Silver Circle? Hmm, has a ring to it…

Last month saw The Lawyer magazine gamely reviewing its 2005 decision to endow a small group of elite UK law firms with the title ‘Silver Circle’, a term which achieved immediate market recognition upon its unveiling.

You’d think The Lawyer’s joy at being feted as kingmaker would be unalloyed, but alas, the actual market stole its carefully-crafted ‘silver circle’ [sic]* at birth and ran away with it to beat it into a shape more pleasing to its eye. No point being kingmaker if just anyone is going to start creating more kings now, is there?

In advance of its attempt to regain taxonomic control, The Lawyer craftily surveyed 1,133 readers and found that the market ennobles at least 15 firms, in contrast to its own original four choices.

Such heresy! Cue much wailing and gnashing of teeth in Soho

“As the term gained popularity recruiters would commonly ascribe silver circle status to any largish City firm outside the magic circle,” explains The Lawyer, before continuing, primly: “In fact, that was never the thinking behind the term. The silver circle was intended to define a category of firms with a similar approach.”

Its latest redrawing of the diminishing UK legal landscape sees a muddle of UK and hybrid UK-US firms in a series of five interlocking rings, with four apparent outliers The Lawyer just can’t seem to squeeze into any of the ‘pure’ circles or their four interstices.

Complexity, she is a demanding beast.

The Lawyer’s attempt to make sense of an increasingly complex and dynamic market is admirable on the one hand, but – to my mind – fails to acknowledge what is really going on here. The answer, I think, is to be found in the language, not the numbers, structures or strategies.

Why magic? Why silver?

Magic, you’d think, is pretty obvious, but nobody really knows definitively whence this comes.

The Magic Circle, according to the Law Society’s Gazette, evolved out of the rather more prosaic-sounding ‘Club of Nine’, an informal group of top law firms – Clifford Chance, Linklaters, Slaughter and May, Freshfields and Allen & Overy, plus four others deemed to be rivals for the best talent – who all agreed cosily, back in the 1980s, not to poach from one another. Alas the other four – Lovells, Herbert Smith, Norton Rose and Stephenson Harwood – fell away after SH hit a patch of black ice in the mid-1990s, and the deal ended in 2000 leaving just the original Famous Five with the ‘magic’ tag.

The choice of ‘Magic Circle’ lies, according to some theorists, in its allusion to the secret/not-secret society of magicians founded in 1905, into whose hallowed ranks, rather like the Masons, one has to be invited; the price of entry being purely and simply talent, after which one is inducted into the secrets of sawing a woman in half or pulling a rabbit out of a hat.

Personally, I prefer a more lyrical explanation; that the term refers to a group of firms whose ability to attract and transact the best work, whose allure is – simply – magical. Entry to the circle, rather like a faerie ring, is forbidden to mere mortals. It is a signifier of being part of a singular class.

And so it is with silver also.

Silver – since ages-past humanity’s second-favoured trading metal – is laden with class resonance on this side of the Atlantic.

It is only the English** Middle Class which could afford ‘family silver’, a liquid asset useful in times of last-ditch economic desperation (“selling off the family silver”), whose offspring benefited from a jump-start in life (“born with a silver spoon in his mouth”) or unearned privilege (“handed to him on a silver platter”).

Silver, for the English, bespeaks wealth, but in a modest, prudent way. The more valuable gold is seen as being too flashy, too nouveau-venu. Silver is classy, gold is not.

The Lawyer coyly notes that ‘silver’ is meant to give a sense of “elite”, but fails to acknowledge that you cannot – just cannot – use the word ‘elite’ in England without talking about social class, and that has little to do with money or intelligence even, but everything to do with birth.

As the strategies of the five Magic Circle firms began to diverge after 2000, Slaughter and May fell behind in size, international spread and some other measures – but crucially not profits, or perceived capability – and the legal press felt it needed to redefine the market as it saw it.

The Lawyer’s own attempt involved ejecting Slaughter and May from the MC, while Legal Business thumbed its nose at such crude surgery and not only did not eject the country’s most profitable law firm as its rival had done, but added one firm: Herbert Smith.

The fact that the UK’s two most prestigious and thoughtful legal organs – both of which I love and respect, by the way – can’t decide on a single taxonomy neatly illustrates the problem. We are not talking about facts and figures, we are talking about look-and-feel. We are talking about class.

The Lawyer’s editor, Catrin Griffiths, says of Slaughters, that “an assessment of its true model is not served by misplaced deference, and we’re talking about business model here, not its M&A brand”.

