"The magic circle doesn't exist, but if it does, we're in it."

The above comment from one of Herbert Smith's better-known M&A personalities rather neatly sums up the quandary facing the firm as it attempts to compete in the era of the global giants.

Central to its campaign for 10 years has been the attempt to beef up its M&A practice while adapting its contentious practice team to an age that values arbitration over red meat litigation.

Yet the reality is that much of the transactional progress made by Herbert Smith was achieved in the less stratified market of the mid-1990s, when it was easier for firms to move up a division.

The impact of the more competitive legal market has also obviously been amplified by the return of cross-border M&A, with continental acquirers in Europe – where Herbert Smith has patchy coverage – often in the driving seat. The true believers maintain there is no problem – and Herbert Smith's M&A practice has a lot of zealots – but the more thoughtful privately concede the international question will have to be addressed at some stage if the firm is going to make good on its very considerable ambitions.

Some answers have emerged as part of Herbert Smith's ongoing strategy review. In essence, the firm has (rightly) decided that it needs to become substantially more international but, rather than a broad push, the focus is firmly on the world's key emerging markets. That means more investment in Herbert Smith's small but nicely-formed Hong Kong/China practice and its Moscow arm, with an eye on less-developed markets of India, Singapore and Indonesia. It also means that the firm plans to get on with its long-awaited Middle East launch.

This approach has much to commend it. Jeremy Xiao's respected China team already looks to be punching well above weight after securing a string of eye-catching mandates. Moscow is touted as a solid performer, even if the practice will have to contend with the return to London this autumn of respected finance partner John Balsdon. On a more general level, an emerging markets push fits snugly with Herbert Smith's energy/utility-heavy client base.

But the best thing to be said about the current thinking is that it recognises that Herbert Smith, with limited investing power and high leverage, cannot fight against larger rivals on too many fronts. A concerted and co-ordinated push into the world's hottest growth markets promises maximum bang for moderate buck and possibly even a touch more market differentiation.

Considering the firm is also audaciously attempting to upgrade its City finance practice along every major product line at the same time, Herbert Smith would do well to maintain this concept of ruthlessly targeted investment. Otherwise it will be painfully reminded that the magic circle is very much still in existence and its members still want Herbies' lunch.

Summer blues

This rise in European M&A also has its downsides for the magic circle. The partners there don't get to have the whole of August off anymore. New entrants in the market (Canadian pension funds, Australian infrastructure funds and mega buy-out house consortia) are bidding for public assets like BAA, ABP and McCarthy & Stone, in deals that are not dependent on the time of year. Once a public asset is in play, it remains in play, meaning the traditional summer lull is fast becoming a thing of the past.

But while the poor old partners might only get a few weeks off, it is the assistants who are the real losers. As one Linklaters partner puts it: "Partners still get to go away, while associates tend to stagger their holidays throughout the year." Internally this reads more like 'I'm going on holiday, so don't even think about leaving the office'.