In every market, there’s always room for smallish firms that cater to small private companies and high net worth individuals. Firms that in the truest sense serve as consiglieres to each of their clients. Clients in longish-term relationships with these firms tend to eschew substituters, are not rate-sensitive, and are change-averse. This is rational on their part. If your firm is in this niche, our best counsel is “Don’t mess it up.”
The question, I suspect, of greater interest to our readers is, How many global players can such a market support?
We met with the office managing partners of three such firms, two London-based and one New York-based, and to venture a guess three (three to five, max) global players with a presence in a market like Prague is about the limit. What do they offer and why isn’t there room for more?
Start with economics; we always try to do. The Czech Republic’s economy is beyond healthy, growing in the high single digits in the last few years, but it’s still tiny in the context of the rest of the globe. (2015 GDP about $185-billion, $32,500 GDP/capita at purchasing power parity, which is indisputably “First World” territory. But US GDP is currently running around $18,000 billion, or 100X that of the CZ.)
There’s only so much outbound and inbound financial investment. That said, when you’re one of the handfiul of local-office-presence firms that can service that work wtih your network of deeply connected and collaborative offices from London to New York to Silicon Valley, you have no indigenous substitutes. You’re on the short list for deals with material extraterritorial reach.
But the lesson of Prague, and many other cities we’re familiar with, is that more global player firms have been there or thought about being there than are there now. This is a good thing. If it means that law firms are becoming more selective about where they set up and keep shop we applaud it.
The fallacy of sunk costs seems to infect Managing Partners’ and more caustically law firm partners’ “strategic” thinking more than in any other industry we’ve seen. Beware.
So yes, some Magic Circle and a couple of US-based global players need to be in Prague or its adjacent centers of commerce. Not everyone; not now and not for the foreseeable future.
Old Town Square with the twin-steepled Church of Our Lady Before Tyn