Big Law – the future global elite brands

The competition to become one of the undisputed market-leading global law firm brands is still very much an open race. The next decade will see a dramatic shakedown among the contenders to become the future global elite firms because there are currently too many firms competing.

There are at least 20+ Big Law firms with a realistic prospect of making the cut.

Evermore global

The term global is a relative one when it comes to law firms. Although many have radically transformed themselves over the last two decades from influential national firms into powerful international brands, none can yet be said to be global in the way PWC, McKinsey or Goldman Sachs are global.

The Big 4 accountancy firms, Bulge Bracket banks and top management consultancies are truly global entities with strong global brands — at or near the top in every key market around the world — attracting the top clients and talent simultaneously in a virtuous circle of market dominance. There is a gulf of blue water between them and their second-tier competitors, and, barring an earthquake in regulatory changes, there’s no realistic prospect of anyone else bridging the gap in the foreseeable future.

In the legal sector, by comparison, the picture is far from settled, and there are at least 20+ Big Law firms with a realistic prospect of making the cut. The trouble is there is probably only room for around 10 of them around the table. These 20+ Big Law firms currently sit in one of four groups,

The UK Internationalists (aka the Magic Circle, Linklaters, Freshfields, Allen & Overy, Clifford Chance)

The US Internationalists (Kirkland, Skadden, Latham ++)

The Globalists (Baker McKenzie, Dentons, DLA, Norton Rose)

The Transatlanticists (Hogan Lovells, White & Case, Mayer Brown ++)

The firms in these groups have similar strategic and branding advantages and face similar challenges in the race to become one of the future global elite firms.

In branding terms, the Magic Circle firms need to adopt a different brand strategy in the US to their ‘home’ strategy and become genuine challenger brands.

Global magic?

The UK Internationalists / Magic Circle firms share the same big strategic challenge, the United States.

Due to its size and value, despite being only one country, the US accounts for around 50% of the premium legal market in terms of fees. So no law firm can be genuinely global unless it has a significant standing in the premium US market.

Primarily because of significantly lower partner profitability (PEP), the Magic Circle firms have found mergers with other elite law firms in the US elusive, and whilst they have each made valiant efforts to grow organically in the US, they have not been able to achieve anything like the level of success that their US counterparts have achieved coming in the other direction (see next).

At home, these firms face a different problem, being knocked off their pedestals by some of these premium US firms for the highest value work. None of them will disappear any time soon. However, a recent report on Spanish firms highlighted that while the traditional firms in Madrid still maintain the vast majority of M&A deals in terms of volume they were now being outcompeted by non-Spanish firms for the highest value work – mainly from the US and London.

The Magic Circle firms are not in this situation today, but neither were the Spanish firms ten years ago. Somehow the Magic Circle firms need to change the game or become like the proverbial frog in hot water. They need to do what James Bond does at a certain point in every movie when it seems that the opposition is winning and hold all the cards. He walks right into Spectre’s home territory and kicks over the hornets’ nest. In the ensuing chaos, he gains the upper hand. That’s just a movie script, but waiting for a sensible and risk-free strategy to appear on the horizon, they could be waiting a long time.

In branding terms, the Magic Circle firms need to adopt a different brand strategy in the US to their ‘home’ strategy and become genuine challenger brands. This means throwing off any sense of expectations and incumbency and offering something ‘fresh and new’ in the market. This approach to branding isn’t even straightforward when the firm is already a challenger. But it’s even more complicated when the firm’s internal culture ‘at home’ is steeped in market leadership and elite status. Partners adopting a genuine challenger brand stance ‘away from home’ can be looked down on by their peers unless leadership intervenes and evens out the pitch.

Topically, you can see these competing narratives being played out in the Senior Partner election at Clifford Chance. One of the candidates has proposed a radical rethink of its culture and strategy more familiar to West Coast tech firms than City of London law firms. The reactions, both for and against, highlight the Magic Circle firms’ dilemma in suggesting trying anything new.

The US Internationalist firms currently have all the momentum in the race

Sharp elbows?

The US Internationalists have recently made significant inroads into Europe via London. It’s early days, but undoubtedly as a group, these firms are now genuine challengers to the incumbent Magic Circle firms in London and to a lesser extent in other key European capitals. They’ve made all the running in terms of profitability and revenues over the last decade, and these firms currently have all the momentum in the race. 

The only thing that could get in their way is culture. Whether fair or not, these super-premium US firms are perceived to be ‘sharp-elbowed’ environments to work in and build a career. Until now, they have found enough supply of willing candidates. However, it’s uncertain whether they will reach a ceiling unless they address these perceptions. The recent comment, “I know that this reputational thing is a problem” by Jon Ballis, chairman of Kirkland, highlights their awareness of the issue. He was talking about his firm, but he might have been referring to the reputation of this group of firms as a whole – both inside and outside of the United States.

