Many small and midsize law firms find themselves in some difficult -- and for most of them, unprecedented -- strategic predicaments.
They also are confronted with a wide range of possibilities such as, mergers, Vereins, general and specialized networks, "best friends" relationships.
How can each firm make the decision that is best for them?
The internationalization of legal practice and the entry of foreign and other non-traditional competitors into local legal markets have created a lot of uncertainty for small and midsize firms:
- They have been reasonably successful in the past, but feel less confident about their ability to continue to succeed in legal markets that have become increasingly competitive.
- They believe that they need to grow, but are not sure how to define the “growth” that will produce the best results for them.
- They understand the potential advantages of mergers and Vereins, but do not want to lose their sense of independence.
- Many of them belong to various types of law firm networks, but they question whether they are receiving a satisfactory return on their investment.
- They are aware of the many other options for growth, such as networks and “best friends” relationships with foreign law firms, but are skeptical about the return on investment from those structures.
An attractive, growing legal market inevitably attracts new competitors. Local law firms, which for purposes of this discussion include law firms that are located in only one jurisdiction, inevitably find themselves having to navigate new currents in a maturing legal market with new competitors, many of which are larger, better-resourced outsiders. The firm in New York or London that used to refer work to the firm now has an office across the street and is competing head-to-head for the many of the same clients.
Local law firms have responded to the maturation of the international legal market through a variety of structures to improve their international visibility and, more importantly, their service delivery capabilities: de jure and de facto mergers with other law firms; global networks; joint ventures; strategic alliances; and “best friends” relationships. Each structure, in its many variants, offers substantial opportunities to serve clients better, improve financial performance, and maintain competitiveness in a tightening, much more competitive, legal market.
The relative advantages and disadvantages of these options are well-known among most lawyers in most legal markets. This paper suggests several intellectual processes that are less well-known, but have proven to be critically important for a local law firm that wants to retain its client base and market position when its legal market matures and becomes intensely more competitive.