Bakers chief Leite on Brexit, global growth and why lawyers need to learn to code
Baker & McKenzie chair Eduardo Leite reflects on his six years at the helm of the firm
August 24, 2016 at 05:43 AM
6 minute read
The original version of this story was published on Law.com
A year after posting declines in both revenue and profits, Baker & McKenzie more than regained lost ground this past financial year, reporting an 8% increase in firm revenues and a 13% surge in profits per equity partner.
Its $2.62bn (£2bn) in revenues and $904m (£692m) in profits both represent high-water marks for the 77-office firm, which is also larger than ever, with 6,045 lawyers.
Baker & McKenzie's chair, Eduardo Leite, who is passing the reins to London managing partner Paul Rawlinson in October, told Legal Week sister title The American Lawyer that demand grew by 5% during the past year. The increase was spread pretty much across the board, he said, including in some tricky markets, such as the UK and China.
In his six years at the helm, the Uruguayan-born, Brazil-raised Leite has presided over the firm's fastest growth in its 67-year history, increasing headcount by 31% and opening 10 offices and a second global services center in Belfast, which now employs nearly 200 people.
In this interview, Leite reflects on the headwinds facing the industry and the joys of his globetrotting tenure as chair. Among his proudest accomplishments: lifting gender diversity at the firm. Last year, 40% of newly promoted partners were women, among the highest proportion in the industry, and 24% of partners are female, up from 20%.
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Unpack the firm's financial results a little bit. Why are they up so much, given the distressed state of petroleum and commodities markets, flattening transactional work and currency volatility?
"Last year, we did more cross-border deals than any other firm in the world, according to the league tables. Some other areas that had significant growth were international trade and commerce, and antitrust/competition, which go hand-in-hand with M&A work. There's been a big surge in transfer pricing and tax litigation and tax structuring matters, including some major, major ticket items.
"We were more impacted by the currency fluctuations last year than this one. But for global firms like us, currency fluctuations are the norm. Thirty-seven percent of our lawyers are in Europe, the Middle East and Africa; 26% in Asia; and 37% in the Americas. So currency fluctuations will continue to impact us. But the majority of our collections are in dollars and the expenses are in local currencies, so hedging strategies really wouldn't get us to a better place."
Where do you see the market going for global legal services?
"The market will continue to consolidate. Because of our longevity, all our offices are very profitable. We don't need to subsidise markets or offices as others do. But we can see the pain or the pressure among the national firms, which maybe aren't shrinking but are feeling the pain of not being able to grow.
"I think we'll continue to see clients moving more work in-house or outsourcing more work to lower cost providers. We will continue to face the disruption of technology, artificial intelligence, cognitive and predictive computing. We need to train our lawyers to code, to learn computer language, if they want to gain an advantage in the market."
Did you just say law firms have to teach their lawyers how to code?
"I did. I think it's a must. It doesn't mean that we're suddenly going to develop programmes for IBM. It's just understanding how computer intelligence works, that binary thinking, so that we are able to use the tools better. We are working with the Watson technology and we're encouraging our people to develop small apps for their day-to-day operations."
You say you're focused now on growth in New York, London and China. I get that you're undersized in New York, with just 100 lawyers. But with the UK vote to leave the EU and China's economic contraction, isn't a growth strategy counterintuitive?
"China's economic situation has changed dramatically. But we still need to grow and we are eager to grow there. Two years ago, we were granted the first licence to work in a joint venture with a Chinese firm, FenXun Partners, in the Shanghai Free Trade Zone. They have the licence to practice Chinese law, we have the global operation, and we're all in the same building. We like the fact that we are license number 001. That puts us in a very nice market position. The Chinese justice bureau is putting this forward as a model for the internationalisation of Chinese law practice.
"In London, our financial results were very good, better than the previous year in sterling. The Brexit vote has an impact but it most deeply affects firms concentrated on the UK market. Our London office does a lot of work with the Middle East, Europe and Africa, as well as the Americas and China. Because of that, I think we're better insulated."
What's been most challenging about the job for you personally?
"I didn't expect to travel so much – two thirds of my time! That's a lot of time in the air. But I like it, I must confess. I like to walk the aisles, to see what's happening in a country, not to rely on reports only. It's so powerful, say, to sit down with the governor of the central bank of South Africa or Azerbaijan and get the flavour of the economy, the position of the country in the region. Or with clients from Indonesia to Colombia. That's richly rewarding professionally, and it's a rich experience personally too, because I've seen a world that in six years has changed a lot."
What are your plans after October?
"I don't have clear plans yet. But generally, I'm not thinking about going back to Brazil to my old practice. Perhaps I'll contribute on client relationship and growth initiatives. It's a huge firm. There are too many panels – 67 new big panel appointments this past year alone – and too many areas where we need senior people with gravitas and with knowledge of who's who in the firm. But Paul and I haven't had the time to sit down and talk about it yet."
For more, see: Baker & McKenzie posts 13% jump in PEP as revenue grows 8%
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