When it comes to targeting markets for strategic growth, law firm leaders are contending with a virtual world in which geographic barriers have broken down and legal businesses are discovering new ways of driving revenue, panelists said Wednesday at ALM’s Legalweek.
Trish Lilley, chief marketing and business development officer at Stroock & Stroock & Lavan, said every law firm has its own strategy for expanding into a new market.
Having spent a decade in the same role at Philadelphia-based Fox Rothschild, Lilley said her former law firm was most comfortable going into a new market by leveraging a combination with a local firm of 20-30 lawyers to hit the ground running with a critical mass, as it has done in Minneapolis and Dallas.
“The firm felt there were strong enough roots and revenue generation that would allow it to build off that office,” Lilley said. In so doing, she said, the firm grew from 400 lawyers to close to 1,000 during her 10 years there, from 2008 to 2018.
As with large elite companies from other industries, Lilley said Big Law firms expanding into a new region often face the perception of being a “carpetbagger” that doesn’t care about the local community. To project a more benevolent image, Lilley said firms “need to find inroads to make yourself part of the fabric of the business community.”
When Fox Rothschild expanded into Dallas in 2014 via a strategic merger with David & Goodman, Lilley said, the firm partnered with the Dallas Holocaust and Human Rights Museum to judge an essay contest that was open to local underprivileged middle schools. Lilley said the initiative spoke to the history of Fox Rothschild, which was founded by Jewish lawyers in the early 20th century who were discriminated against by much of the white-shoe Philadelphia legal community.
Texas has become a major site of Big Law expansion in recent years, as firms have followed the flow of venture capital investment money and tax incentives, which have stimulated a vibrant startup and tech business community, panelists said. Patrick Fuller, vice president and general manager of ALM Intelligence, said firm leaders should look for these indicators for where to open up next.
“If I’m a midsize firm, I don’t want to go into established markets where prices are inflated. I want to get into markets that haven’t been invaded by larger firms. That’s the combination for local firms,” Fuller said. For instance, he said, “Michigan did a great job of putting in a lot of tax incentives that have stimulated the startup community.”
Looking beyond the U.S., Lisa Shuchman, executive editor of Law.com International, said firms are pivoting their Asia strategy away from China. Many Western-founded law firms that have long had a Hong Kong satellite office are now directing their growth efforts toward Southeast Asian markets, sometimes pulling out from Hong Kong altogether as tensions over China’s authoritarian government continue to mount.
“If you want to do work in China, you have to do work in Hong Kong. But firms don’t want to be China-centric,” she said, pointing to Singapore, Vietnam and the Philippines as countries whose technology and startup sectors have been hospitable to expanding law firms.
The decisions of law firms to pivot away from a country for ethical reasons, the panelists said, speaks to a growing question in the legal profession: that lawyers are increasingly asked to clear an ethical standard in practicing law and conducting business, not just a legal bar.
Instability in geopolitics always poses risk to a business with goals of global expansion, Shuchman said. A number of firms have now shuttered offices in Russia, she noted.
Richard Tromans, founder of Tromans Consulting, said the ongoing exodus out of Russia in response to the invasion of Ukraine raises the question “should U.S. firms do the same with Hong Kong?”
A New Non-Geographic Market
Firm leaders shouldn’t just be keeping tabs on emerging markets that can be defined geographically, especially as COVID-era legal work has taught the industry it can function as productively on a remote basis without overhead costs dragging down profits, panelists said. Robyn Addis, chief operating officer of Legal Internet Solutions Inc., said the virtual space is itself an emerging legal market.
“A lot of the reporting has been that law firm leaders want to hold on to a physical presence because what will associates do when they don’t have the opportunity to mix and mingle with senior partners?” Addis said. “Instead, [firms] can now say [to an associate], ‘We have more money to bring you along with us to a client meeting,’ so it’s just about reimagining what that opportunity looks like.”
Tromans pointed to Elevate and Deloitte, massive legal services companies using distributed work models, which allow them to save on overhead while continuing to grow on a global scale.
While it’s important to know where litigation is filed and where venture capitalists are supporting startup business communities, Tromans said firm leaders need to track the evolution of legal markets into new business models. He pointed to Cleary Gottlieb Steen & Hamilton, a white-shoe law firm that launched Cleary X, a technology-driven practice group focused on transactional work.
“There are new ways to make revenue. Once you actually start to think of the how, you realize the whole business model can change,” he said. “Law firms are disrupting themselves.”