Doors still swinging at ClUtz

					EXPERT VIEW: The week Allen & Overy took on Australia >> page 2-3                                                                                   1

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                                                                                                                                  1 FEBRUARY 2010


Doors still swinging at ClUtz
By Kate Gibbs                            deliver the notices in that fashion,”      He said that while the departures
                                         he said.                                will have a short-term impact on the
THE double hit of shock news this           A&O announced this week the          firm, “in the medium-term the firm
week that 14 partners from Clayton       launch of its Australian practice       will emerge stronger”.
Utz would be departing, and mov-         with the appointment of 17 new             Fagan said that because most
ing to the soon-to-open Australian       partners, 14 based in Sydney and        of the firm’s clients operate using
office of Allen & Overy, was also        three in Perth. Fourteen of the new     panel arrangements, they have
a shock to Clayton Utz, the firm’s       partners were taken from law firm       expressed to the firm that the recent
managing partner said yesterday.         Clayton Utz.                            news will have little or no impact on
   Unusually, Clayton Utz was told          The details of how the recruit-      their purchase of legal services.
of the partner retirements not by        ment of the 14 partners came               Meanwhile, the firm is wait-
the 14 partners themselves, but via      about remains a mystery, at least to    ing with bated breath on which, if
a call on Sunday evening from Allen      Clayton Utz. Fagan said yesterday       any, lawyers will be following the
& Overy (A&O) itself, followed up by     he had not spoken to any of the part-   departing partners out the door. As
an email Monday morning, Clayton         ners, and was “not really certain       yet, it has had no resignations apart
Utz managing partner David Fagan         how it transpired”.                     from the 14 partners, Fagan said.
told The New Lawyer.                        “We were told by Allen & Overy          The question of whether that door
   Speaking on Thursday, Fagan           that it had been planned for some       is still swinging remains to be seen,
said “it’s certainly been a hectic 48    time. So one would have thought         but the firm is “seeking to retain
hours”. He said he only received         they were planning it last year. That   as many lawyers as we can”. Any
notice of the partner retirement         is only a guess,” he said.              departures, however will provide
on Monday morning after he had              But the remaining 201 partners       opportunities for promotions else-
received calls from Allen & Overy        at Clayton Utz have been galvanised     where in the firm, depending on the        TO ADVERTISE
late Sunday.                             into action by the news, said Fagan.    levels of departures.
   “So we had little notice on that.        Pressed as to how the firm will         “It gives us an opportunity to
                                                                                                                           HERE CONTACT
But in a sense this is part of the       succeed in competing with a new         make a number of promotions,                    AMY ON
globalisation of legal practice. This    firm of predominantly former part-      which were are looking at. We’re
is a new entrant in the market. The      ners, he said: “Competing against a     looking at a number of deserving
                                                                                                                             02 9422 2970
partners who were approached             new firm comprising against former      senior associates who will be appro-
obviously saw it as an opportunity       partners and other people is a little   priate for partnership. We’re look-
and wanted to take it up, they were      but unusual, but it’s not that out      ing at certain areas. Obviously this
receptive to that,” he said.             of the oridinary. It’s just another     gives us a chance to review different
   Fagan said the nature of the          competitor and we’ll just have to       practice areas and see that we are
notice was “somewhat unusual”.           make sure the offering to clients is    appropriately structured in those
“One would have thought that you         suitably compelling. The partners       areas for the type of work that we      IF THIS IS NOT YOUR
would be called. But it’s a reflection   have been galvanised into action as     are doing,” Fagan said.                 COPY, SUBSCRIBE NOW
of the nature of legal practice. And     a consequence of the events of the                                              >>   CLICK HERE
obviously these partners wanted to       last 48 hours.”                                  >> COMMENT HERE

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                                                                                                                     1 FEBRUARY 2010
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                                            THE NEW L AW YER EXPERTS WEEK IN REVI EW