That “misplaced deference” is the key phrase here. We Brits tug our forelocks to monarchy and the aristocracy, not Johnny-come-lately property tycoons or genius entrepreneurs, and this continues to irritate everyone – liberal media in particular – who believe in a more egalitarian, rational and meritocratic way of thinking.

The truth of the Magic (and Silver) Circle(s) is that try as you might, just as with the English class system, it doesn’t matter how much money you have or how much money you make, if you’re not of the right stock, have gone to the right schools, the right colleges or know the right people, you’re never going to be ‘in the club’, either figuratively or literally.

The reason recruiters – and the market – ran away with Silver Circle and made it their own is because of the immediate resonance they knew it would have with candidates for very particular reasons relating not to size, strategy or any other measure.

I love the chutzpah of The Lawyer including Mishcon de Reya – deserving no doubt – in its latest redrawing of the Silver Circle, but I fear the market will not easily accept its entry alongside the doyens of the argent hoop: Macfarlanes, Ashurst and Travers Smith.

All it would take is a couple of years where Mishcon’s PEP slumps to half where it is now, and the reclassification will look as daft as Legal Business’ choice to insert Herbert Smith into the Magic Circle, a choice the market thought questionable at the time and one which has not stuck…

As one recruiter said to me yesterday: “It’s ridiculous…Mishcon are just not.”

So beware, ye taxonomers. In this Britain of Brexit, the old power-lines run deep and are newly thrumming with class-prejudice.

If you want a term which, as Catrin Griffiths put it in 2005, is shorthand for firms “content to advise a premium UK client base rather than service global institutions”, I have another suggestion: ‘The English, Patient’.

Away from this Madding Crowd, London continues to be taken apart and reformed by the increasingly-dominant US firms. The Colonials Will Inherit Blighty, and neither Boudicca’s Magic nor the flash of good old-fashioned Sterling Silver will prevent that.

The Americans – a classless society, they like to claim, though that’s another story – could care less*** about such intangible piffle.

So why, in the 21st Century, should we?

 

*I’ve never quite understood The Lawyer’s steadfast refusal to award Silver Circle and Magic Circle the capital letters they deserve as proper nouns…

**Note: I use ‘England’ and ‘English’ here advisedly, and interchange between UK, England, English and British deliberately depending on the context. The Scots have their own social class system which has similarities, but which is distinct, from the English (and Welsh) one, as is its legal system. I am, proudly, of mainly Scottish heritage myself. This, by the way, stands in direct contrast to the American term ‘middle class’, which in English terms would cover a broad spread of society from working families through white collar and some professionals.

***I use here the US form “could care less”, whereas we Brits would of course say “couldn’t care less”. No prizes for guessing which one I prefer!

 

This is not a PEP-talk (summer Long Read)

After 25 years symbiotically-bonded to the legal profession, I’m afraid I groan inwardly when I hear talk of the latest revelations of law firm PEP (Profits Per Equity Partner – as if that TLA really needs spelling out these days to anyone in law).

We are, of course, approaching the annual Festival of Pants-Down, where everyone in the legal profession finds out what everyone else is claiming what they’re earning, via not just one but three legal market publications here in the UK.

A quarter of a century spent listening to lawyers obsess – or pretend not to be obsessing – about what everyone else is supposed to be earning in a given year is enough to send anyone demented, and I’m afraid I may finally have cracked.

If you are thick enough to calibrate your sense of self-worth around your perception of what the Jones’s are up to over the garden fence, then you really need to take a look in the mirror and ask yourself what your life is all about.

And much as many lawyers might protest they don’t really care, or don’t really look at the stated figures, or whatever, we all know that’s a fetid pile of dingo’s kidneys, as the dear-departed Douglas Adams might have said.

But then BigLaw lawyers and the cash they earn from their – frankly – crazy work schedules have long-since detached from the reality of most of us mere mortals.

I recall a conversation with a friend – happy with his life but on average earnings – about a dinner he’d had one evening with husband and wife law firm partners whose monthly disposable income – disposable mind you, disposable, let’s keep that word front-of-mind for a minute – was £90,000. Yes, £90,000 a month. After tax and all the bills they had to pay. Over twenty grand a week to play with.

And yet, they spent the whole evening at one of London’s finest restaurants arguing, bickering, bitching, back-biting and whining to my friend and his wife after one of them had gotten bored on Friday afternoon and decided to do a bit of online shopping. I say “a bit”, but how exactly one spends £40,000 in an afternoon online is a little above my social pay-grade.

This kind of behaviour, and crass discussion in front of those less ‘blessed’, is why Trump is in the White House and the UK is about to commit social and economic suicide, but I digress.

