Magic Circle Firms Comparison Essay

As the saying goes, “All roads lead to Rome.” Well, not all law firms are positioning themselves to be global providers; however, for those that are, there appear to be two distinct paths: (1) the global Goliath; and (2) the global elite. The former—personified by Dentons—is the upstart firm that, through dizzying acquisition, becomes ubiquitous on the map and in the media. The latter category—embodied by Magic Circle firms—builds on an established “bespoke” brand in its domestic and adjacent markets and leverages it to morph into a “global elite” firm. These are very different paths that are pointed in the same direction: to service multinationals across the globe.

Dentons: The Global Goliath

Imagine having Dentons as a client: what a boon to an M&A practice! They are the rollup kings of the legal world, effecting takeovers (or as they are sometimes euphemistically called, “mergers”) with machine-gun fire rapidity and global range. One needs a scorecard to keep up with the acquisitions—not to mention locations and key personnel—of this corporate iteration of a law firm. It was just a couple weeks ago that their breathtaking swath of deals—including the formation of an IT incubator—prompted me to chronicle their recent moves and the implications, but as Jacqueline Suzann wrote, “Once is Not Enough.” A June 11th article appearing in “The Lawyer” reported that Dentons has entered into non-disclosure agreements with 21 law firms to negotiate potential “mergers.” Not only is this number remarkable, but also the geographical breadth of the targets is, too. Dentons plans to expand its imprint in Europe and Asia as well as to establish a foothold in Latin America. That’s a grand plan and will keep the travel industry humming.

But there’s more to the latest chapter of the latest Dentons story. Dentons Chairman, Joe Andrew, was quoted as saying that the April, 2015 acquisition of McKenna, Long (already, no doubt, in Mr. Andrew’s rearview mirror) was a: “signal to everyone to say that although we are in the US, our intention was to be much larger.” That comes as little surprise since the U.S. remains—at least for now—the world’s largest legal market.

Focus on domestic markets is now only part of the story as some firms vie for business on a global stage. Presence and capacity in markets across the globe is the strategy of firms like Dentons who seek to service multinationals’ cross and multi-border legal challenges. This “follow the client/follow the money” strategy fueled the growth of the large accounting firms—now the Big Four—so should it come as any surprise that law firms would channel that model? It is also understandable that Dentons and other legal behemoths like DLA, Baker &McKenzie, and Hogan Lovells, are Swiss vereins– just as the Big Four are. This not only allows “member” firms within the global brand to remain largely autonomous from a P&L perspective, but it also enables the firm to overcome regulatory hurdles as in the case of the Dentons merger with Dacheng in China. Dacheng continues to practice in its own name in China, although it is marketed as part of the Dentons brand everywhere else. It also maintains its own database. Is this beginning to sound like a franchise?

The Global Elite

While Dentons is in the vanguard of the global Goliath model, other firms, notably the Magic Circle, are positioning themselves as “the Global elite.” What’s the difference? Dentons seemingly came out of nowhere to become the largest (by headcount, countries, and offices) law firm on the planet via a dizzying number of mergers. Neither were they an elite firm that leveraged its brand nor were they a firm tied to a particular geographical base. This accounts, in part, for why they have no global “headquarters.” Their brand is premised upon global coverage and heft, not by a “bespoke” image cultivated for decades. By contrast, the Magic Circle firms—as well as a handful of elite U.S. firms—have cultivated their “bespoke” brands for years and, within the past two decades or so, have ventured well beyond their domestic markets to service existing clients as well as to leverage their brands and attract new ones. The Magic Circle firms, particularly, have successfully evolved from domestic powerhouses to global ones. Linklatters and Allen & Overy, for example both derive well over half of their gross revenues from “foreign” markets with the bulk of their work (and revenues) coming from cross and multi-border engagements. It comes as no surprise, then, that the Managing Partners of Linklatters and Freshfields, Simon Davies and David Aitman, both have eschewed the “Magic Circle” moniker referring to their firms as “ the global elite.” And just as Dentons is doubling down in the US, so too have the UK-based “global elite” (f/k/a Magic Circle) firms served notice that the U.S. is in their line of sight. That is why they have recently added “bonus pools” to augment their long-held “lockstep” partner compensation models. It’s an era of global free-agency, and the global elite are forging what will become law’s “global one-percent.”