Allen & Overy: The implications
                                       Shocking Australian law firms last week was the                               that it’s ‘business as usual’ will be
                                                                                                                     making a grave error in strategic
                                       news that Allen & Overy would be entering the                                 thinking.
                                       Australian marketplace, and taking from Clayton                                  The truth, laid bare this week, is
                                       Utz no less. What does it all mean, asks Ted Dwyer                            that local reputations mean noth-
                                                                                                                     ing. If a major international firm
                                                                                                                     wants your best people, there’s a
                                                                                                                     good chance they will succeed. If
                                       About 3 per cent (say 300 firms)       sobering reality check for major       they seek business here, there’s a
                                       of the 9,700 law firms share £10       Australian firms. To cherry-pick       good chance that they will get a
Ted Dwyer                              billion. Get in there with the right   some of Clayton Utz top talent         fair share. This represents a direct
                                       business model and the profit          in the way they have is a painful      threat to the income that the top
 >> COMMENT & DEBATE                   would flow. They were right.           reminder that Australia is now         local firms have been able to rely
In the mid 1990s, a number of             The repercussions of the            very much part of the fight for        on, year on year, for the last 25
major American law firms aggres-       American entry into England &          supremacy between the world’s          years. It means that the current
sively entered the London market,      Wales are still being felt. Partners   global law firms. Those that adapt     model used by major law firms to
focussing on corporate/M&A and         in American firms still enjoy a        to the new reality can continue        deliver client services may not be
banking & finance work. Their          higher PEP relative to English law     to succeed, but only if they make      sustainable in the medium to long
tactic? Aggressive poaching of         firms. The Americans dominate          some hard decisions. Those that        term. Accepting this new operat-
talent from major English firms,       cross-border deals in Europe.          choose to ignore reality will pay a    ing environment is the first key
particularly the ‘magic circle’. The      And working for an American         significant price.                     step that law firm leadership must
English majors were stunned. The       firm is a very attractive propo-          The entry of Allen & Overy,         take, before planning a response.
legal market in England & Wales        sition for young, talented part-       Norton Rose and DLA Piper into            Where do the global firms have
changed forever.                       ners in major English firms.           the Australian market has forev-       an advantage? The advantage they
   There was no mystery behind         Sound familiar? The same thing         er altered the landscape for local     have is not technical expertise.
the decision to enter London and       is about to happen in Australia.       major firms. More of these firms       As the senior partner of Allen &
compete. Sure, the multination-        Competition. Globalisation. Profit.    will arrive here and they will prob-   Overy has been saying, Australian
al clients of American firms had       The same dynamics that have            ably use A & O’s entry strategy, as    lawyers are high quality. No, the
‘requested’ a local presence in        fuelled the market in London have      well. Large Australian firms will      advantage lies in terms of geo-
England & Wales.                       now arrived here.                      now have to compete with global        graphical reach, depth of expertise,
   But it’s also a very attractive        The news that Allen & Overy         powerhouses, in Australia. It’s a      quality of work, global client base
market. The value of the legal sec-    have decided to set up here – and      big reality check, but any major
tor in E & W is about £20 billion.     the way they have done it - is a       Australian law firm that assumes            >> CONTINUES PAGE 3

                                                                                  Time for a change

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                                       HERE CONTACT                             Find your new career opportunity
                                             AMY ON
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                                                                                                                         1 FEBRUARY 2010
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                                              THE NEW L AW YER EXPERTS WEEK IN REVI EW

