CREANDO ALLEANZE


Top legal International 05/08/2009 MARCO MICHAEL Dl PALMA N.7 - JUL/AUG 2009 p. 18
Cover Story LEGAL ALLIANCES
Despite set-backs, international alliances remain a popular strategic model. But as their sponsors readily admit, they face important challenges

IN a surprise move in June, UK firm Pinsent Masons abandoned its multi-lateral European alliance Pinsent Masons Luther Group (PMLG) to ink a non-exclusive bi-lateral understanding with Salans. Pinsents' decision put legal alliances back under the spotlight. The exit appeared a tactical move by Pinsents to improve its coverage in Eastern Europe rather than any verdict on the merits or demerits of alliances themselves. Observers, however, believe that in this particular case at least the outcome was to be expected. "I think at some point you have to decide whether to strengthen co-operation otherwise everyone goes their own way. Informal alliances have little chance to survive over the long period," believes Rainer Stockmann of GSK Stockmann & Kollegen If a looser affiliation between firms results in a lack of direction and cohesion, the opposite can similarly cause strains. In March, Brazilian Barbosa Miissnich & Aragao withdrew from Garrigues' Latin American alliance, Affinitas, as a result of a mis-alignment of strategic intentions (see TopLegal International issue 6). Sources close to PMLG, meanwhile, claim that part of the Pinsents' team wanted a merger with allies, resulting in the cooling of relationships. Both Affinitas and PLMG illustrate the risk posed by multilateral alliances. Garrigues, for instance, has reiterated its ambitions to be the world's first Ibero-Latin American firm and Affinitas makes sense if its firms eventually merge. The loss of its Brazilian relationship will prove costly as Garrigues is forced to re-build its alliance in Brazil anew. Despite misfiring, alliances continue to enjoy an appeal, not least because international clients look on them favourably. Many of these are aware that global firms are far less integrated than they claim to be and that quality across different offices is often short of uniform. Global names have also been scaling back in less profitable markets, cutting staff in outlying offices or even closing them altogether. Independent networks in this respect enjoy an advantage. "We can continue to provide worldwide coverage," says Carl Anduri, president of Lex Mundi. "If clients go to our member firms, they are assured that those firms have an international correspondent which clients can go to if necessary." Avoiding conflicts of interest is another reason for the popularity of alliances. Firms can also accept a client even if their ally in another jurisdiction does not. A fact underlined by partner Julio Veloso who co-founded SJ Berwin's Spanish practice and is now partner at Rodes & Sala, Nabarro's ally in Spain. "When you have a network and you're not working at the firm's HQ, there is a higher likelihood of a conflict. If I have a client who wants to work with another firm in another country, I will try to convince them to work with my alliance; if not, they are absolutely free to work with whoever they please. At a global firm, you can't say: "Fine, we will do the work in Madrid and you can hire a different firm in Paris." Alliances also allow members to pursue independently their own international strategies which may or may not involve one or more allies. For instance, best friends Slaughter and May, De Brauw Blackstone Westbroek and Hengeler Mueller decided to open together in China, leaving the other two other core members, Bonelli Erede Pappalardo and Bredin Prat, free not to join them. Germany's GSK, a member of the Nabarro European alliance, announced its project to launch in Singapore this summer. Tonucci, the Italian ally of Mayer Brown, is also pursuing its own regional expansion programme. "We have offices in the Balkans and our clients who invest there also have interests in different countries in Eastern Europe. It is easier to serve them with the same formula. We were considering Ukraine prior to the crisis but we have now switched our attention to Poland," explains founding partner Mario Tonucci. Clearly alliances also face important challenges not least on the obvious issue of which allies to select. Two years ago, French outfit Racine formed an alliance with Belgian counterpart Vergels and declared that it was negotiating with practices in Germany, Italy and Spain with a view to extending its fledgling branded network across Western Europe. Two years on and Racine confirms that this process is "ongoing". "It is not easy, it takes time," admits partner Jean-Yves Martin. "We have a number of best friends relationships