magic circle

Recent Trends Impacting International Law Firms Looking To Grow their U.S. Presence

A recent article published in the Global Legal Post does a good job summarizing what some of the so-called “Magic Circle” U.K. Firms have been doing to grow their presence in the U.S. Specifically, the article identifies recent moves made by Allen & Overy, Freshfields, and Linklaters to hire lateral partners from Am Law 100 and open offices in various major U.S. locales such as Boston, New York, Los Angeles, San Francisco, and Silicon Valley.

Setting aside that the phrase “Magic Circle” might sound strange and witchcrafty to certain American ears, the expansion of Allen & Overy, Freshfields, and Linklaters into new U.S. markets has interesting implications for other international law firms who want to expand their U.S. presence but lack the resources to pay lateral partners millions of dollars or to invest in long-term leases in Class A buildings in the most expensive real estate markets in the U.S.

So how should most international law firms react to the spells cast by the “Magic Circle”?

Strategic planning begins by recognizing opportunities and threats.  Much of the legal media treats the biggest global firms as constituting a distinct market segment, such that they barely mention what is happening to most law firms, even ones with 200-500 attorneys. The first task for leaders of sizable international law firms is recognize that what Allen & Overy and others are doing impacts their efforts to attract U.S.-based clients.

Let’s start with the threats posed to most international law firms. Historically they relied on attending international legal conferences and joining associations of international law firms to expand their visibility within foreign markets. When larger firms open physical offices in U.S. cities and other countries, it makes it less likely that attorneys in those cities with reach out to foreign-based law firms. Joining an association or consortia of firms is going to be less effective when, for example, a law firm based in the UK doesn’t need to communicate with a firm based in Greece and can instead directly talk  to their colleagues in their Greek offices. And given that the largest U.S. firms are also opening up more offices in more countries, there is a growing risk that the biggest global firms will interact with each other, and other sizable international firms will be increasingly cut out of the picture.

The expansion of the global megafirms into more U.S. cities also presents opportunities for other sizable international law firms. One opportunity involves increasing legal fees; Allen & Overy attorneys are pricey, which has the effect of allowing other international firms to charge more, but still be perceived as relative bargains. To take advantage of this dynamic, international law firms must be selective and focus on expanding their U.S. presence with respect to specific practice areas. There are some practice areas, such as antitrust, global mergers, and bet-the-company international arbitrations where corporate clients are unlikely to move away from the global giants. But that leaves other practice areas, such as intellectual property, real estate, privacy compliance, and tax, and others where international firms are well-positioned to attract U.S.-based clients.

In addition, many international law firms would be well advised to reach out to firms that are also competing with the biggest of the big in their home markets. There is an adage that the enemy of my enemy is my friend. And that principle applies here. Too many international firms fail to connect with large U.S. based law firms who compete with the Am Law 100. This oversight is understandable. It can be hard for foreign lawyers to grasp the size and scope of the U.S. legal industry. It is a $250 billion USD industry annually, and while the biggest law firms gain a lion’s share of the media attention, there are hundreds of firms with between 50 and as many as 500 lawyers who would be natural potential allies for sizable foreign law firms.

As consultants to law firms, we have firsthand knowledge and over 20 years experience working with these large U.S. firms. Opportunities do exist for foreign law firms looking to expand their presence in the U.S. or generate more work from U.S. based business clients back in their home countries. The first step is for the leaders of international firms to recognize that, notwithstanding what the “Magic Circle” conjures up, they do have options in the U.S.

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