Download Long term implications - College of Law Practice Management

Long term implications of the interdependence
and dispersion of the world’s capital markets
College of Law Practice Management
October 22, 2010
The global market for legal services
 It
is the aspiration of all people to improve their lot in life
 People do this by investing assets
 Time and money to create or use property, real and personal property,
intellectual property and natural resources to turn them into financial
assets to reinvest to do more of the same
 We are living in the era of appropriately regulated free markets – the emerging
and developing countries have adopted and are adopting this model - most
importantly the BRICs
 A lawyers work is at the intersection of the use and protection of assets,
whether contested or consensual – we are in the engine room and the pace has
been and will be white hot – the engine needs more lubrication
 Demand for legal services long term will grow as the world’s financial and
intellectual property assets continue to grow and natural resources become
more scarce
 U>S> will ong be a magnet for litigation
 There is a limited supply of lawyers – admission to bar/law school classes
 The principal challenge is breaking barriers to entering new markets
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The top performers
 19
of Global 100 at $1 bil +
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 Top
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 19
13 are AmLaw 100 firms
AmLaw 25 have captured 49% of market
6 Global 100 at $11.6 bil
1.9% market share each
Have captured 15% of market
of AmLaw 100 now at $2 mil + PPEP; 9 at $2.5 mil +


Grew PPEP at 3%, 10x other 90
No growth in EPs
 Benefit
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of compounding
Emerging Markets
BRIC
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Brazil
Russia*
China
India
N11s
 Indonesia
 Phillipines
 Bangladesh
 Egypt
 Korea
 Nigeria
 Turkey
 Vietnam
 Iran*
 Mexico*
 Pakistan*
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The global economy in 25 years*
ETA
Event
Acceleration since 2003
2010
Brazil overtakes Italy
15 years early
2011
China overtakes Japan (#2)
6 years early
2027
China overtakes US (#1)
14 years early
2027
India overtakes Japan
5 years early
2029
Brazil overtakes Germany
7 years early
2031
BRICs overtake G6
8 years early
2032
BRICs equal G7
No prediction made in 2003
2034
Brazil overtakes Japan
Wasn’t predicted
2037
Russia overtakes Japan
Wasn’t predicted
*Goldman Sachs, Global Economics Paper No: 192, December 4, 2009
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Long term implications of interdependence and
dispersion of world’s capital markets
Five Drivers
I.
II.
III.
IV.
V.
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Clear vision/strategy to match
Disciplined growth
Client management
Talent management
Communications management
I. Vision
 Most
successful firms must grow market share dramatically in the
world’s largest economic powers and attract U.S. inbound foreign
investment and dispute work


China and India will eclipse the G-6 very quickly, and the U.S. during the
careers of current associates; Brazil will also be a mega-economic power
 China may be the world’s largest economy within 20 years
 India will eclipse China
Protective policies will make it difficult for US firms to penetrate these
markets
 American
firms are mistakenly focused on Europe in their drive to
globalization

 To
This is an expensive and wasteful distraction
the extent there will be a Global 20, five Western firms will be
squeezed out by Chinese law firms
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II. Disciplined growth
 Balance

reach and profitability
The AmLaw numbers indicate this will be the principle challenge
 The
need for growth resources is driving a hyper-active merger market
 Coming transcontinental mergers will inevitably focus on Asia
 Law firm structure and governance will be driven by and required to
straddle the balkanized regulation of the profession globally

U.S. firms should be clamoring for a national regulatory structure

 Grow

in markets (broadly defined) accretive to profitability
Vexing choices


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Critical for India
Litigation’s rise in economic might v. historical strength of transactional work
Building in China and India - cut-throat price competitive markets
III. Client management
 Focus




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on multi-nationals
Relative to their size, they play a disproportionate role in the economy
2,270 companies (less than 1%) of all companies in the U.S.
In Europe, Germany and France, not London, are home to the multinationals
London is a corporate finance practice
Role of multinationals
 11%
of private sector
employment growth from 1990 –
2010
 19% of private sector workforce
 25% of private sector wages
 25% of gross profits
 31% of GDP growth since 1990
 23% of value added to the US”
economy
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 48%
of exports
 37% of imports
 74% of US R&D
 60 % of sales in US
 2/3 of workforce in US
 3/4s wages in US
 60% of assets in US
IV. Talent Management
 Vexing

Challenges - two possibilities
A dearth of qualified legal talent in the BRIC and N11 countries will drive
the cost of talent unlike anything we saw in the “golden era”
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Challenging leverage models

 Key
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Billing rates will soar
PPEP will be king
Inexpensive leverage and delivery models (e.g., KM, unbundling) will result in a
cost cutting battle for market share
drivers
Diverse lawyers with Western business know-how and personal skills will
be king
Ability to prosper in a multi-cultural, multi-lateral business and
professional setting
Best team on the field will be virtual
Management of associates across global platforms
V. Communications management
 Vexing
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challenges
Lack of commitment to Asia
Marketing is woefully underfinanced and struggling under a crushing
workload
Lack of marketing professionals in BRIC and N11 countries
Lack of marketing experience and know-how in Asia
Lack of competitive intelligence about BRIC and N11 markets
Differences in buying behavior
General disrespect and disregard for the rule of law in emerging
economies
The end
Thank you