Compared to the challenge faced by the Magic Circle firms, this cultural problem might seem relatively surmountable. However, in a post-Covid economy, nobody yet knows whether enough professionals such as lawyers will be as inclined to put up with super-long hours and aggressive work environments in exchange for more money as they were before.

In the branding toolbox, these firms should think about ‘symbols & substance’ and develop some high-profile strategies that challenge the prevailing narrative surrounding their cultures. They need to take a long hard look at their cultures and decide whether there is an actual problem or simply one of perception. Maybe a Chief Happiness Officer is needed in more places than the City of London? That may be a slightly flippant comment, but this is the kind of thing that constitutes a brand symbol. Having a Chief Happiness Officer doesn’t make people happy. But on the other hand, it’s hard to only pay lip service to the happiness of your people if you’ve appointed such a person and don’t expect it to attract a huge amount of disdain, internally and externally, if you don’t back it up with genuine substance and action.

Baker McKenzie can credibly be said to have invented the idea of a global law firm.

Swiss-style

Initially led by Baker McKenzie, this group had the world to itself for a while. Indeed, Baker McKenzie can credibly be said to have invented the idea of a global law firm. Way before lawyers at other premium firms had even got their passports out, they had successfully operated way beyond their home territory and created genuinely international cultures and operating models in tune with their internationalising clients.

Since then, other firms operating under the same Swiss Verein structure have undergone transformational growth and have caught up with Baker McKenzie on the global stage. These firms include DLA Piper, Dentons and Norton Rose. It’s worth saying that these firms, whilst similar in some ways, are very different from each other beneath the skin. However, in terms of the race to become a global elite firm, they all face the same challenge — perceptions of brand quality.

In the legal market, brand reputation is everything. That’s partly because product quality is nigh-on impossible to measure objectively. It’s also because for the decision-makers involved in appointing a law firm to a critical deal or dispute, perhaps the overriding factor is their reputation as individuals. If it goes well, no one around the boardroom table will notice or remember who the law firm was. But if it goes badly, and if everyone perceives the law firm to be one of the very best in the world, the adage “no one gets fired for hiring IBM” comes into play.

Of all the competing groups, ironically given their initial lead, these firms face the steepest challenge in gaining a place at the very top table of global elite firms in the future. Indeed, the leadership teams of some of these firms would already say publicly that that is not their strategy. Instead, they are aiming to be a different kind of law firm. If you like, a high-quality ‘business law firm’ that can offer a strong and clear branded service offer across a wide range of practices and with complete global coverage. That makes tremendous sense, and if they can adapt their business models to make it a commercially attractive proposition, these firms could reasonably find that long-term success is easier to find away from the intensity of the race to become a global elite firm.

Strong brands will be vital to achieving this. Brands that signal a consistent level of service and quality globally and a value proposition that separates them from the aspiring global elite firms charging eye-watering fees.

The brand challenge for these firms is to gain ‘super-premium’ status on both sides of the Atlantic.

Full of transatlantic promise

Powered by US/UK mergers in most cases (except White & Case, who grew organically), the Transatlanticists have emerged on the global stage as far more globally balanced firms than either the US Internationalists or the Magic Circle firms.

Despite trailing somewhat in profitability and prestige, these firms have some distinct advantages compared to the US and UK Internationalist groups.

They are already well established on both sides of the Atlantic as premium (if not super-premium) law firms with significant reach beyond London and New York. Also, possibly because they haven’t been as wrapped up in the PEP arms race as other firms, they’ve managed to retain relatively collegial cultures. It’s impossible to generalise here, and associates and partners in these firms certainly work long hours. But, they don’t have the same ‘sharp elbows’ cultural narrative to overcome compared to other premium firms – particularly those from the US – in the competition for talent at all levels.

The brand challenge for these firms is to gain ‘super-premium’ status on both sides of the Atlantic. This subtle but critical difference connects back to the reputational risk to the client as much as any rational criteria. This will require focused strategies and go-to-market propositions that can compete toe-to-toe toe with the best US/UK Internationalists in key areas. And these firms are generally more agile when it comes to strategy; after all, that’s probably what enabled most of them to pull off significant mergers and then make them work. These firms should also invest in, develop and promote their cultures more actively to retain top talent and attract high-quality laterals.

If history is anything to go by, the US Internationalists will win out.

Not repeating but rhyming

If history is anything to go by, the US Internationalists will win out. They always have in just about every other professional and financial services field. But historically, the UK incumbents were small national players when the US firms landed, whereas the Magic Circle are already semi-global forces to be reckoned with. And, their potential Achilles heel – culture – wasn’t the same issue then that it is today. There are also too many of them to all succeed unless the firms from the other groups all totally collapse.

The Magic Circle firms, or just one or two of them, may decide to change the game and adopt a more radical strategy today to avoid drifting into a cycle of relative decline. The same applies to the Transatlanticists. They move less in a pack than the others, and some might adopt bold and innovative strategies that shake up the market.

Watch this space.


Ian Stephens

CEO and Founder of Principia, bringing deep expertise and experience in strategic branding to the unique challenges of the global professional services market.