering is starting to register with major clients.

Heralded as an innovative new way of outsourcing legal services, the model was initially devised by legacy Lovells’ head of property Robert Kidby for PruPim. The company sent its legal work to Lovells, which then divided the work into straightforward low value work and complex high value transactions. The high value work was retained, while lower value work subcontracted out to a select group of provincial firms. The principle was simple: clients get the ‘guaranteed quality’ associated with City firms, while gaining the benefit of lower prices from firms outside of London.

It was an innovation that failed to spark a trend, however. Others may have adopted a similar model for indivdual clients but it was never wholeheartedly embraced by the legal market. Until now, that is.

Over the course of the next few weeks we will see substantial institutions demand that private practice start proposing these kinds of deals off their own bat. Collaborative working has caught the attention of some heavyweight general counsel, who see benefits in firms working together to cover their demands.

It’s been a long time coming.

The Law Firm of the Year roundtable was sponsored by Travelers, headline sponsors of The Lawyer Awards.

 The Lawyer Awards takes place this Wednesday (June 25) at the Grosvenor House Hotel.