Finding the right friends in Europe
Globalisation - The head of Edge Ellison's international task force talks to Philip Hoult about the firm's 'enlightened promiscuity' strategy
September 22, 1999 at 08:03 PM
5 minute read
"Enlightened promiscuity" is how David Hull, the head of Edge Ellison's international task force, describes the firm's strategy overseas. As a description it is probably more accurate, and is certainly racier, than the alternative – 'best friends'.
For Hull and the rest of Edges' management, however, making the strategy work is hugely
important.
After all, no other firm has publicly committed itself to trebling its international work within three years. This is exactly what Edges did when it unveiled its three-year plan 'The Way Forward' in May 1998, in a bid to boost morale and provide leadership after the sudden collapse of merger talks with Pinsent Curtis and the loss of good lawyers to rival firms.
Hull says that Edges decided to focus efforts on its international work because of the hugely competitive state of the UK legal market. That and because, according to Hull, "there is now no area of UK legal practice immune to the internationalisation of legal services".
A strategic review of the firm's international practice concluded that there were five basic options available: merging with a firm; setting up an alliance followed by a merger; joining a franchise; setting up a joint venture; and making so-called 'best friends'.
Edges chose the last option in contrast to its Birmingham rivals, with the exception of Wragge & Co. Dibb Lupton Alsop and Eversheds are both putting in place European networks, while Pinsent Curtis has held talks with German firm Schurmann & Partners.
It is, of course, too early to say which strategy is right for the long-term and there is room for different approaches. But adopting a best friends strategy makes sense for Edges for a number of reasons, including cost and the firm's own previous experience. For a start, of the five strategies, the best friends option is the one with the lowest cost and the lowest risk.
Smaller than its immediate rivals and with lower profits – an average £150,000 per equity partner – Edges cannot afford to open offices everywhere or spend valuable management time on the slog necessary to make a network a success.
Establishing overseas networks can also dilute a firm's brand and make quality control a management headache the larger that network becomes.
And Edges already has experience in making a best friend. In the US it developed a relationship with 70-partner-plus Pittsburgh-headquartered firm Buchanan Ingersoll.
"Where this all started," Hull says, "was in the late 1980s and early '90s when we found ourselves increasingly following clients, particularly corporate clients, having to invest and make acquisitions abroad."
This was the period of the fastest growth in the firm's history and the firm piggybacked on its clients.
This growth prompted the firm to go out specifically to find a partner, and it discovered one in Buchanan Ingersoll. The city of Pittsburgh had gone through similar changes to Birmingham, moving from a manufacturing dominated economy to a more service-based one.
It is understood that the significance of the link has waned. Edges still uses Buchanans in those states where it has offices, but outside those states, Edges does what it considers best for its clients.
Although requiring fewer resources, a best friends strategy still requires investment.
Hull admits that the firm is some way from Slaughter and May's best friends model, with its single-billing arrangements and partner-level secondments to top German firm Hengeler Mueller Weitzel Wirtz.
Even so, he argues that there
is still plenty that a firm can do with visits, sharing know-how and
secondment of lawyers.
The firm has also looked to adopt a more focused approach to its international work. While remaining a full-service firm domestically, overseas Edges is looking to cash in on what it perceives to be its sectoral strengths.
The areas it is looking to push are: media and marketing; entertainment and leisure; e-commerce and advertising; minerals, quarries and aggregates; specialist retail; and pensions and employment.
Edges' approach makes a lot of sense in the US, where there are a huge number of independent firms with good clients to woo.
But in some European jurisdictions, the number of potential friends is undoubtedly dwindling.
Hull says this is a key issue for the firm – when working with US firms it is a direct beneficiary of referrals working, but it is a net giver when working with European firms.
Nevertheless, Hull insists that there are plenty of quality firms that want to stay independent in the European countries where Edges' clients want to invest.
And, he says, there are plenty of clients who think along these lines. "We have existing clients who would want to continue operating an independent approach," he claims, "rather than have one particular firm foisted upon them just because it has an exclusive relationship with its UK firm."
Friendships, particularly those of a promiscuous kind, can, of course, be brittle. Hull is clear about the consequences if one of the friends should catch the eye of a rival: "If we are going to expose our client base to other firms, it would be totally counterproductive to refer work to firms tied to the competition."
Ultimately though, and in contrast to the best friends tag, the acid test of these relationships comes down to the amount of work referred and the fees generated.
With international work currently standing at 18% of the firm's total turnover of £6.5m, Hull says, "it is fair to say that we are more than on target".
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