Palling around

Having the right international network in place can make the difference between a good law firm and a great one. Corinne McPartland looks at the pros and cons of using best-friend agreements as opposed to launching overseas offices

Palling aroundI want to work for Linklaters because its a regional firm and I dont want to have to go and work overseas, says a student clad in shorts and flip-flops at a law fair. I see my editor Husnara Begum bristle as she enquires of the student why on earth, if he does not want to work as part of an international law firm, should he want to apply to a global organisation such as Linklaters?

You may laugh, but this is exactly the type of blunder that we have heard many students make this milk round season. The trouble is everyone gets lost salary counting, watching league tables and hardly anybody gives a thought to how a firms structure may affect their working life. Or to how having the right structure in place can determine how successful a firm can become.

For some firms, a web of overseas referral firms is invaluable. For others, such as Linklaters for example, a network of international offices is the only way forward. In stark contrast to Linklaters, Slaughter and May has operated a best-friend network for more than 30 years now and argues that its way of doing things works best for it and its clients.

With networks, firms have found that they can leapfrog City rivals with their own international offices, without the hassle and expense of launching in a different country. SJ Berwin, for example, has just recently compiled a definitive list of US best friends after several years of planning, choosing to focus on its relationships with three firms in particular. The firms on the roster are New Yorks Paul Weiss Rifkind Wharton & Garrison, Silicon Valleys Cooley Godward Kronish and Boston-headquartered Goodwin Procter.

We looked to identify which firms wed been doing most with and which firms we felt we could deepen our relationship with, an SJ Berwin source says. So what does this mean for the firms staff? Well, even though the new relationships are not exclusive, they do include lawyer secondments. Also, the bond could secure overseas instructions that will make the firm money, without having to pay for new offices.

Best-friend networks, however, do not always end happily ever after, as was demonstrated by Berwin Leighton Paisner (BLP) and New York firm Kramer Levin.

The association, which was set up in October 2002 and was seen as a prelude to a full merger, was terminated five years later after dissatisfaction on the part of BLP (The Lawyer, 1 October 2007). At the time a source close to BLP said the aspirations in terms of clients was a total mismatch.

The move followed BLPs decision to reshape its international strategy into a wide, non-exclusive best-friend network.

Slaughters accepts the risks involved in the best-friend model. It knows relationships can grow stale and before you know it, the love of your life is in bed with another classy-looking firm. But it is adamant that the pros outweigh the cons.

One risk, says one of Slaughters graduate recruitment partners Robert Byk, is what would happen if a best friend merged with another law firm? As we are all independent law firms, I cannot rule this out, but I would counter this by saying, a) we have such strong bonds and will know if anything was going on in the first place, and b) a one-stop shop isnt immune to this type of risk, as partners – or entire offices may move on to other firms or set up on their own.

Linklaters scrapped its Central and Eastern Europe (CEE) presence in May this year, leaving former managing partner for CEE, Jason Mogg, to set up a new firm called Kinstellar, which launched on 1 November. However, the changes have not ended in tears for either firm because Kinstellar will hold joint pitches for work with Linklaters, as well as sharing training and secondment schemes.

I do not think it is a likely scenario we sit down with our best friends fairly often and discuss strategy, says Byk. All of our best friends are independent firms that enjoy the flexibility of independence and want to retain that flexibility.

In fact, Slaughters goes against the grain when it comes to structuring. It is totally different to magic circle firms, such as Linklaters and Clifford Chance, because it does not operate on a global structure, yet still manages to secure the most FTSE 100 clients using a best-friend model.

I think its true that in the past 10 years many firms have said that a one-stop shop is the way forward and we must open offices everywhere, says Byk. Thats brought into sharp focus what we do, which is not to open offices everywhere but instead have good, strong relationships with high-quality law firms.

He adds that if a client wants to do a deal in a particular country he is confident that the firm will have a best-friend relationship with another premium law firm in that jurisdiction.

One of the strengths of our models is that it has flexibility, explains Slaughters dispute resolution partner Sarah Lee. For example, Im a litigation partner and some of the firms that we work with regularly on the corporate side may not practise litigation as one of their core areas.

Therefore, for a particular matter, I may discuss with a client instructing another law firm to be able to ensure that the client gets the best advice.
As part of a shock move for the City giant, it is planning to launch a single-partner outpost in Beijing by the end of 2009, despite having best friends in China already. But the firm maintains that moving closer to its Chinese counterparts will only cement its relationships further.

Slaughters says the office would be run with European best friends De Brauw Blackstone Westbroek of the Netherlands and Ur?Men?ez of Spain, both of which announced that they would also open in the Chinese capital. The firms are expected to share facilities but operate separately.

We will still be working with our existing best friends in China, says Lee. The opening of our Beijing office is a natural extension of our China practice in Hong Kong and London.

The best-friend structure is not exclusive to Slaughters. Many other firms are structured this way. And some UK firms that already have networks in place are seeking to extend their reach into Europe and those that have not are launching them.

