Law Firms Explore Merger Option with Foreign Players for Growth

Small and medium-sized firms feel a tie-up with global cos will help in brand building

With the Bar Council of India having come around to accepting the entry of foreign law firms into the country as proposed by the government recently, medium-size firms have spotted an opportunity. Firms that were talking of expanding their own brands are increasingly considering alternatives.

Meanwhile, the split in India's top law firms seems like the harbinger of a wave of consolidation. The breakup of Amarchand and Mangaldas and Suresh A Shroff & Co. has got smaller firms thinking, said inhouse lawyers at prominent business houses. Several firms have pitched themselves to prospective clients with the promise of growth, possibly through inorganic means and bringing these two themes together.

“If a good foreign law firm seeks a tie-up, even with the possibility of merging, if and when regulations allow it, law firms like ours will not shy away from exploring it,“ said Ramesh Vaidyanathan, who founded Advaya Legal after quitting his job as general counsel at Mumbai International Airport. Lawyers at half a dozen similar-sized firms echoed his view. Harish Narasappa, a founding partner of Samvad Partners, said the firm's intent to grow organically and merge with another outfit was not on the agenda, when it came to the future of 60 lawyers, “obviously the partners will consider seriously good opportunities when they come along.“

Smallto mid-size firms that comprise 30-50 lawyers, started by individuals who wanted to build brands of their own, have hit a ceiling in growth and in terms of the categories of business they can service, said Premal Shah, CEO of AFCL -a legal recruitment firm.

The next step is to reassure clients by either merging with an accepted brand, or with a likesize firm following which the collective strength of the combined entity can be cross-sold.Shah added that a greater number of firms are open to discussing merger options now than a year ago. “It may not be an entire firm, the merger may work out by large practices moving, but it is consolidation in a market where business revolves around individual brands rather than law firms.“

Shah acted on behalf of Shar dul Amarchand Mangaldas to recruit lawyers in Mumbai. As it turns out, many of them were lawyers who started on their own, but decided to get under a bigger umbrella. “When you're on your own, it is difficult to mandate rates with clients, but now many of the same clients will come at nearly three times the consulting charges because that is the firm's fee,“ said a lawyer who asked not to be identified.

Foreign law firms haven't had a great run in India thus far.One of the country's leading firms, AZB Partners, led by Zia Mody, ended a “best-friend“ relationship with Clifford Chance in 2011.

Foreign firms that chased local ones in 2008-09 have since set up practices in Singapore or Hong Kong. They are looking for partners to access key Indian clients.

One such is London-based Allen and Overy that ended its relation with Trilegal in 2012.The firm is still interested in establishing itself in India and perhaps the quickest route would be to partner with someone or acquire a mid-size firm, managing partner Wim De onge said in an interview ear ier this year.

But overseas firms aren't ooking to rush into India, given the nature of the environment.

“I'd compare the Indian market with the Australian one, where about 10% to 20% of the irms are global or multina ional companies but the rest are smalland medium-size,“ aid Kartik Ganapathy, partner at Indus Law -a mid-size firm.“So unless it is to get a toehold nto the work of Indian con umer businesses in the coun ry, there is little incentive for a oreign firm to come in.“

There's a difference in culture as well. Local clients approach ndividual lawyers rather than irms, pointed out Anand De ai, managing partner of DSK Legal, which handles a large number of celebrity contracts apart from banking and financial services companies.

“In India, clients are still keen on going to a particular individual lawyer who is reputed in a particular practice area and don't usually just go to the irm,“ he said. By contrast, quality is associated with the irm rather than specific lawyers in the west.

The one thing all lawyers agree on is that Indian firms are about to enter a phase of consolidation, regardless of he catalyst -the rush to become India's top law firm or in ernational takeovers.

The Economic Times, New Delhi, 28th July 2015