This is the third in a series of posts about the New Faces of the Law Firm Competitive Landscape
While there is no evidence to suggest that bigger is better, that hasn’t stopped a new breed of Mega Global Firms from emerging onto the legal landscape.
Mega Global Firms are easy to spot: Just follow the attorneys. Mega Global firms have the most lawyers and the widest global footprint. Interestingly, there are only nine AmLaw 100 firms that meet the “global” requirement (Global is defined by distribution of attorneys across the globe rather than number of offices). Of those, only three fall into the truly “mega” category: DLA Piper and Baker & McKenzie – each with 4000-plus attorneys – and Norton Rose, which trails closely behind with 3,800 attorneys.
If you don’t think three firms is enough to make a class, let’s wait five minutes and check to see who has joined the group. The pace of acquisition raises the potential for additional Mega Global firms to evolve. Among the remaining global firms, all but one have 1,000 or more attorneys. Merger discussions with SNR Dentons and McKenna Long, would cleary establish the 1,000-plus attorney firm as a Mega Global. Talks of an Orrick-Pillsbury combination would make these two national firms Mega Global contenders as well. (Although as of this writing, there are serious doubts about the viability of either merger).
There is no question that globalization makes sense in that it provides firms a competitive advantage with multi-national companies with broad global footprints. After all, mega company begets mega firm. But the trickle-down effect these firms have on small and mid-sized players could be potentially devastating over the long-term.
With the Ultra-Profitable firms capturing the highest value work (see previous posts here and here), Mega Globals will continue to expand into new markets. While large company work may be there bread and butter, don’t be sure they won’t move downstream if demand continues to remain slow.
In doing so, Mega Globals will be positioned to poach talent in key markets where they want to grow. If the talent doesn’t come with them, they may also leverage their economies of scale to undercut smaller players and ensure control of the market.
So if the legal market evolves over the next 10 years to a handful of Ultra-Profitable firms and a handful of Mega Firms, where does that leave everyone else?
Clearly many will scramble for the last chair before the music stops playing.
But there is plenty of room for firms that define success beyond partners per profit and headcount, but it will require change. To survive among the new faces of the legal industry law firms will have to rethink the way they deliver legal services and how they differentiate from others in the market. They need to look at their market focus, the way they deliver legal services and identify insight they can provide clients that will help them run their businesses better.
Where will your firm land?