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What impact will the crisis on law firms?

di Ambra Di Tommaso

Fatturati record: solo un ricordo?

A Settembre 2008 l'autorevole rivista inglese Legal Business ha stilato la classifica LB100 dei primi 100 studi legali inglesi molti dei quali hanno da anni i propri uffici in Italia. Il quadro che si estrapola dai dati non è allarmante ma verosimilmente gli effetti del credit crunch e della tempesta finanziaria che si è appena abbattuta saranno visibili solo a partire dai bilanci del prossimo anno. In questo momento marketing e sviluppo del business sono risorse più che mai strategiche e la parola d’ordine è consolidare le relazioni con la propria clientela e tenersi pronti a cogliere le new opportunities. Data in hand, we try to understand what is the climate that reigns in London, the headquarters of many of our so-called "first level of studies."

£ 13.96 billion that the total value of sales that British law firms have generated in 2008, an increase of 14% which seems to have peaked.
The profit margin equal to one third of total turnover (33.8%) is slightly lower than the previous year which had been issued in 34.2%.
But here's the most significant. In 2008 the profits of the studies were up 13%, a significant decrease compared +19% in the past year, and have also registered a growth rate lower than the turnover. data return the clear sign of a slowdown. The amount of work has increased but has produced much lower profit margins.

The Director-General of the law firm Norton Rose, Peter Martyr says commenting on the situation for the current fiscal year the revenue target could be a growth of zero percent. "It 's very difficult to judge what will happen next year. No one can predict" . The same thought is shared by the management of the studies that are part of the so-called Magic Circle (Clifford Chance, Allen & Overy, Freshfields and Linklaters) they would see as a satisfactory result of zero growth.

In such a scenario, development activities and communication play a crucial role, says Silvia Hodges, founder of the Legal Marketing Italy and Professor of Marketing at Emerson College in Boston. "It 's clear that the rules of the game are changing dramatically for many law firms. In times like these, the business the old way will not work, new opportunities are looming and the survivors will be forced to adopt new behaviors and strategies to overcome this period of economic disruption ". "It 's now time to be visible ," says Silvia Hodges suggesting a possible way to go, "it is necessary to add value and build key relationships. Law firms need more than ever to understand what customers are saying and what they need in this difficult situation. The lawyers will make a greater effort to know their customers and build solid relationships with their partners. "

rising Practice, practice reduction

Studies in view of the crisis corrono ai ripari tentando un riposizionamento. Allen & Overy che nel 2007 riceveva dal suo dipartimento di contenzioso solo il 9% del business generato dall'intero studio (il 33% era rappresentato dal corporate ed il 44% dal finance) ha lanciato un programma che prevede un rafforzamento dei ricavi provenienti dal litigation per arrivare ad un 40% del fatturato nei prossimi quattro anni.

Il contenzioso, come anche il diritto fallimentare e la ristrutturazione d'impresa , è una tipica practice anticiclica. Gli studi legali che incentrano la loro attività sul contenzioso, hanno infatti registrato un aumento del fatturato ma non così esorbitante come ci si potesse aspettare. "I clienti are still extremely reluctant to embark on a dispute "as Elizabeth Barrett, former Head of Litigation by Slaughter and May's.

On the other side, the practice of corporate continues to keep up - despite the size of transactions have decreased - but finance and real estate is weakened. The same applies to the practices of private equity already in the data charts LB100 of 2007 showed a first deflection.

But what are the prospects for who focuses his work on the financial sector? In light of speculation that caused the outbreak della bolla finanziaria ci si può aspettare che le varie autorità competenti decidano di rivedere le regole a tutela del mercato e di porre dei rimedi laddove siano emerse delle falle nell’ordinamento. "Questo può implicare una progressiva crescita dell’attività Regulatory, ovvero di assistenza a istituti finanziari e società nell’implementazione delle nuove normative." afferma Jeffrey Greenbaum , capo del dipartimento Financial Services presso la sede romana dello studio Lovells.

Clicca l'immagine della classifica per ingrandirla

In the eye of the storm

The goal of zero population growth called for by the large law firm would appear to apparently a perspective in which the current situation remains unchanged, although almost always is reflected in a decline in profitability if they are not implemented the cuts.

costs of large law firms grew over time in proportion to the increase of the salaries of lawyers and investment in the new offices. The British magazine Legal Business compare the current crisis with previous crisis in early nineties which lasted until 1993. At that momento gli studi legali cercarono di far fronte alle difficoltà protraendo i contratti dei trainee (praticanti) e liberandosi dei collaboratori in esubero. Questo potrebbe accadere nuovamente ma se fino a un anno fa il principale problema che veniva sollevato dai managing partner era di riuscire a trattenere gli associati di talento, è probabile che molti preferiranno agire con prudenza.

“E’ troppo presto per parlare di esuberi” afferma Chris Carrol, managing partner dello studio legale Travers Smith. “Sei mesi fa nessuno aveva abbastanza persone. Saremmo poco lungimiranti se dopo così poco tempo dicessimo di averne troppe. Probabilmente per i tempi che corrono ne abbiamo effettivamente troppe ma sappiamo how difficult it is to recruit talented people, so I do not think that many are already thinking about making cuts. "

In any case, since the previous crisis, we can identify some differences.
If in the '90s who suffer most were assistants and practitioners, this time to get worse - George Bull says the head of consulting firm Baker Tilly - may be lawyers with more seniority as non-equity partners who receive compensation high on a predetermined going to have a significant effect on sales of equity-partner - or shareholders, including dividends are distributed. The figure of non-equity partner is gone developed over the years and was not contemplated 18 years ago when the legal market was hit by the previous crisis. The equity partners are 16% of the total of the top 100 lawyers study English. The small number on the one hand allowed him to achieve record revenues - every equity partner in 2008 generated an average income of € 607mila - but then exposed them to more current volatility of the market making them more careful on the way invest resources.