Lawyers’ obsession with PEP dates back to the time august legal monthly Legal Business – following in the footsteps of its then-dance partner The American Lawyer – decided to start publishing the results of exhaustive anonymous research among law firm partners about how much they earned, mystifying pretty much everyone, especially the accountants, who have never had to face the same scrutiny.

And boy did it work wonders. Lawyers were fascinated. Beyond fascinated.

Weekly publications The Lawyer and then Legal Week duly followed suit, each bringing new metrics, new angles, new nuances to the party. And hasn’t it been fun? It certainly was to research, and the effect it had on the legal market has been game-changing. PEP – in particular – has become the thing to aim for, the benchmark, the Blue Riband, raising it annually the sine qua non of managing partner survival. Nudging it above the £300k/£400k/£500k mark became the legal market equivalent of pricing things at £29.99, and in the upper echelons, £1.5m has become the new Olympus.

Of course, we all know PEP is a lie. The average (“public”) figure is manipulated, often bears little relationship to partner drawings and can be wilfully misleading as to the financial health of the organisation. In fairness to the press, they have, variously, tried to address this with the addition of the new metrics and exhortations to look beyond the headlines (eg the Lawyer and Earnings Per Partner), but the PEP genie (efreet, more like) is out of the bottle, and it ain’t going back in.

As useful as it has been to law firm chief execs, managing partners and finance directors to be able to set targets relative to their perceived competition, and to learn what other firms are doing, I have concerns about the effects of this annual circus on the psychology of lawyers and therefore on the psychology – and personality – of the profession itself.

And it is an important issue, beyond the profession. Lawyers, lest we not forget, rule the world. The US – by any measure still the only world superpower – is governed by a Congress dominated by lawyers, and recent presidents (Obama, Clinton) have been lawyers. Here in the UK, the two most successful prime ministers in modern times (Thatcher, Blair) have been lawyers.

For me, the real global struggle has never been Right vs Left, Capitalism vs Communism, but Law vs Unlaw (Chaos, if you will, though being a lifelong Dungeons & Dragons devotee, that has other connotations…)

Law must win that struggle, and it’s therefore vitally important who lawyers are and what they think of themselves.

If the essential measure of self-worth for the people who are really running the world is the amount of money they are making compared to their peers, then we may be in trouble.

And, let us not forget, what lawyers make is vastly inferior to the amount the truly rich are coining, compounding still further the lawyer’s sense of angst about burning their entire life away in order to “compete internationally” or whatever they have to tell themselves to justify some of the most aberrant working patterns on the planet (go on, deny it if you will…), and reinforcing the subservient mindset which apparently compels the delivery of such acrobatic levels of service in the first place.

It’s not necessary. Not. Necessary. Or, as one partner friend once related: “when one of my clients told me my team would need to work on Christmas Day in order to get the deal started as soon as possible, I told him to f*** off.”

But let’s not get bogged down comparing lawyers with other businesspeople when we have enough on our hands comparing lawyers with lawyers.

In hermetically-sealed markets, the wars for talent are always civil wars. Brother on Brother. Blues vs Grays. You dig me yet?

I love this Henry Ford quotation: “If money is your hope for independence you will never have it. The only real security that a man will have in this world is a reserve of knowledge, experience, and ability.”

The reason I love it is because it illustrates exactly the problem with the idolatry of PEP, and exactly the problem with the current direction of travel of the legal profession.

When I was a recruiter I acted for plenty of partners earning north of Generous Lottery Win every year who were miserable as hell because they had allowed themselves to become enslaved to PEP and, when their gravy train hit the buffers, found that they did not possess enough knowledge, experience or ability to continue earning the amount of money their lifestyle now demanded. #firstworldproblems #heartbleeds etc

The Magic Circle firms now engaged in a desperate battle to win a war they can’t win (see my blogs, passim) are busy bending, shaping, manipulating their financial structures in order to produce a PEP figure they have determined is a market necessity, fundamental to their ability to recruit and retain the best talent and…to do what, exactly? Are they happier as a result? Do they even think in those terms?

Happy firms – few and far between – are those firms who understand that earning healthy profit should be a function of Ford’s security triumvirate; happy lawyers are those who understand that earnings may ebb and flow from year to year, but that enriching the fundamentals – both for themselves and for the firm – is the most important thing in the long run.

As I look back over 25 years glued to the UK legal profession, I have seen PEP rise to dizzying heights, yet the happiness, contentment, fulfilment and sense of personal enrichment of lawyers, certainly in my circle, has not grown in tandem; in many cases, the reverse has occurred.

