The generation game: the senior and managing partners of the top global firms

That the term "global" means different things to different organisations is clear from a survey of the office locations of the six law firms that top Global Counsel 3000's World Rankings 2001 "I do not feel we are a 'global' firm, if that implies having offices all over the world," says Freshfields Bruckhaus Deringer senior partner Anthony Salz. "For now, at least, our priority is to focus on being as good as possible in the jurisdictions that really matter to our clients."

This emphasis on being better than the local competition is inherent in the idea of a global practice for both Tony Angel, Managing Partner of Linklaters, and Michael Bray, CEO of Clifford Chance, too. "It means you need to be in the very top tier in the areas you want to practise in," says Bray, "that means top tier local credibility, and critical mass, with an international outlook; providing a one firm service and culture, with genuinely integrated teams and values."

Baker & McKenzie and White & Case took the decision to expand internationally decades ago (for White & Case the reason was simple, says managing partner Duane Wall, "being global would attract more business"). Each of the other four firms now has an operation that would have been beyond the imaginations of their founding partners. In the past decade alone most have doubled size and doubled again.

This expansion has brought (and continues to bring) novel challenges to each as they seek to capitalise on their idiosyncratic strengths in new environments. For Freshfields Bruckhaus Deringer, growth has meant wrestling with cultural issues and managing potentially disruptive mergers within a tight lockstep partnership model. For others, such as Clifford Chance, it has meant changing accepted governance and remuneration systems. For all, it has meant the challenge of maintaining and fostering a shared ethos across huge networks. But achieving such aims, all agree, is not easy. In addition to sustained commitment and substantial investment, both of money and time, it requires:

International expansion means increased scales and an increased need for coherent management. An essential element of growth for Guy Beringer, senior partner at Allen & Overy, is the need to ensure that the people within an expanding organisation feel fulfilled, and to counter the emergence of over dominant practice elements, "the whole must be more than the sum of its parts," he says.

He acknowledges the importance of headline growth but places emphasis on internal development and his implementation of a firm-wide value program, which he says helped enormously during 2001. "The increased competition over the past nine months has shown that there is no room for complacency. By focusing strongly on internal development and flexible working we think we bring the best out of people." In Bray's experience, the fundamental rule is communication: "Clifford Chance is very large, but we want the feeling among partners of involvement as owners."

Salz is keen to assert that the management team at Freshfields Bruckhaus Deringer relies heavily on a large number of people, and more than ever as the firm grows you must seek out those with leadership qualities. He accepts that not all lawyers make good managers and that not all partners like being managed, but is of the opinion that "if people are respected for their practices, then others are more happy to follow them."

Of vital importance to all, is what Wall identifies as the maintenance of "momentum," the continued execution of an identifiable strategic vision and strategy. "All our partners believe in a global firm - because we derive enormous benefit from it," he explains.

Despite souring economies and a drop in transactional and capital markets volumes internationally, and even with the benefit of hindsight, strategically there are few things any feel their firms could, or should, have done differently over the last year.

"We did a lot and are very happy," says Bray. "We had a very clear vision and the mergers we did were designed to give us first mover advantage." 2000 was when the firm began to appreciate the "business point" of its mergers, he says: "it was when we tried to handle the integration. But 2001 was when we can genuinely say we started to see the synergies blowing through."

The sentiment is echoed at Freshfields Bruckhaus Deringer where Salz says of 2001 "our success was strategic, making the mergers an evident success, both for the clients and our own people." There are very few benchmarks against which to mark international performance he believes. "Little things have been disappointing, missed hiring opportunities, conflicts, pitches not won and the like, but the headline events have gone very well." He does, however, acknowledge that in Germany they may have initially underestimated the need for scale in their first merger, with Deringer Tessin Herrmann & Sedemund.

The only hint of a sour note for Duane Wall is a reference to White & Case's aborted attempt to merge with New York's Brown & Wood (in 1999) - that firm did merge last year, but with Chicago's Sidley & Austin. "The aim has always been to develop the network, which we have done; expansion, while executing a global strategy. Do I wish we had stronger investment or capital markets capability in New York [Brown & Wood's strength], well I'm not going to comment on that."

Angel states with relish that Linklaters' ambition to merge with the Alliance of European Lawyers, originally derided as "impossible," is almost there. Last year saw it merge with four of the original five Linklaters & Alliance firms and it is in talks with the fifth. In the jurisdictions where merger partners were harder to secure, such as in France and Spain, he believes the firm has done admirably well through organic growth alone. "We have largely succeeded in our objectives set three years ago of having leading [aligned] practices in each of the major European jurisdictions."

All six point to the inherent strength of the global strategy in periods of economic malaise. All emphasise that a key benefit of both their international and practice spread is the relative cushion it provides against national economic downturns.

"Effects are felt differently in different markets, but we have a lot of counter-cyclical business throughout [the organisation] so we are very well hedged," says Bray. By way of example he states that litigation now comprises around 25% of Clifford Chance's total business.

