Last year a cluster of law firms focused their attention on Bristol and Cardiff. Is the southwest and Wales now viewed as one region by clients, or does regional loyalty still count? Ed Thornton reports

One of the largest buy-outs to hit the South Wales market during 2007 drew note for reasons other than its size: the principal legal advisers hailed not from Cardiff's established cluster of law firms, but from Bristol. The management buy-out of Williams Medical Supplies saw southwest leaders Osborne Clarke (OC) and TLT secure key roles – the former advising two directors and the latter advising the majority shareholders.

"The days have gone where just because a deal was happening on your patch, you had the right to receive a mandate," says Morgan Cole corporate partner Johnathan Rees, adding that the leveraged finance teams at banks – along with the corporate advisory practices at the big accountants – increasingly view the southwest and Wales as one area. "With the deal size people are looking at, it is more efficient to operate that way," he says.

Consequently, while there has not historically been a huge amount of interaction between the southwest and the Welsh markets, barriers are clearly beginning to break down.

In April last year, Anglo-Welsh firm Morgan Cole, for a long time one of the Welsh market's leading players, unveiled plans to open an office in Bristol, establishing a small corporate law team based at the city's new financial quarter, Temple Quay, with a particular focus on leveraged acquisitions, private equity and initial public offerings.

Rees, one of the team overseeing the Bristol practice, says the firm, having spotted a gap in its coverage along the M4, wanted to capitalise on the city's buoyant corporate market. "The corporate market in Bristol is much bigger than people realise, although there are a number of good firms," he says. "We are convinced that there is more to go at commensurately and that we have a quality offering."

Rather than parachuting in a team from Cardiff to run the new office, the firm tapped the ranks of Bristol's high-quality corporate lawyers, poaching Clarke Willmott partner Paul Hardman and associate Mark Gilder. Having worked together for four years, the pair had built strong links with the southwestern city's burgeoning band of corporate financiers and dealmakers. "There is a synergy between what they do and our existing contacts in the Bristol market," says Rees. "They have contacts in the market we could not have tapped."

The firm's Bristol team wasted little time, completing three transactions in the first quarter. One of the advantages of being part of a larger firm has been the ability to draw on the resources of other offices. "It gives our offering flexibility and resources that we think distinguish us from some excellent law firms in the city and wider region," says Hardman.

Rees adds: "Initially, the plan was to keep it as a corporate offering, as it helps people understand what we are about. We would not want to get lost in the noise of the Bristol market place."

However, Rees says that if the five-strong corporate practice continues growing it could clear the way for other practice areas to open in Bristol. "Corporate tends to be the vehicle within which grows the firm, and tends to spin off work for other disciplines," he says.

But while firms from outside the city are eager to reap the benefits of a buoyant market, Bristol's leading firms do not appear to be plotting an expansion across the Welsh border just yet. "We have clients in Wales, but it is not a key strategic area geographically for us," says Burges Salmon managing partner Guy Stobart. "There is a shedload of business that we do not have in more competitive markets such as London and overseas. We will go in for particular types that we think we are well suited to. Some clients straddle the border and that is where it makes sense to try and do their work."

Bristol firms appear to view the Welsh market as self-contained and less accessible than others. "We perceive that Wales has a strong identity," says Stobart. "There is a perception that clients in Wales want to support firms in Wales and those with strong Welsh connections."

Such sentiments are echoed by Paul Cooper, a corporate partner at southwest rival heavyweight Osborne Clarke, who says: "Wales is traditionally a very different place for Bristol lawyers to sell their services. There are very good firms in Cardiff and they do like to keep the work in Cardiff – we get the odd referral."

However, the Cardiff market has caught the attention of other non-Welsh firms, notably Berrymans Lace Mawer, which opened an office in the city on 1 November under the leadership of Matthew Harrington, hired from local firm Cartwright Black.

Berrymans' senior partner Terry Renouf says the firm, whose offices include Birmingham, Leeds and Southampton, perceived a gap in its geographical coverage. "We are constantly looking at broadening the range of services that we offer and our clients need in doing their business," he says.

"They may choose to use an individual, team or office or any combination of those, but the important thing for the client is that they know that the range of expertise is available to them."

One of the reasons the firm might have felt the need to have a physical presence in the city was the type of work driving its business, which focused more on litigious work in personal injury and insurance. "Geography, even in the age of the internet, remains important because witnesses, who may have to appear in local courts, need to be seen and proofed face-to-face," says Renouf.

"Knowing the local Bar, judiciary and experts all adds value. Knowing your opponents is important and you do so through being in their locality."

Morgan Cole's move into Bristol and Berrymans' foray into Cardiff share one common characteristic – both are targeted at specific markets and do not yet amount to a bid to compete with the respective cities' burgeoning number of full-service firms.

As Alan Meredith, senior partner in Eversheds' Cardiff office, points out: "The firms opening in Cardiff are fairly boutique. They are not new firms which are offering the full panoply [of services]."