Over that time, some nice firms have fallen by the wayside, usually sliding into a gentle but ultimately non-enriching merger, and the nice partners have gone on being nice, usually disappearing from view quite quickly, caught in the manic undertow of the annual PEP frenzy.

The really nasty firms, firms whose partners would break down crying in meetings with me, who would ring me with tales of despicable behaviour on the part of other partners, tales of callous, mean-spirited, vile, arrogant and spiteful individuals, have gone out of business ignominiously, for the most part, collapsing like slabs of rotting meat sloughing off the side of a dead horse. Good riddance, though I wonder whether their inherent toxicity has travelled to those firms ‘fortunate’ enough to pick from these carcasses.

The PEP obsession did not create nasty firms, but whereas most of the truly unreconstructed firms have been swept aside by the progressive leavening of society as a whole, PEP has revealed the inheritors of the nasty mantle, who are nasty in a colder, harder yet still fundamentally antisocial way.

The PEP totem is planted in the ground of daily billing targets, illuminated by the light of screensavers which warn fee-earners not to leave the office until they have recorded ‘enough’ hours. It surrounds itself with the pastel shields of diversity committees and health advisors, rebadges HR as ‘talent management’ and hires workspace-design consultants and installs pink noise generators, but the truth seeps out here and there: sixteen weeks without a day off (including weekends); equity partners sacked on the first day of sabbatical; women logging on to the firm system the day after giving birth to deal with an “urgent” client matter; every deal commencement meeting in one Projects department fixed for Saturday morning, despite protestations from two mothers in the team; endless expensive holidays cancelled at the last minute, anniversaries, birthdays and weddings missed, sacrificed on the altar of ‘client service’. And on. And on. And on.

Yeah, you can punt the “oh well, it’s their choice” argument at me, and you’d be right. But that doesn’t answer the main point; whether the world’s ruling clique is at the behest of a self-created, self-perpetuating, self-flagellating monster, and what might be the consequences for individuals and, indeed, society in general, of such a pernicious obsession.

I’ve spent 25 years watching it, listening, thinking and I still don’t have any answers, only questions.

Never having toked from the PEP-crackpipe myself, I can’t say for sure whether any of this is right, but reflecting on it after 25 years of observation, for sure it’s not made me any happier either.

 

The world’s in flux. Lawyers need to man* up.

Sometimes I think lawyers forget what it is they actually do. I think it’s time for them to remember.

We live in a world where opinion polls can no longer predict elections. Societies divide and reform along unfamiliar lines and technology has created a yawning gap between the generations. The future has never been less predictable.

Against this backdrop of dysfunction, disarray and repatterning, Law is busily being reduced to a banal service-processing industry, lawyers apparently just marking time until Watson takes over.

Lawyers have largely failed to push back on the reductio ad processum – please forgive my Latin, alas I went to a Comprehensive School in the 1970s, and linguistic foundation for the unwashed masses went the way of free school milk – being forced on them by various legal services ‘gurus’, crusading in-house lawyers and technology companies determined to reduce law to Lego (nb. other plastic construction bricks are available…).

The slide of the legal profession into an ‘industry’ which increasingly defines itself by how many Pez-pellets of legal services utilisation it can profitably extrude is made worse, in my humble opinion, by the lionising of “the client” in the legal press and endless mawkish blogs.

This noble creature, a heroic arbiter possessed of powers to sense the “quality” and “value” of legal services, has attained an exalted status at conferences, around tables, behind lecterns and upon podia the length and breadth of the land.

Of course clients are important. Without them, you wouldn’t exist. They pay your bills. But just because they do doesn’t anoint them either with penetrating wisdom, per se, or with some kind of moral validity that the private practice lawyer (my client) lacks.

I mean, I’m sure that the developer of the next Angry Birds or the makers of silicon pectoral implants for men are adding meaningfully to the sum total of human endeavour but really… Really?

We are constantly told that clients want it faster. Clients want it better. Clients want it cheaper. Well, who doesn’t? I’d love to go into M&S every week and find everything cheaper when I do, but that’s not quite how the world works, is it?

There is even a theory that law firms themselves are obsolete, and are doomed to be replaced by the legal departments of their clients. God save us. Food companies already decide just how sick we will get from the amount of sugar and salt they sneak into our food. Car companies lie to us about emissions. Pharmaceutical companies bury research they don’t like the look of. The pursuit of profit neither signals virtue nor compels efficiency.

