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Law Firms Going Global- A Baedeker Guide

Law Firms Going Global- A Baedeker Guide

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Kowalski&Associates
www.kowalskiandassociatesblog.com

Law Firms Going Global: A Baedeker Guide
Jerome Kowalski Kowalski & Associates December, 2011

Kowalski&Associates
www.kowalskiandassociatesblog.com

Law Firms Going Global: A Baedeker Guide
Jerome Kowalski Kowalski & Associates December, 2011

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Published by: Errol A. Adams, J.D., M.L.S. on Dec 23, 2011
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Page | 1
 Kowalski
&
 Associates
The latest from our blog: www.kowalskiandassociatesblog.com 
Law Firms Going Global: A Baedeker Guide
Jerome KowalskiKowalski & AssociatesDecember, 2011
T
homas Friedman told us a couple
of years ago that “
.” The
annual AmLaw reports on law firmprofitability strongly suggests that as lawfirms go global, taking advantage of the newflat world, profits seem to soar. Butperhaps globalization
is not all that it‟s cut
out to be. And, even if 
it‟s for your firm,
going global requires heightened diligenceand vigilance.A recent article in The Economist,
subtitled
 
concludes that going globaldampens and slows profitability. TheEconomist suggests that global expansioncan be an expensive mistake.
Foreign Offices as Revenue Enhancers?
I
recentlyreported on the
The
 National Law Journal’s Managing  Partners’ Breakfast 
Meeting.
As I noted,thepanel leading the discussion consisted of 
 
Page | 2Tom Mills of Winston & Strawn,Alice Fisher of Latham andElizabeth Stern of  Baker & Mackenzie, each of which served
as their respective law firms‟ Washington
offices managing partners. Each firmrepresented on the panel was global andcertainly eminently profitable. Winston &Strawn has 15 offices, of which seven areoutside the United States. It reported grossrevenues of $717,000,000, 868 lawyers andprofits per partner for 2010 of $1,385,000.Latham boasts 31 offices, of which 19 areabroad.
Latham‟s gross revenues for the
same period of $1,929,000,000, earned off of the backs of 1,939 lawyers. PPP atLatham for the periodwas $1,995,000.Baker, which has a June 30 Fiscal year,reported revenues of $2,104,000.000produced at 68 offices, of which 58 areoutside the United States, where 3,768lawyers work. Baker reported PPP of $1,125,000.Baker & Mackenzie stands apart. For
more than 30 years, Baker‟s business model
was unique in that it consisted of a web of dozens of offices throughout the world. Ithas consistently been at the top of the heapof AmLaw 100 firms in terms of headcountand at or near the top of the heap in terms of gross revenues. It has never ben at the top of the AmLaw listings in terms of either profitsper partner or profits per equity partner. TheBaker model has been, for decades, to be the
“go
 
to” firm for matters international. While
PPP of $1,125,000 is nothing to sneeze at, itis substantially lower than the firms thatmake up the AmLaw top ten.CoudertBrothers,a firm founded in 1853, pursued asimilar strategy of pan globalism. By 2006,it had 650 lawyers spread around the globein 28 offices. In that year, after years of declining revenues and profitability, Coudertdissolved and filed for bankruptcy. Asignificant number of Coudert partners joined Baker, following aborted discussionsbetween the two firms aimed at a merger.All of the panelist attributed a great
deal of their respective firms‟ growth to
their
firm‟s
global platforms. Earlier, TheEconomist reported on the growing trend of law firm globalization and some of thetechnical difficulties for law firms whichseek to leave their native shores and set upbeachheads abroad(certainly a worthwhileread for those firms seeking to go global
 
).
G
oing global is not the uniqueprovince of AmLaw 200 firms. Twohundred lawyer Atlanta basedSmith,Gambrell & Russell maintains an office in
 
Page | 3Frankfurt.One hundred and seventyCleveland basedBenesch, Friedlander,Coplan & Aronoff maintains an office inShanghai.And there are many others.The single most important metric of 
the success of a law firm‟s offshore branch
office is whether it is a net importer orexporter of legal services. Most law firmforeign offices are net importers of services.Despite this disappointing result and reality,law firms continue to plant foreign offices ina fashion most akin to the NineteenthCentury urge by industrialized nations toengage in blatant and boisterouscolonialism. The analogy is most apt, as youwill see below.But going global is rife withadditional landmines, some of which aredescribed below.
Can Global Collaboration beAccomplished?
F
irst, as I recently wrote,the key to future success for law firms is collaboration.Cultural and language differences, as well asan army of 1,000 or more lawyers in a dozenor more nations poses some seriousobstacles to advancing a culture of collaboration. In addition, the nature of theattorney
 – 
client relationship varies widelyfrom nation to nation. In some cultures,lawyers are trusted business advisers andconfidants. In other cultures, lawyers aremere scriveners. In some areas of the worldclients treat lawyers as an obstacle to gettingbusiness done and dissembling when dealing
with one‟s own lawyers is com
monplace.
Impacts of Local Upheavals on the Firmas a Whole
S
econd, in discussing strategicplanning with attendees of the recentconference as well as with managingpartners I regularly meet with, I was rathershocked to learn that virtually no global lawfirm has a disaster recovery program in the event of a disaster in a major foreign branch.
The greater a law firm‟s footprint, the more
likely one of those footprints may well landon a landmine. Disasters may be of a naturalkind, such as an earthquake on Japan (fromwhich Japanese branches of foreign lawfirms are still reeling). Local disasters maybe politically inspired, such as in theinstance of a regime change or as isnowtaking place in Russia.Or, most critically, adisaster may well be the consequence of local financial upheaval. Of course, themost foreboding crisis is the continuedupheavals in the Euro zone; should the Eurocollapse, the consequences will bedevastating at every level. But, oddly, while

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