Is becoming bigger and bigger the future for law firms?

The merger of the US law firm McDermott with the, equally US, law firm Schulte Roth & Zabel, which brings the ‘big’ McDermott's from 1,400 lawyers up to a total of 1,750 lawyers, raises the question of whether external growth is the right strategy for a profession that will inevitably be impacted and then transformed by the various tools developed through research and development in artificial intelligence.

The arrival of these tools on the legal market is already saving time and significantly increasing productivity. Instead of picking up a book to check a particular point of law, it is much quicker to consult one of these new tools, which gives you the answer to your question and allows you to check the sources on which it is based. Some platforms are announcing the capacity to update contracts stored in your database of precedents, as well as the performance of legal audits using AI. The tedious task of entering the details of the parties to contracts is already a thing of the past. Search tools are becoming increasingly efficient. Etc...

All of this leads us to believe that law firms will inevitably have to slim down. So why get bigger?

I remember the saying that was highlighted when Mitterrand came to power in 1981: ‘When the fat ones are thin, the thin ones are dead’.

While the big players can always slim down, they will have to resolve the human issues associated with mass redundancies, the difficulty of slimming down without affecting the age pyramid and, even more importantly, the problem of adjusting the downsizing process on a speciality-by-speciality basis (see the downsizing processes of 2008 and then the Covid years).

On the other hand, it seems that the thins will be able to stay alive relatively easily, precisely because of the arrival of AI-based tools, thus proving the initial saying wrong on this point. Of course, they will need to remain alert, informed and willing to evolve and adapt constantly. This is easier to do when you are a small team than when you are several thousand lawyers. This is the eternal issue of the time it takes for information to travel from the tail to the head of the dinosaur and then back down from the head to the tail.

That leaves medium-sized firms. In my opinion, they are the most at risk. Especially when they are ‘full service’. The sticking point is then to succeed in slimming down small, autonomous and close-knit teams. The solution for them will be, on the contrary, to increase their productivity and pursue an aggressive growth strategy. They will have to attack the markets of the big players, who will then be losing momentum.

If we think further to find the ‘ideal model’, what are the common points of tension for small, medium and big firms (they are big even when they want to be great): full service and the price of service. The latter point deserves an article of its own, so I will come back to it.

Full service is out of reach for small firms and a concern for others when they have to downsize.

A new type of firm has gained momentum in the US: there are only partners with all skills combined. You are free to organise yourself as you wish, to work as much or as little as you wish. The firm takes between 20 and 30% of your revenue, depending on the firm, and in exchange covers all operating costs. If you work from home, the firm will rent a workspace with a meeting room and other electronic and digital amenities. It will also handle the management of partners' bids.

Example: a big M&A deal comes your way (ouch!): you launch a tender for the areas you are not familiar with and put your team together. Once the deal is completed and the fees paid, the firm pays the team members less the percentage they owe you for bringing the deal to them.

Several of these firms have offered me the opportunity to become their partner for France. I declined. Why? Their system is not suited to foreign countries: since I am a small firm, if a US partner refers me a large deal, I will either have to turn it down or put together my own team. So, I have no reason to pay them 20%, let alone 30% of my revenue.

On the other hand, their logic raises questions: could the network model be the solution?

For small firms, certainly. It would allow medium-sized firms to focus on their core competencies while maintaining their service activities (the Anglo-Saxons have this cruel expression for their so-called ‘service partners’) by relying on specialised firms chosen for their quality.

In my opinion, this is the strategy that the fat Anglo-Saxon law firms that have invaded us (without, it must be said, much resistance on our part, unlike our Swiss colleagues) should adopt. Their highly paid local partners will certainly not agree with me, nor will the headhunters who make a living from the permanent mercato that the major European legal centres have become, such as, for example, Paris.

There is also much to consider about how foreign offices, particularly Paris ones, are managed from the US and why the promised quality is not always delivered. This too could be the subject of a new article…

(To be continued...)Écrivez votre article ici...