A Global “One- Stop Shop”? A Missing Piece

The global Goliath and global elite models share a common objective and prize: to provide multinationals with a global “one-stop legal shop.” That is a bit of a misnomer, though, since these firms will still need to solve the riddle of integrating the disaggregated legal supply chain in the delivery of their services. How to do this? They partner with elite service provider(s) with expertise, size, and geographic reach in critically important, high spend areas including: e-Discovery, cyber security, project management, as well as other key disaggregated or niche “legal” services. This pairing would have several salutary effects: (1) promote efficiency of the overall legal delivery process; (2) reduce overall client cost; (3) enable the law firm to retain a piece of that profit (create a previously ceded revenue stream); (4) tighten the grip on the client relationship; (5) integrate and control the delivery of these key components in the legal delivery process (which could be white labeled and/or re-badged); and (6) free up firm management to tend to acquisitions as well as acquiring and retaining key legal talent. Why don’t the global firms develop this back-end capability organically, you ask? It’s not law firms’ core business, and it would take considerable time and resources to ramp up. Besides, each model of global firm is expanding quickly (though Dentons is unique in this category), and senior management’s focus is, predictably, directed to scaling the core business. As well, elite service providers—untethered from regulatory restrictions to an even greater degree than the recently liberated firms operating in the re-regulated UK environment—operate with a business-oriented efficiency that would be highly compatible with the unabashedly corporatized approach of the leading global law firms. This might be the final piece of the global puzzle.

Conclusion

Not long ago, people referred to the “AmLaw 200” to describe those who virtually monopolized U.S. corporate legal spend. Then the reference became the “AmLaw 100” because of the significant disparity between the PPP and revenues of the first and second 100 firms. Translation: half the firms had become marginalized. More recently, The American Lawyer (as well as other sources) has identified 20 or so US firms that have separated themselves from the pack. What does this portend for the other 80 in the AmLaw 100? Ask the alumni at the bottom half of the former AmLaw 200.

But the winnowing process does not—will not—end there. The corporate legal market is no longer domestic or even regional; it is global. Enter: the global Goliaths and global elite. Who will prevail? Let’s leave prognostication for another day and conclude with something we can take judicial notice of: it’s a brand new ballgame.

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Filed Under: Legal PracticeTagged With: Dentons, elite global law firms, legal services, Magic Circle Law Firms

In the world of Commercial Law, you will often hear talk of ‘Magic Circle’ firms. This is an informal term used to describe what are generally regarded as the five leading UK-headquartered law firms, namely Allen & Overy, Clifford Chance, Freshfields, Linklaters and Slaughter and May. 

These firms are some of the most prestigious in the world, and consistently guarantee highest earnings per-partner and earnings per-lawyer amongst firms headquartered in the UK. If you're considering applying to a Magic Circle law firm, it’s worth knowing the key difference between them to find out which one you’re best suited to.

Working at one of these firms involves long hours, high pressure and a fast-paced working environment, so it’s good to be aware of what you’re getting in to. We’ve put each firm under the spotlight to give you an idea of what to expect.

Allen & Overy

Allen & Overy is an international law firm structured across seven practice areas: corporate, banking, international capital markets, litigation and dispute resolution, employment and benefits, tax and real estate. They are known for their banking and geographical strengths, and have a big presence in China.

Trainees at this firm describe it as an open and sociable environment, with their own café/restaurant-by-day and bar-by-night “Lavanda” being a popular spot for trainee lawyers. The firm’s headquarters are located on the fringe of the City, meaning you are right next to Shoreditch which is packed with trendy bars for after work drinks and client entertainment. 

Clifford Chance

At Clifford Chance, transactional work rules the roost. Within this work, it’s traditionally the finance practice that shines the brightest, in particular in areas like banking and finance, capital markets and asset finance. The firm’s global nerve centre is London, and a trainee role here revolves mainly around project management. This will mean co-ordinating lawyers across different jurisdictions. The UK produces 35% of the firm’s total revenue, however there are still vast opportunities for global travel. 

Freshfields Bruckhaus Deringer LLP

Based on Fleet Street, Freshfields' trainees are unanimous about what sets their training contract apart from others: flexibility. There is the option of three-month seats, but also the opportunity to apply for seats as you go through the training contract rather than having to do so at first. The firm boasts a glittering client list – its first ever client being the Bank of England back in 1743. A couple of years ago, Freshfields advised the government on the flotation of the Royal Mail, so you can be assured of high profile client interaction and a particularly interesting workload.  

Linklaters

This firm prides itself in its personable, team oriented environment. Linklaters is an ideal place to work for those who want a hand in matters that visibly impact the key economies and sectors. As a trainee, you will get involved in projects reaching beyond UK stores – above and beyond what a lot of other firms can offer. It’s a transaction-heavy firm, so half of the 225 trainees sit in corporate, banking or capital markets-focused seats at any one time. Seats outside these realms are particularly competitive. The firm boasts a constructive atmosphere, where partners are easy to approach, and care about your career.

Slaughter and May

Unlike other Magic Circle firms, Slaughter and May haven’t embarked on aggressive programme of international expansion to every continent. The reputation of their corporate department is second to none, and they work with more FTSE 100 and FTSE 250 clients than any other law firm. They are on the look-out for strong lateral thinkers, not people who will recite verbatim what they have learnt in law school, so if you’re thinking about applying, make sure you’re passionate about thinking outside the box. They are keen to find people who will consistently come up with innovative ideas and new solutions. 

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Thinking about applying to a Training Contract with one of these firms? Check out our snapshot guide here. 

Want to tailor your C.V. for a career in law? Download our C.V. template here. 

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