Nabarro took inspiration from Slaughters when it expanded its best friends to include Spains Rod?& Sala Abogados and 13-partner Italian firm Nunziante Magrone, while CMS Cameron McKenna is busy expanding its network into Lebanon and deepening ties with alliance firms.

The Nabarro and Camerons models are at different points in the spectrum of European alliances. The CMS alliance is at one end, which comprises deeply integrated firms that do pretty much everything with their overseas colleagues except share profits. At the other end are those firms that have non-exclusive friendships with European practices. Berwin Leighton Paisner and Addleshaw Goddard are examples, with the latter firm counting European powerhouses Garrigues and Gianni Origoni Grippo & Partners in Italy among its buddies. The relationships are cordial but the level of integration goes no further than that.

Camerons graduate recruitment partner Simon Pilcher says: Our structure is unique in the legal market, although its one that the large accountancy firms, such as Deloitte, adopted for their global expansion.

The CMS alliance was established in 1999 and today comprises nine firms, with approximately 600 partners, employing more than 2,200 lawyers, in 56 offices in 48 cities covering 28 jurisdictions.

In February 2008 the CMS alliance firms voted for closer alignment and integration. Since then, the firms have been involved in a process of developing common standards, but will continue to operate as separate legal entities and under their existing names, reflecting their strong identities in their local markets. For example, the German member of the firm is called CMS Hasche Sigle.

We feel it gives us the best of both worlds, says Pilcher, enabling us to operate efficiently internationally and achieve a much higher degree of integration and alignment than a best-friend network, but without the kind of costs, bureaucratic and profit-share challenges associated with a full financial merger.

It might seem superficial, but the use of branding in business development is central to how an alliance works. Without the appearance of unity, few clients are going to believe that a network can handle a cross-border transaction smoothly. But joint branding can be a real sticking point for firms that are keen to keep their identity in their home markets. Slaughters and its best friends are a great example of this because each firm is known for its prestigious brand name.

Where we work as an integrated team with best friends, we never turn around to a client and say its only Slaughter and May doing this, says Byk. From the clients point of view, what they care about is that the transaction is coordinated as a single team and that they have access to the best advice in each jurisdiction. If thats us leading the deal, then thats fine. But it may be that if a deal is mainly an Italian or Spanish deal, then we would be part of the team and maybe our Italian or Spanish best friend would be leading the transaction.

UK firms hook up with colleagues to ensure that they can stick close to big clients, do business abroad and not lose out to international competitors. But the network can only be called a success when clients fail to notice any gaps in service and are treated as if they are dealing with one firm in one jurisdiction.

Baker & McKenzie likes to be thought of as an international firm because it operates in 38 core countries across the globe. The firm insists that its expansion, unlike that of any of its rivals, has been organic because it does not have one main headquarters.

You may think this sounds all very hippy, but the firms graduate recruitment partner Vincent Keavney claims it works well because clients can get a fluid transaction and feel as though they are working with one global firm.

We operate as a global firm thats very much part of our DNA because I can pick up the phone and talk to local experts knowing that theyre committed to providing the same service to clients as we are here in the London office, he says. In terms of billing, the money comes in from all the local offices and gets put into one pot our central finance function. The local offices costs and expenses are all paid out of that central fund.

The amount of money each partner around the world earns
is calculated by using a specific formula.

Judging how deep to get into a relationship is as difficult for law firms as anyone else. A regular fling or two with some independents might bring more freedom of choice for UK firms, but they pay a price in terms of fewer referrals coming back to them and the lack of integrated systems such as IT and documentation.

This is where Linklaters graduate recruitment partner Matthew Keats thinks his firm gets it right. We have offices all over the world, all with the same Linklaters mindset, he says. And now, with our new law and business school, all our lawyers will be getting the highest possible training to make sure well have the same high levels of service in every jurisdiction.

There is also more choice when it comes to secondments. People who come to work with us know were a global firm and know that therell be lots of opportunity to work abroad, explains Keats.

But this is not always the case, argues Byk, who insists Slaughters offers secondments to its best friends overseas. And, he says, because Slaughters only hangs out with premier firms in each jurisdiction, the secondee will only be working on groundbreaking cases.

Many students look at a one-stop shop and say, Wow, that firm has lots of offices in lots of countries, but Slaughter and May only has a few so it must be domestically focused, he says. So a lot of what we do is trying to explain to them that what makes a firm international is not the number of offices, but the breadth of international transactions and the majority of our work has an international element. In terms of secondments, us having lots of best friends means that we have many secondment opportunities. And people from here who go on them probably have an even more varied experience in terms of culture, procedures and the way things work.

Flexibility, choice and cost savings seem to be the key to a successful network offering. But there are some process issues and thats where global firms might be able to do things better. But whatever the case, I think Byk sums up the whole structure thing perfectly.

If we could ensure that we could have the best lawyers in every area practice in every jurisdiction, then would we change our structure? he asks. We might do. But the way we do things works for us at this time.