There was a time when no profession could have seemed more local than law. But now, some of the world’s largest law firms are global institutions, actively scrutinising emerging countries for the next market opportunity in locations as remote as the Mongolian capital, Ulaanbaatar, or as far afield as Jakarta in Indonesia. And many are going beyond simply forming alliances with local law firms. In many cases, they are setting up new offices or merging with domestic firms to expand their brand. Even a few moderate-sized firms are getting in on the act.

UK- and US-based law firms are big players in this expansion. Both countries recently entered into free-trade agreements with South Korea, and this has spurred a rush into the South Korean market, while China continues to act as a magnet for foreign law firms. Australia, with its rich mineral resources and proximity to Asia, has also seen an influx
of new entrants from the UK, Singapore and Hong Kong. Association of South-east Asian Nations member states such as Malaysia, Thailand and Indonesia are also becoming increasingly important destinations.

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In the Middle East, Istanbul has attracted a number of law firms, while some Western outfits have long-standing operations in Dubai, Qatar or Abu Dhabi. And in Latin America, Brazil’s emergence has made São Paulo attractive. India is a hold-out, as it bars foreign firms from setting up shop in the country, although in 2011 a court ruled they may “fly in, fly out” for specific cases involving international law or arbitration.

Going global

However, UK and US law firms are not the only ones moving abroad for growth reasons. One of Australia’s largest law firms, Mallesons Stephen Jacques, officially merged with Chinese giant King & Wood to become Asia’s largest law firm, with 380 partners and 1800 lawyers. A number of other big Australian firms have branches in China and throughout Asia.

Meanwhile, Chinese firms Yingke, Dacheng, Jun He and Zhong Lun have begun to venture abroad. Their new foreign bases are in locations as diverse as the US, the UK, France, Brazil, South Korea, Taiwan, Japan, Poland, Hungary and Italy, in addition to the strategic alliances that they have formed with foreign law firms.

According to Bryan Hughes, chief executive of Eversheds, a UK law firm with 45 offices around the world, expansion abroad is crucial to the success of his company. “It is a cost of doing business. If we did not have the international coverage we have, we would not be doing what we do,” he says. Indeed, many of the firm’s location decisions are driven by the service needs of its global clients, he says.

In addition to its own wholly owned offices abroad, the firm has created Eversheds International, a network of affiliated local firms across a number of countries that can be tapped as needed or in combination to manage a deal. Mr Hughes cites a recent $2.8bn acquisition of Scandinavia’s Statoil Fuel & Retail by Canada’s Alimentation Couche-Tard. The deal involved UK partners as well as lawyers from the firm’s Polish, Swedish, Estonian, Danish, Latvian, German and Lithuanian affiliates.

Loss leader

Baker & McKenzie, the world’s largest law firm both in terms of revenue – $2.27bn in 2011 – and in number of lawyers (3805) has 69 offices in 42 countries and describes itself as “passionately global”. It is structured as a Swiss verein, and thus technically has no nationality. In 2011, 39% of its fees were generated in Europe and the Middle East, 33% in North and Latin America, and 28% in Asia-Pacific – a distribution that broadly reflects its lawyer base.

“All our offices have the objective of being profitable and competing in the local market,” says chairman Eduardo Leite, describing this approach as different from that of other firms. “We think that an office abroad is truly a foreign direct investment.” The offices are generally staffed by local lawyers, with specialised expatriates brought in if needed.

The firm had offices in many countries before they gained the status of emerging markets, Mr Leite says. “We are constantly looking for the next generation of BRICs [Brazil, Russia, India, China] and Civets [Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa].”

Baker & McKenzie’s selection of new office locations – the most recent is in Istanbul, and has been opened in partnership with a local firm – is largely client-driven. Although other factors include the business case for the location, the synergies it would generate and the availability of qualified personnel to offer a full range of legal services.

Thus, while Mr Leite sees tremendous opportunities in Africa, in countries such as South Africa, Angola and in north Africa, he says that they have not yet reached the stage where the firm would open an office, instead working with partners. Despite vast global expansion, the firm has not lost its focus on Europe and North America, which are still dominant players and target markets for the developing world.

Relationship building

Opening an office abroad is both an expensive and time-consuming investment, says Tony Williams, a principal with London-based Jomati Consultants. Mr Williams has studied the globalisation of the legal profession, and his research shows that it is rare that a firm makes money in a foreign office to begin with. Still, he says, a firm might choose to maintain an office that is not profitable in order to attract work to its headquarters or to improve its relationship with its clients.

“We are still at a relatively early stage in the globalisation of law firms,” says Mr Williams. “If home markets remain flat, we will see more of this. But US- and UK-based firms should not assume that they will have the global legal market to themselves.”