so there is no urgency," he adds. "We must work together before we enter into an agreement," concurs fellow Racine partner Carla Di Fazio-Perrin. "We need to make sure that we share the same vision." The quality of intra-firm relationships is all important for the market standing of an alliance. "The market is in some situations not very receptive to loose alliances," says Stefan Kraus, managing partner at German firm Luther and a member of the PMLG executive committee. "Clients often want to buy from one source. Alliances are competitive if members are committed to operating closely together and all of them are highly ranked in their local jurisdictions. A loose club is little more than a referral network." GSK's Rainer Stockmann says the Nabarro alliance could well bring in allies from the Netherlands, Poland and the Czech Republic but it must avoid acting like the European Union. "You cannot have more and more members joining continually. Things just get too difficult to manage. We invited two new firms from Italy [Nunziante Magrone] and Spain [Rodes & Sala] which we took a long time choosing. Our task now is to grow these relationships and involve the newcomers more deeply in our business," he says. Echoing this, Carl Anduri says Lex Mundi is attempting to create additional mechanisms and introduce new protocols to knit its members more closely together. "We have two task forces working on this," he confirms. "At firm level, we are examining what happens when clients want help from more than one member firms. At a process level, we are looking at improving the services delivered by cross-border practice groups." It will not have escaped the managers and strategists that client-driven demand for crossborder services, a principal justification for international alliances, has fallen as businesses rein in investment and concentrate on their domestic markets. Some concede this point but insist there are other considerations as well as immediate returns on instructions. "We are at the bottom of the cycle," admits Mr Stockmann, "but the alliance is not just for boom times and the economic situation will improve. Allies need each other as a marketing tool to demonstrate their international strengths to cover different markets when we pitch for transactions." Tonucci's founding partner, meanwhile, reminds the sceptics that money is not everything. Domestic rival Chiomenti ended its exclusive alliance with Skadden Arps Slate Meagher & Flom because it closed the door to most US referrals. However, Mr Tonucci says an alliance in good working order delivers leverage that goes beyond clients and deals: "It is more important to have access to know-how and to be part of a larger structure where you can get support. You can do a good job as a lone independent, but you will only go so far as your own energies and resources alone permit." Others, meanwhile, are taking advantage of what they see as a significant shift in the demand for legal services brought on by a return to the real economy. "The strength of London's legal centre was to a significant extent based on finance," says Luther's Mr Kraus. "You have to ask yourself whether more real economy deals will not change the balance of power and make Continental law firms stronger." As a result of this scenario, PMLG has no plans to replace Pinsents with another UK member. Contrary to perceived wisdom, and sounding a new confident note on the prospects of an all-Continental alliance, he adds: "To add a new UK firm to our network as a member is not our priority. It might be easier to close gaps on our Continental European landscape if the UK is not covered on an exclusive basis. Alliances continue to enjoy an appeal - not least because international clients look on them favourably Client-driven demand for cross-border services, a principal justification for international alliances, has fallen ALLIANCES: A ROUGH GUIDE Co-ordinators and members set out some strategic advantages and a few inherent limits CARL ANDURI LEX MUNDI "If clients go to one of our member firms, they are assured a international correspondent" CARLA Dl FAZIO-PERRIN RACINE "You must work together before entering an agreement and make sure you share the same vision" STEFAN KRAUS LUTHER "The market is not always receptive to loose alliances. Clients want to buy from one source" RAINER STOCKMANN GSK STOCKMANN & KOLLEGEN "You cannot have members joining continually. Things just get too difficult to manage" MARIO TONUCCI TONUCCI & PARTNERS "You can do a good job as an independent, but you will only as far as your own resources permit" JULIO VELOSO RODES & SALA "Globals cannot say: "We will do the work in Madrid and you can hire a different firm in Paris"