A tiny, tiny number of general counsel in big corporate organisations are doing amazing work with big data and outcomes and all the other things required to tie down slippery concepts like “quality” and “value”, but they are the exception, not the rule, and, meanwhile, the headlong pursuit of process poses a systemic risk to Law itself.

Law is not like other services. It is not like accounting (the “bean-counters” have their own detractors). It is not something which could be replaced by something else or be allowed to die off completely.

Oil rig explodes? Law. Poisoned water supply? Law. Territorial dispute? Law. Make sure you don’t get screwed on how this company works? Law. Promise you’d pay me this and you haven’t? Law. Want access to the kids? Law.

Law ultimately governs all the interactions between human beings in a civilised society. It is the backstop where all else has failed. It not only covers all the bases in disputes and non-disputes, it is the memory of society and of business, where governments and companies come and go.

The oldest English law firms have existed for longer than any of the political parties in this country, longer than virtually all of the modern states in the developed world, never mind the mayflies of the business world. Think of how important that is; the continuous existence of organisations across centuries of economic and political development. Yes, that.

Lawyers are the guardians of this system, the nearest thing modern societies have to the shaman. Break that, it’s not coming back.

And yet, before you run away with the idea that I have a head filled with wild romantic notions about hero lawyers, well I don’t.

I’ve been around lawyers for 25 years and learned that far too many of them are, well, not to put too fine a point on it, a bit crap. And a lot of the ones who aren’t crap are deeply average, and hence whatever they’re paid for doing whatever they do is too much.

Alas, like any guild, the legal profession is hobbled by the very thing which protects and enriches it. There is simply not enough reason for lawyers not to be average, and so – in the absence of external disruptors – a drive for process improvement and the ‘power of the client’ are doing the job of scrunching up legal services and sifting out the crap. Or that’s the theory.

But if law firms allow themselves to be degraded to the point where there are no large, well-resourced homes for true expert practitioners, then law will become just another commodity supplied and consumed by big business.

And in that scenario, just what happens to small businesses who can’t afford in-house legal departments? Where do they go for advice if law has effectively been dismantled and picked up by the big boys?

(You may think this is fanciful; but the narrative of BigLaw doom is silkily-persuasive).

Lawyers need to “man”* up. They need to remember their purpose, what they are actually there for, but without the arrogance that says “I can do this without having to explain why or how to you, lesser mortal”. Those days are gone.

They need to push back on people saying they should be cheaper not by bulling it out, but by working out what value they add and demonstrating it. And they should resist the idea that they are somehow less valid than the developer of a new app allowing your child to experience the thrill of running their own pizza restaurant, or the makers of new flavours of nicotine-laced water vapour or any number of ridiculous job creation schemes propped up by that most insidious of public subsidies, the Limited Company.

Lawyers will be the reason the tangerine toddler mysteriously elected to be Leader of the Free World will not get to turn the US into a banana republic. Lawyers will be the sanity in the Brexit process. Lawyers will ensure the contractors and architects and legislators involved in the Grenfell Tower fire will not get off the hook.

Lawyers make sure you don’t f*** up, and if you do, get you out of it or give you the framework to defend yourself against those who would cast you down. Price that up, why don’t you, procurement person? (sidenote: who’d be a procurement manager? I’d rather be picking litter off the highway).

Lawyers don’t charge “too much”, because the people who are buying the service all too often have no idea what they’re buying; but in order to avoid being ground into the dust of history, lawyers need to find new ways of telling clients why it costs what it does, new ways to demonstrate their value not just on the day-to-day stuff but also for those Black Swan moments.

And in the meantime, lawyers need to remember who they are. The last bulwark before human civilisation melts into chaos.

*with apologies to the significant proportion of the legal profession who are women and who are usually possessed of more cojones than most of their male counterparts! 

The Magic Circle is doomed. Here’s why.

The UK’s Magic Circle – a variable, but severally-numbered group of firms which represent a charmed band favoured by the government, banks and major companies in the UK – will not, I think, survive in the longer term.

The UK’s premier players are in a strategic dead-end, unable to achieve what they need to without sacrificing everything that they are, and facing impossible competition which will ultimately choke the life out of them.

I’d except one firm from this analysis: Slaughter and May. The Lawyer unceremoniously ejected Slaughters from its definition of the Magic Circle for perfectly logical reasons, but instinctively, emotionally, I think the legal market continues to regard this bluest of blue chip firms as part of the charmed five, and I think it’s the one which will endure.

So it is to the other four that this piece is primarily addressed and to their need to attain credibility in New York, the world’s largest, richest and most prestigious legal market.

