P&G shake-up threatens firms

Multinational giant Procter & Gamble is transferring its legal function from a regional to a global structure – meaning a huge cut in work for its UK and European panel firms.

The restructuring of its 210-strong in-house team reflects the re-organisation of the company along product rather than regional lines – a process that began last year.

Under the new general structure, one “business unit” will be responsible for profits in each product area across the globe. For example, the Fabric and Home Care unit based in Brussels will oversee sales of related products in every other continent but will not be responsible for other products sold in Europe.

The legal department is being changed along the same lines. Three global departments are to be set up to deal with mergers and acquisitions, anti-trust work and intellectual property.

They are being referred to as “centres of excellence” and serve all the business units, supplementing and, in some cases, replacing the work of regional law teams. At present, the global units employ around 50 of P&G's 210 lawyers.

The regional teams are also being grouped into clusters so that, for example, one person will deal with enquiries in a number of countries. These regional lawyers will deal with enquiries involving referrals to outside firms or the intricacies of national law.

“For a long time, we will be confronted by national legislation, so we can't do away with local or national legal support,” says Horst Dengler, vice-president and general counsel, Europe.

“But the first question is: does there have to be local representation in every country of the European Union? And the trend now is towards the globalisation of law, so I see our legal team increasingly moving towards global units.”

This could be bad news for the company's panel of law firms in Europe.

In the UK, P&G uses Cameron McKenna, Simmons & Simmons and SJ Berwin.

Dengler says that, for the moment, the amount of work being farmed out globally will stagnate.

“There will be a shifting of work from some regions. We have our own expertise in-house, so we have to rely less and less on the outside firms.”

He says Europe is likely to follow the US lead of increasing the amount of work done in-house.

Dengler says that in future most outsourcing work will be in countries where P&G is developing its market, rather than where it is established.

Simon Holme, partner at SJ Berwin, says: “The changes within P&G are something which it told me about before they were publicly announced, so we don't feel threatened by them.”