I will offer you two opposed ideas at the same time and trust you will all retain the ability to function: First, those positing the US/UK divide is unbridgeable will be vindicated: The cultures are indeed too foreign to each other, clients want either New York or English law but never need both under one roof, the lockstep end of the compensation spectrum and the EWYK end are incapable of being squared, and so on.
In other words, the current law firm rankings and standings on both sides of the Atlantic will continue to look much as they do today—with the salient difference that people will be largely at peace with it. Firms will retain their essential identity as US/New York rooted or UK/London rooted. No problem.
Second, this is indeed a moment of severe disequilibrium whose only resolution lies through a substantial recombination and re-ordering of existing firms. Globalization is inexorable and for the law firm market to fail to offer a wide range of choice of providers offering strong US and UK capability will prove to be a vacuum that nature abhors.
Once one or two high-profile US/UK marriages or engagements are announced, there will be a rush to follow before the proverbial window closes. The landscape of firm rankings and standings will be altered greatly. And I’ll offer a bonus footnote under this hypothetical future: Because there are far fewer UK firms of the caliber to hold up their end of the bargain than there are equivalent US firms, the great majority of US firms will be left without a partner and, like it or not, will indeed have to focus on tending their home garden.
But for all this to be the same in 2021 or 2026? Hard to see this level of obsession and anxiety persisting that long.
Coming into Heathrow
A faithiful reader who prefers anonymity sent us this private email and graciously consented to having us republish it without attribution. For context, our commenter is not US-based.
I have just read the ‘Letter from London’. As always a really interesting piece. I thought you might be interested in my ‘two penny worth’ on the main points raised.
Compensation – I think the challenge for firms here is less about lockstep v EWYK and more about if we want something different how do we change. Historically (in my view) most compensation systems have evolved without much thought of the behaviours that they drive and while everyone made money it didn’t matter. Now firms may want to change (in order to drive different behaviours) but require partners to vote for that change in order to push it through. On the assumption that if you were so unhappy with your compensation you would have left already it is not surprising that the status quo is an attractive option for todays partners even if he behaviours it tolerates (or encourages) put the long term future of the firm at risk.
New entrants – I think they are here to stay, are already stealing market share and will only continue to do so. As traditional firms talk about wanting the ‘high end complex work’ they are by definition restricting the size of their market (only so many market changing M&A deals or disputes a year) and they cannot support the number or scale of firms set up for them. The big four made plenty of mistakes in the pre Enron era but seem to have learned from most of them. The key point you raise about being able to tell their professionals to march is incredibly well made, one of the main differences between the two industries and benefits the accountants. I don’t think the accountants care about doing the world’s sexiest deals they will happily watch the Magic Circle and White Shoe firms at the top of the directory rankings when they see themselves at the top of the profitability / revenue scales.
New York/London axis – In a world with such growing free agency of lawyers I think it will become harder for firms (without retained earnings) to make genuinely big bets. I think the future for law firms is a world with many different business models (not just the ubiquitous pyramid) and the best firms will get very profitable first before they have any thoughts of trying to get big. If a London firm merging with a NYC one (or vice versa) means more profit lets do it. if not why would we? Big for the sake of big, I don’t think will prove to be any protection from market forces. Cross Atlantic mega-mergers will I suspect happen again but fewer than we might think. The growth of 2 and 3 partner boutiques makes me think that partners are recognising that size is a vanity issue for many.
Thanks! And you know who you are….