I’m not going to give you a data-led analysis here. For an eye-popping article looking at the issue from that point of view, check the excellent piece by Bruce MacEwen in 2014, which starkly illustrates some of the trends I’m talking about.

Gaining credibility in New York is a very tricky thing to do. Organic growth via lateral hiring has seen Freshfields recently adding a restructuring team from Kaye Scholer, and Allen & Overy bringing a finance and securities team in from Paul Hastings, for instance.

Clifford Chance is the only firm to try to short-circuit the grind, merging with private equity firm Rogers & Wells in 1999, a merger Legal Business described as “the troubled US acquisition that halted Clifford Chance’s once unstoppable momentum”. CC’s New York office today is less than half the size it was immediately after the R&W takeover.

The perceived failure of that merger stands as a warning to any US firm foolish enough to consider submitting to a takeover by the former Colonial masters, so organic growth is the only viable option for the MC.

However, this strategy is costly, beyond the titanic recruitment fees hanging off each hire. Because indigenous New York firms are significantly more profitable than the Magic Circle, the MC has had to award ‘super-points’ to many New York partners, a policy which has been extended to London in some cases, with inevitable systemic consequences I fear.

While UK firms in New York have to break their own rules in order to hire good people, US firms in London, in contrast, can comfortably cherry-pick from the Magic Circle without breaking stride, financially.

But a deep-dive into the London vs NYC comparison demonstrates how the Magic Circle is, in fact, going backwards in comparison with New York rivals.

To illustrate, in the 2006 UK edition of The Legal 500, there was not a single US firm in the first six tiers of the ‘London: Mergers & Acquisitions’ table, the directory’s Blue Riband benchmark of elite status.

By 2016, however, Skadden Arps had climbed to the first tier of the ‘Upper Mid-Market and Premium Deals (£250m+)’ table, and tier three featured Cleary Gottlieb and Shearman & Sterling, along with the US/UK merged firms Norton Rose Fulbright and Hogan Lovells.

Cross the Atlantic, and in the US directory’s equivalent table, ‘Mergers & Acquisitions $1bn+’, the first UK firms to feature – Allen & Overy and Clifford Chance – are found languishing in the 7th tier.

Corporate isn’t everything, of course. In the US rankings, Clifford Chance manages top tier status in Asset Finance and Leasing, REITs and Tax: Financial Products, but this is classic ‘mid-tier’ performance. Freshfields scores top in International Arbitration, but that’s the only Gold Star it gets.

The combination of being squeezed in your own backyard and slogging expensively to try to gain purchase in New York creates a terrible asymmetry, and forces the Magic Circle into that thing all military strategists warn against: fighting a war on two fronts.

The obvious solution would be merger, and many Magic Circle partners have fantasised over the years about creating a Transatlantic titan – Davis Polk and Freshfields was often touted, for instance.

But there are only two ways to do Transatlantic merger. Either you find a firm of equivalent gravitas – as Hogan Lovells and Norton Rose Fulbright seem to have done, broadly – or you subsume one into the other and let the legacy identity fade into history – Rowe & Maw, Richards Butler, Rogers & Wells and so on.

True merger is impossible for the Magic Circle. All the New York firms of the requisite quality and pedigree have nothing to gain by a ‘merger of equals’, and even if any of the MC firms would agree to be acquired – a scenario which I have difficulty imagining – we’d have Rogers & Wells: 2, in London, as the more powerful partner’s identity took over and key teams headed for the door.

So organic it is. And this is where resources come into play, and where the US firms have an insurmountable advantage over their UK rivals, thanks, in large part to the US preoccupation with litigation, a problem which is magnified thanks, of all things, to the English Bar.

While successive UK governments have kicked the backside out of litigation in the UK, the US tort ‘industry’ continues to grow, pushing in excess of $300bn through the US legal system every single year, much of it going directly into the coffers of US law firms. To put that into context, that is larger than either the US agriculture or mining industries.

So while litigation – not including incredibly-lucrative patent litigation, as well as some other contentious disciplines such as labour law – accounts for roughly 30% of major US firm income, the figure is barely half that for their top UK competitors. As Cicero said – albeit translating terribly into English – “the sinews of war is infinite money”.

Litigation, as the US has rightly recognised, is the gift that just keeps on giving.

And then we have the English Bar. While the rest of the Anglo-Saxon world happily adopted the principles of a ‘fused’ profession, where the same lawyers both prepare the cases and take matters to court, the English (and Welsh) trundle on with an antediluvian system which seems to suit primarily those people who benefit most from it: barristers.

