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Invasion of the Bundle Snatchers

In Category: The Legal Market
Published: 16/03/2014

Invasion of the bundle snatchers

Mark Husband of Cogence Search comments on the continued influx of international firms into the London market.

London has always been attractive as a centre for legal practice due to its position as the World’s leading financial services centre; the City continues to attract large numbers of US and other overseas law firms for this reason. Additionally the UK financial services market has proven itself to be resilient to regulatory attack and to the effects of the credit crunch. A solvent and stable market governed by a robust, predictable and sophisticated system of laws is attractive to business and to legal practice.

US and other international full service firms tend to play to their strengths when entering the UK market. Following the recession of 2008, as the UK bank's approach to the loan market altered there has been a demand for creative new lending solutions. One product particularly in demand is High-yield bonds, due to the availability of an array of investor-friendly terms. Senior debt products and high yield bonds offered by US banks and governed by New York law have proved to be a popular choice in European financings. Magic circle firms have worked to introduce High Yield to their portfolio but their offering is not yet as strong as that of US firms. 

Private Equity work traditionally a stronghold for Magic and Silver Circle firms has been affected by the dominance of US Private Equity houses; now 9 out of the top 20 firms ranked by Chambers are US headquartered. Mirroring the model applied in other practice areas the US teams in London have targeted the cream of the market; acting on the biggest pan-European transactions backed by Private Equity. This has seen a number of leading UK private equity lawyers jump ship to US firms in the past 12 months, such as Clifford Chance’s David Walker, joining Latham & Watkins.

Parts of the UK economy are now returning to pre-credit crunch levels of activity and the professional services sector have been leading the charge for some time. The attraction of investing in growth in an improving economy is clear even if in some instances the investment required to secure market position is ahead of the market.

There is an increasing trend for long established UK offices of US firms and newcomers alike to focus on disputes work it is by no means clear whether these firms are able to introduce new disputes work to the UK or whether there will simply be an increasing number of firms dividing an existing, finite pool of work. Many firms in London or coming to London do so because their clients are increasingly Globalised, their disputes tend to be multi-jurisdictional and London provides a platform for and access to work in Europe and the Middle East that is difficult if not impossible to service from North America. 

Home grown litigation boutiques like Stewarts Law and Enyo Law have demonstrated that conflict free pure litigation practices are attractive to clients and can generate significant profits for their partners. The US growth in UK based litigation has been led by Quinn Emmanuel, Hausfeld, Boise Schiller and latterly Kobre & Kim to name a few. 

US firms have developed their practices in an environment which permits contingent fee agreements and the sharing of risk and reward with their clients. They are very experienced at pricing risk and comfortable with a model which requires them to take their fair share; UK firms at present are far more risk averse and in terms of using and selling contingent fee models and, in particular DBA's and are playing catch up. 

In hiring laterals we find that US firms are also more tolerant of risk in their litigators and arbitrators, recognising that a consistent disputes following is rare and that the skill, reputation, track record and personality of the lateral are far more important indicators of success than the number of current matters they may bring with them. 

As the number of litigation boutiques increases and the use of alternate fee models become more widely adopted we would expect that the competition for work will centre on true niche expertise - simply offering a conflict free disputes service will not be enough to ensure success and boutiques which do not offer highly specialised services such as energy, tax or derivatives litigation will need to adapt or compete on success fees. 

The firms that thrive in this competitive environment will be those that spot an opportunity, understand the risks and invest in the development of practice areas and teams that are rare or unique to the market.

 

Written by Mark Husband

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