The Cardiff market has yet to see a repeat of the merger that spawned Eversheds' Welsh office some years ago. Firms such as Russell Jones & Walker that set up shop in the city in recent years have focused on specific practice areas such as employment.

Meredith thinks the days when clients simply instructed firms out of loyalty to a historic relationship are over, meaning that firms must face up to the realities of an increasingly competitive commercial market. "If you provide a good service at the right price they will give you work," he says. "People feel they can get independent advice here, which is why we have sought to provide specialisms. We would not pretend to give advice on capital markets, but we would refer it to another office."

The buoyancy of the Welsh market is evidenced by Hugh James' expansion during the last year. In June, the firm announced plans to create 135 jobs at its Cardiff headquarters after its workflow rocketed following a string of fresh mandates from bluechip clients such as HBOS and Norwich Union.

Managing partner Matthew Tossell, who was last year appointed to serve a third four-year term at the firm's helm, notes a pick-up in insurance work – as well as construction and projects – also contributing to the firm's expansion. "We have seen a huge increase in demand for lender services and claims handling. That will increase further as insurers outsource pre-litigation claims handling work," he says.

Local rivals have also been enjoying a steady workflow, as well as some notable client wins. Geldards last year landed a prestigious spot on the panel of the National Museums and Galleries of Wales following a formal review, a three-year appointment that will hand the 35-partner firm work across its commercial human resources (HR), property, IP/IT and public law practices.

In October, the firm also announced a shake-up of its management structure, appointing corporate finance partner Jeff Pearson to the new post of chief executive, heading up an executive team comprising two other partners as well as the firm's heads of finance, employment, IT and HR.

Meanwhile, David Williams was appointed to the post of non-executive chairman while the firm's Cardiff-based head of public law, Huw Williams, took on the role of non-executive vice chairman.

"Modern commercial law firms frequently need to work very closely with clients, helping them in a strategic capacity," says Williams. "In order to remain among the best, we need to employ and recruit the most talented lawyers from around the country and that means having a management style and focus which can help the firm to constantly move forward."

Public sector work, which has long been the fuel of the Welsh economy, has also been in good health. The Welsh Assembly is on the verge of completing its first-ever review of its legal advisers, which is expected to culminate in an eight-firm legal panel from February. If Whitehall's L-Cat super-panel is anything to go by, firms that win places are likely to enjoy a lucrative workflow: in the most recent year recorded, £14.5m in fees were paid out to L-Cat firms.

"The Welsh Assembly Government has attracted more work and that is attracting outside firms to look at Cardiff," says Meredith, who thinks it likely that more firms will follow Berrymans' lead and establish a presence in the Welsh capital.

Private sector work in Wales is also providing a steady flow of work to Welsh firms, according to Morgan Cole's Rees. "The corporate base in Wales is fairly healthy, there are some firms and corporate finance boutiques doing well," he says.

"Historically, the public sector has been strong, but there is growing private sector work. For most law firms, public sector work has underpinned their growth, but most also have good corporate teams."

The demands of resourcing the local domestic market have not prevented Hugh James from embarking upon ventures into other markets. In September the firm launched a London office, recruiting Pillsbury Winthrop Shaw Pittman outsourcing partner Phillip Rees to head it up.

"We had been looking to open in London for some time and have existing institutional and insurance clients there, so it was partly to do with servicing the existing client base," says Tossell. "But it was also about having additional commercial capability around IP/IT. There was an opportunity to acquire a specific team at Shaw Pittman, which gave us a hook to open an office in London in specialist IT/IP outsourcing."

While the office currently focuses on procurement, outsourcing and technology work, Tossell insists this is only the start. "This is a foothold and our big problem will be trying to contain people. There are a number of areas where we want to push out," he says, adding that the firm will be examining which other practice areas based at the firm's Cardiff office might have the potential to establish a presence in the City.

Whether it be Cardiff, Bristol or London, one of the persistent challenges facing firms is recruitment, particularly in specialist areas. Tossell says that while it has proved difficult to recruit appropriate specialists in a minority of areas, such as commercial property, there is generally still a strong supply of candidates, demonstrated by the fact that the firm filled its 135 extra posts in just two months.

Eversheds' Meredith thinks Cardiff is competing with cities such as Bristol as an alternative to London in a way it did not seven years ago, although there usually has to be a personal link, such as family and friends, pulling candidates towards the Welsh capital. But he adds: "When people have a reason to come back to Wales, they will not do it unless you can promise them the quality of work they are used to," he says.

Given the amount of work being generated in the public and private sectors, both Cardiff and Bristol are likely to go on attracting the attentions of law firms from elsewhere in the UK. The big test will be how such firms fare when they attempt to gravitate from niche offerings, servicing a particular client base, to larger outfits fighting the existing heavyweights for an increasingly demanding pool of candidates and clients.