Yes, you can go on as much as you like about how special the English court system is, how respected around the world it is, and so on, but the net effect of taking many of the most talented legal brains out of the intake valves of law firms and sticking them as guns-for-hire in antiquated premises clustered where the centre of the English legal universe used to be has been to deprive the UK’s law firms of the cream of the legal talent pool, not to mention revenue.

The combined effect of being comprehensively and continually out-pointed on money by US firms, and the subtraction of talent and revenue from the UK’s law firms due to the continued existence of the Bar is, I believe, a toxic cocktail for UK law.

Firms like Lovells, Rowe & Maw and Richards Butler saw the writing on the wall, and jumped early. Norton Rose and Eversheds are trying a slightly different tack and trying to retain the cultural whip-hand, a strategy which may or may not be sustainable in the long term.

For the Magic Circle, though, the stakes are much higher and the deck is stacked against them.

To win this one will take something breathtaking, a genuine reinvention of the way these firms operate. At the moment, I see little evidence of such radical vision at work.

London

Is there any value in a law firm brand?

After the recent spate of mergers and the odd brand relaunch – the most recent being the relaunch of CMS, following the combination with Nabarro and Olswang – I’m left wondering whether there is any value in a law firm brand.

I say this only because the consistent pattern has been to subsume a firm or firm into a larger firm and then dump the legacy name or names.

This is what CMS has chosen to do, with CMS managing partner Stephen Millar telling Legal Business: “It’s been very much agreed from the outset that we go to market as a CMS brand. CMS is the bigger brand, it’s an international brand. Nabarro and Olswang are great brands, particularly in their sector areas, but when you bring three firms together you very much have to go with one, particularly when there’s different parts of CMS.”

Do you though? “…very much have to go with one”?

Well, in point of fact, you don’t have to do anything at all, in particular. The fact that everyone else seems to do it is neither here nor there (as my mother might say “if everyone else jumped off a cliff, does that mean you would do it too?”)

But I think it’s worth reflecting on what might be inferred from such a choice.

Certainly, outside the service industry, this doesn’t happen for the most part where a brand is a successful one. BMW didn’t dump the Mini name when it took over the company, reasoning that there was a positive brand-association with the Mini name that it could exploit to sell more small cars. Kraft didn’t dump the Cadbury name for its chocolate bars. Dell didn’t get rid of the Alienware name when it bought the niche PC manufacturer. Tesco didn’t suddenly rebrand Giraffe ‘Tesco Café’ when it bought the chain it later decided to sell.

So what does CMS’ decision – and I’m not saying it’s the wrong decision, by the way, nor a unique one in the legal profession – say about the value of the brands it has chosen to leave by the wayside (ie Olswang and Nabarro).

Now, Olswang and Nabarro had both spent a lot of time and money on their brands. Olswang operated in a universe of clients whose main assets are intellectual property, and who are, consequently, very brand-conscious, so you could say the firm was operating right at the sharp end of law firm branding. Nabarro, meanwhile, had become practically synonymous with real estate in the UK, in an industry where your name is often as good as your word.

Both firms, I think it’s fair to say, had built up considerable brand value in their key client sectors.

CMS itself had established a brand presence in particular industries and across the legal profession in general, but was several rungs beneath the firms it has acquired in some of their respective key service offerings.

Looking at the current edition of The Legal 500, for instance, it’s notable that while CMS and Olswang are ranked similarly for ‘IT & Telecoms’ and ‘Pharmaceutical & Biotechnology’ (in London), Olswang is two rungs above CMS in ‘Intellectual Property’ and first-ranked in ‘Media & Entertainment’ where CMS does not feature.

In the directory’s highly-contentious (I should know, I used to edit it) Real Estate section, Nabarro is in the first tier, CMS the second for ‘Commercial Property’, while in the crucial ‘Property Finance’ table, Nabarro is again a rung above CMS, and the two are ranked similarly for ‘Construction’ and ‘Planning’.

Now, I don’t want to get into the vagaries of how directories are compiled, but I think these particular rankings are pretty accurate, and what that says to me is that there is a degree of explaining to do – more so in some market segments than others – about why a brand might choose to defer to a lesser or, in a few cases, broadly equal one.

In this case, the names ‘Nabarro’ and ‘Olswang’ have consigned themselves to history.

So what, you might say, but I think this decision has deeper ramifications in the short term.

In other complex mergers/reorganisations in other sectors, companies sometimes decide on an entirely new brand name to give something of a fresh start, and to be able to have a conversation with clients of all the legacy parties about what’s new. Think of Aviva or Centrica, for instance, but there are plenty of examples.