Allen & Overy: The implications
                                                                                                                         strategy, however, I’m not so sure
                                                                                                                         that overseas firms will want to
Continued from page 2                                                                                                    play this game anymore, unless it
                                                                                                                         ends with them having some con-
and, quite frankly, deep pockets.                                                                                        trol. The third option is to stand
Any managing partner who thinks                                                                                          alone.
that their top partners will not be                                                                                         This third option has risks, but
interested in an approach is, to put                                                                                     also has opportunities for major
it mildly, slightly delusional.                                                                                          Australian firms. There is insuf-
   Ditto if they assume that cli-                                                                                        ficient space to go into detail here,
ents will not be interested, either.                                                                                     but at a strategic level what is
There’s a lot of talk about ‘deep cli-                                                                                   required is an urgent and careful
ent relationships’ and the like, but                                                                                     review of the business, combined
as we have just seen with Clayton                                                                                        with the courage to make painful
Utz, law is a relationships busi-                                                                                        decisions.
ness. Clients identify with people,                                                                                         Internally, the overall strategy
above all. They will move with a                                                                                         here is to focus on strengths and
partner to another firm. Perhaps                                                                                         to remove weaknesses. Do any-
                                                                                                                         thing it takes to identify and lock
                                                                                                                         in your top talent, now. Consider
“It’s important
                                                                                                                         the overhead – is there a way we
to note that these                                                                                                       can deliver core services as effec-
firms are not                                                                                                            tively, for less? Can we get leaner?
                                                                                                                         This might mean a decision to
intrinsically any                                                                                                        retain a national presence, but to
better than the                                                                                                          get smaller by removing non-core
major Australian                                                                                                         business lines. Innovate, by devel-
                                                                                                                         oping commercial skills in your
firms. Rather, they                                                                                                      professional staff. Genuinely lis-
have been forced to                                                                                                      ten to your client’s needs, rather
                                                                                                                         than your PEP targets. Externally,
                                                                                                                         major firms that decide to stand
                                                                                                                         alone may decide to compete with
more fundamentally, these major                                                                                          the resurgent mid-tiers, or to
English firms have a significant                                                                                         acquire mid-tier firms/ practice
edge in terms of client service.                                                                                         groups to build strength in key
I don’t mean web sites and free            Up and down: “It will be                                                      service lines.
                                           fascinating to see how the
seminars. It’s the ability to deliver      new reality plays out”                                                           There is only one option that
legal services innovatively, in mul-                                                                                     cannot be considered by the lead-
tiple jurisdictions - at a price that                                                                                    ership of a major firm – to do
represents real value to clients.        a far more competitive market           that PEP (profit per equity part-       nothing. Business is not, as they
Ultimately, it’s this strength that      than the Australians. This has          ner) is not merely an inappropriate     say, ‘as usual’ anymore. It will be
may attract top clients away from        led to arguably negative conse-         star by which to navigate, it is in     fascinating to see how the new
major Australian firms, unless we        quences, for example the ruthless       fact a dangerous and undesirable        reality plays out.
adapt quickly.                           removal of non-performing part-         metric for the legal profession to
   How did these firms become            ners. However, it has also led to       follow.’ What a refreshing com-         Ted Dwyer is an expert in law
stronger? It’s important to note         real innovation in client service,      ment from a law firm leader. That       firm pricing, strategy, busi-
that these firms are not intrinsi-       a genuinely strong focus on the         was from Guy Beringer, the firm’s       ness development and profit-
cally any better than the major          needs of their clients, as well as an   then senior partner, in 2007.           ability. He works with major
Australian firms. Rather, they           appetite for risk that Australian          So, let’s assume that the lead-      firms in Australia, Asia-
have been forced to innovate and         firms arguably do not share.            ership of a major local firm has        Pacific and England & Wales.
adapt in a way that Australian              Consider Allen & Overy. Their        decided to accept reality and
majors have not. Put simply, it’s a      work on pricing with Markit RED         adapt, rather than compete. What                 >> COMMENT HERE
tougher environment over there,          is a good example of how this firm      are the options? Well, the first one
which produces highly effective          operates. Their innovation panel,       is to put up the ‘for sale’ sign and
organisations. In the relatively         which also uses two external con-       to become part of a larger interna-
benign local scene, we have not          sultants, has a £2 million budget.      tional firm. No harm in that, well
had to experience the cut throat         They have designed a ‘Big Bang’         done Deacons.
competition that has prevailed           Protocol for Credit Default Swaps,         The second is to put up the ‘stra-
                                                                                                                           WE WANT YOUR WORDS
in England and Wales for over a          which was endorsed by the entire        tegic alliance/ best friend’ flag, as
decade. The large English firms          CDS market in 2009. And what            Phillips Fox have done with DLA           >>   CLICK HERE
have for years had to cope with          about this quote – ‘It is my belief     Piper. Given Allen & Overy’s entry
                                                                   1 FEBRUARY 2010
                                                                    2                      4


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