All see opportunities for pronounced growth across 2002, along with the beginnings of an upturn in the US economy. Angel sees opportunities in new markets, but only if firms play to their strengths, "first develop the capability, then credibility." It is in Europe, particularly in targeted areas, that some believe the greatest opportunities lie. "My own view," says Bray optimistically, "is that the market is set to bounce back. In M&A it will be private equity that leads and we would expect to benefit from that."

In light of its accession to the WTO, China is also viewed favourably. All six firms hold licences to practise there. Bray, however, cautions that firms will take time to see significant returns but they do need to work out their approach and gear up accordingly.

All view their respective firms as having differing practice emphases and each offers a different appraisal of the level of competition and strategic ambition the others present. "Different firms have different agendas," says Angel.

As regards the threat posed by the law firm affiliates of the Big 5 accounting firms, all remain sceptical whether at the highest levels they offer much in the way of serious competition; though none dismisses them completely. "They're a threat, but in five years' time more so than now," believes Wall. "As it stands, in my opinion, any good law firm is better than they are currently."

The only serious question over multi-disciplinary partnerships (MDPs) is the issue of regulation and conflict management. "I have no problems with them as competition," says Salz, "I'm not in favour of protecting law firms from competition, so long as the regulatory and ethical issues are appropriately protected."

Christine Lagarde, Chair of Baker & McKenzie, sees MDPs as fatally flawed. "As attractive as they seem on paper I don't think they are a solution, particularly where there is concern over confidentiality, conflict or insider trading. I think they are a nest for those kind of irregularities and infringements."

The greatest potential threat, all agree, is from the premier New York firms. Consolidation in the banking and investment markets has meant that many of the New York firms that traditionally saw themselves serving a domestic US client base now have a much more international client list.

But among the top tier of US firms, such as Wachtell Lipton Rosen & Katz, Cravath Swaine & Moore, or Davis Polk & Wardwell, there remains a strong reluctance to develop non-US legal capability.

If these firms are not developing international practices to serve their core clients, asks Salz, "who will?" The key inducement for them to do so, he suggests, is when they begin to feel relationships with key strategic clients outside their borders may become endangered. Presumably by the likes of his firm.

But if they do seek to expand internationally a major factor all will face is scale, which may mean having to reassess long held perceptions. "Only a few years ago," says Salz, "many of these firms, like Freshfields, never made lateral hires. The first ones we did, we were nervous about, but over time you realise you need not be so nervous. You grow in confidence and we have benefited enormously from the people who have come in."

Bray senses that though some may recognise the need to follow key clients, it does not mean that presently there is the desire to merge with a very large European firm. But as to the likelihood of a merger involving a top tier firm within five years? "Yes of course, watch with interest is my view."

But Lagarde feels that many New York firms struggle with the merger issue. "There is something provincial and parochial about New York, but at the same time an aspiration to take on the Brits and maintain supremacy in the legal world."

For Angel, the challenge any serious firm faces if it is to develop a global finance or transactional capability is threefold: "first, the ability to offer the infrastructure and transaction handling skills worldwide; second, local law capability, and third, US law capability." The relative global success of any international firm, he suggests, can be measured by the manner in which they approach these goals.

If they are to complete their global circumnavigation, and compete across all their networks at the highest level, then the predominant concern for the London based firms at least, is the acquisition of top tier US capability. Within Freshfields Bruckhaus Deringer, Linklaters and Allen & Overy there are already large contingents of US lawyers, but as to their desire to develop a significant US presence and compete domestically - as does Clifford Chance - opinions differ.

"It is not wholly within our aims to be a full flight US domestic firm," says Angel of Linklaters, "we have top flight US lawyers through the firm, but we're not in New York to do domestic M&A." The only way to challenge for domestic work, he believes, is to have a dominant domestic force, and the only way a European firm is going to do that he suggests, "is through a merger."

"To have credibility and attract talent in the US, you need a credible New York flagship," says Beringer, who is keen to emphasise that, unlike a number of other firms, Allen & Overy is not "skulking about" in the Big Apple. The firm has made a number of high profile hires there in the past year.

Along with Angel he emphasises his firm's US law capacity throughout the organisation, "we now have more US lawyers (68) outside the US than any other firm," he says. But, he says, Allen & Overy's New York lawyers do challenge for domestic work, "we have a self contained US transactional group," he says, "and while they may not frighten Cravath, they are ambitious."

At Clifford Chance Bray laughs at the idea that the other English law firms have little desire to develop full scale domestic US capacity. "We've done it and we're happy, we think it gives us an advantage which obviously we want to exploit. The other firms can say what they want. In a sense it's not really my concern, but if I was in another firm knowing that we hadn't quite got it right in the US yet, I would obviously be giving a lot of thought, time and attention to what my options were and how I might implement them."

Perhaps for all six firms the greatest change has not been the increase in practice depth, or international strength, but generational. The firms best able to sustain themselves and their momentum are those with one eye to the future.

As Salz says, each step along the way has become easier for all six firms as the benefits of an international ethos become more apparent to those within, from top to bottom. The challenge of merger and greater cross border growth seem less daunting and there is less culture shock. "Today's younger partners have signed up to the international model, the next generation will take it all in their stride; they will wonder what all the fuss was about."