CMS could have done that, but chose not to, and in so doing revealed that somewhere, at some point, it was decided that the CMS name had value and, by inference, those of Nabarro and Olswang did not. You can dress this up however you like, but it’s just plain logic.

Practically-speaking, subsuming Nabarro and Olswang partners into CMS does not require legacy CMS partners to say anything other than “meet my new colleagues” (if indeed they are required to say anything at all) whereas every Nabarro and Olswang legacy partner has a whole story to tell to clients, some – I would hazard – rather more complicated a story than others.

I can’t think that new pitches for work by CMS will spend a lot of time mentioning the legacy names, and I would have to surmise that the new branding strategy will be going in the opposite direction – why beg the question at all, instead focus on the new, strong CMS brand. Within a year, the merger will feel quite historical and thus the legacy names will become irrelevant at best.

New recruits, meanwhile, will not look at the positions of Nabarro and Olswang in the directories, or read articles by partners at Nabarro and Olswang, because only CMS is now relevant, and when the directories complete their annual cycle this September, Nabarro and Olswang will simply be footnotes.

In effect, everything that Nabarro and Olswang stood for has now disappeared, replaced by everything CMS stands for (whatever that may be). That is wiping the slate clean of years of carefully-lodged brand messaging in every client segment where Nabarro and Olswang held some kind of sway, and replacing it with something else entirely.

Is that always a good thing, I wonder, especially if – for some clients – the name that replaces the one you’re used to doesn’t have quite the cachet?

I was once part of a company which was a leader in its field and which was taken over by another company, and the name changed, despite the new parent having a very much lower standing in the market. Two years after the takeover, I was one of only four people – out of about 150 – from the old company, and I left the year after. It struck me at the time that all the brand value built up in my old company over nearly 20 years had simply dissolved, vanished into the ether, and the new company had not gained ‘market-leader’ status either.

I am not suggesting that will happen at CMS – or indeed any other firm which takes over another only for the legacy name to disappear (for instance Chadbourne & Park, following its folding into Norton Rose Fulbright) – but I think it raises a legitimate question for lawyers.

Is there any real brand value in a law firm name, or is a firm simply a convenient shell, a name to put on the door of what noted US legal market observer Bruce MacEwen once termed “a hotel for lawyers”?

What's in a law firm website?

What’s in a law firm website?

I spend a lot of my time, one way and another, trawling through law firm websites and Linked-In, informing myself – for various reasons – about what particular partners and departments, and ultimately firms, do and are capable of doing.

Some of this is competitor analysis for my clients, some for general market research and some for potential clients of the firms concerned.

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Good to better

Good to better

This weekend I’ve been re-reading one of my favourite management books, the classic ‘Good To Great’ by Jim Collins. If you haven’t read it, you need to, not least because it puts its finger on a problem which perhaps vexes the legal profession more than any other.

It starts off with the immortal line: “Good is the enemy of Great” and then proceeds to explain in devastating fashion why this might be so.

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A good presence on the web is a no-brainer

A good presence on the web is a no-brainer

After having spent several weeks trawling through law firm websites and partner profiles, engaged on various research projects, I remain quite mystified by some lawyers’ attitude to the fabric of their own business.

It’s not as if it’s that difficult to come up with a list of the deals or cases you have worked on, get it tarted up by your marketing department (or a consultant if you don’t have one) and create a sensible web-presence for you or your department. I’m not asking you to tweet your thoughts from a rainy platform in Chelmsford at 6.15am or commit to the wearisome grind of maintaining a live Facebook profile.

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Legal Weekness

Legal Weekness

I am rarely minded to blog in order to criticise articles in the legal press. On the contrary, I am – as an alumni – generally a defender of the legal press, a much-maligned yet vital part of the legal community.

But as my friend Kim Tasso points out in her blog, Legal Week’s recent wander through the history and current state of legal marketing/business development (BD), lacked a certain something.

This is a pity because the piece covers a lot of ground and makes quite a number of valid observations otherwise, but the record must be set straight.

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Time to call time on the directories?

Time to call time on the directories?

With the publication of the latest editions of The Legal 500 and Chambers and Partners’ Directory of the Legal Profession, I am, as ever, receiving calls from valued clients, contacts and friends baffled, puzzled, and in some cases irate, at the pronouncements of these two weighty tomes.

Let me first declare an interest, so that you can put what I am about to say in context: I edited The Legal 500 in 1996 and 1997 and am responsible for the thematic (as opposed to alphabetical) construction of the editorial of that publication, an innovation I am proud to say remains intact to this day, and which I believe better reflects the interconnected nature of the sector-led approach law has increasingly taken.

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