Global Law Firm Eyes Africa As Next Great Expansion Opportunity
Baker & McKenzie sees Africa as key to future growth
Later this month, Baker & McKenzie’s Gary Senior will travel to Johannesburg, South Africa to celebrate the third anniversary of his firm’s office there, and its presence on a continent that many law firms see as key to future growth.
Big Law Business sat down with Senior, who sits on the firm’s global executive committee, and chair to the firm’s Europe, Middle East and Africa region.
In Africa, Baker & McKenzie has three offices: It opened its original office on the continent in Cairo in 1986. In 2012, it opened offices in Casablanca and Johannesburg, which is when Senior took on responsibility for Africa.
“Compared to 10 years ago, there’s a huge amount of interest,” said Senior. “Almost every week there’s an announcement about some law firm or other doing something in Africa.”
“There’s no doubt it’s partly about investing for the future, and partly aspirational,” he added.
In an interview, Senior explained why the firm plans to enter Africa through local partners, how the African legal market compares to emerging markets, how it compares to China and how he views the global legal market. Below is a lightly edited transcript.
Excerpts:
“It is an investment. You have to work out how long you want to invest for and how much, and when you’re going to get a return.
“It’s quite hard — even the emerging markets have a certain maturity in terms of law firms. It’s a little bit easier if you can find a law firm that has a similar culture that you can open with.
“It’s tough because China is a pretty developed legal market these days with some very big Chinese law firms as well as the international firms. If you just open up there, it’s hard to compete if you don’t have a critical mass and you don’t have all the critical practice areas. It’s quite hard to make money from it.
“We were a U.S. law firm, we’re very proud of our U.S. heritage, but it’s very much a minority of our revenues that’s in the United States now. The biggest office is the London office.
Big Law Business: What’s are the main regional hubs you see?
Senior: It’s quite hard to generalize — Africa is more than 50 countries and they are quite varied. That is one of the challenges.The identity of the regional hubs isn’t quite clarified yet. London is clearly the most important money center. Paris has some importance into Francophone [meaning former French colonies in western Africa]. It’s not clear how Johannesburg will develop as a regional hub. Quite a lot of clients will also base their African operations out of Dubai. How all of that is going to play out is just a little unclear at the moment.
There are certain places where you would imagine international law firms will certainly have a presence. Nigeria being number one, because it’s a very big country. In global terms, the economy is not that large but it’s going to grow because the demographics are there. It’s got a very big population. So you would imagine that firms are definitely going to open up in Nigeria.
We look to be in countries that our clients would regard as major commercial centers and then we’ve got to have the right people on the ground. We wouldn’t open up in any of these offices by just flying in people from outside. You have to have partners who are on the ground, who are nationals in that particular country. You’ve got to find people who become the Baker & Mckenzie partners.
We like boots on the ground. There’s no doubt about that. If you look at our spread across the world, we have 77 offices in 47 countries.
Big Law Business: Baker & McKenzie is a verein structure. Does that make it easier to enter the continent of Africa?
Senior: Well, let me explain. We’re the only verein that used to be a single partnership. All of the other vereins were created by firms merging. We were a single partnership and we moved to a verein structure because we regarded that as a more flexible operating structure.
But any Baker & McKenzie office is a full Baker & McKenzie office. We don’t do co-branding or anything like that, so we are actually quite cautious about opening offices. But if you look at the other continents, that’s what we’ve done — we’ve populated the other continents with Baker & McKenzie offices, one would assume that over time, we would do that in Africa as well. But we are cautious about it.
Big Law Business: What’s the talent recruitment process like in Africa?
Senior: You’ve got quite good law firms, so there are plenty of bright lawyers in Africa — without a doubt. We have identified law firms that we can work with. It’s an alliance in a very loose sort of way, not in any kind of branded way and not in any kind of exclusive way. For example, last week, I spoke at a training event for junior associates in our region and we invited junior associates for firms we work with in Africa, from Ethiopia, Uganda and Nigeria. Next week, I’m in Johannesburg bringing all these firms together from the sub-Saharan African countries where we’ve identified law firms.
Big Law Business: What prompted you to open the Johannesburg office in 2012?
Senior: It was a little bit speculative in the sense that we had looked at South Africa and there wasn’t a firm there we wanted to merge with for various reasons, but we acquired the Johanneburg office when Dewey & LeBeouf collapsed. We basically took their office. We had looked at it and thought it would be an interesting place to have an office.
Usually, it’s more strategic than that. We’ll decide that we’re going to open and we’ll look at the firms there and see if we can acquire somebody. Because it’s quite hard — even the emerging markets have a certain maturity in terms of law firms. It’s a little bit easier if you can find a law firm that has a similar culture that you can open with.
Big Law Business: Do you see mergers as your path into the continent?
Senior: Yes I do. But what the time frame will be is I’m not sure, to be honest. That just depends on, bluntly, the economic development in each of the countries.
Big Law Business: Are these offices investments or do they just have to break even?
Senior: There’s always an initial investment, clearly. I mean it’s like any — it is an investment. You have to work out how long you want to invest for and how much, and when you’re going to get a return. Most law firms, to be honest, they don’t look to invest over the long term in an office. You want to get it to a point where it’s at least sort of a break even, and that’s what we tend to do. Baker & McKenzie, we’ve opened a lot of offices over the years, we know how to do that, and generally our offices are making money of course.
Big Law Business: But when you look at China, that seems like a place where many law firms feel obligated to keep an office open.
Senior: That’s a good point. Well, we were there a long time ago. Between Hong Kong and China, we’ve probably got [several hundred] lawyers over there, and consequently we’re quite profitable.
There tends to be a bit of a herd factor with law firms. The same way there was a time when lots were opening up in Australia, lots are opening up in South Africa. You’ve got a similar phenomenon in China. But it’s tough because China is a pretty developed legal market these days with some very big Chinese law firms as well as the international firms. If you just open up there, it’s hard to compete if you don’t have a critical mass and you don’t have all the critical practice areas. It’s quite hard to make money from it.
We benefited from going into China when it was not a very mature market. [Editor’s Note: It opened an office in Hong Kong in 1974, Beijing in 1993 and Shanghai in 2003.] We started in Hong Kong.
Big Law Business: Do you see Chinese law firms competing more and more in Africa?
Senior: Yes, they do. They’re certainly are deals where the big Chinese law firms will work with a local African firm on an investment, but we do that as well from say, our Beijing office, where we do African investments out of Beijing. Once you look at sub-Saharan, there really is interest from all over the world, and Asia, also growing interest from India into Africa. We’re long past the stage where you would think of any part of sub-Saharan Africa as being part of a British sphere of influence — without a doubt. But London is the key money center for sub-Saharan Africa.
We’re doing a lot of stuff around sub-Saharan Africa where you’ve basically got London lawyers teaming up with Johannesburg lawyers. There’s a lot of co-teaming between those two offices on deals.
Big Law Business: So is Africa the last continent where firms like Baker & McKenzie haven’t totally expanded? I bet you want to get it right.
Senior: Quite so, exactly. But we feel we’ve got it ‘right’ before. Baker & McKenzie was never a domestic firm. We were created after the second world war with a vision of becoming a global law firm, before there was a global legal market. And there were a number of things that were done that enabled a culture to develop that is very beneficial for us in emerging markets. The first thing is we were the first law firm to look to staff our offices with local nationals. We didn’t open up in London by staffing with American nationals. We looked for British nationals. That enabled us to build deep roots.
The other thing is the firm understood that you had to respect the people on the ground. If you are a small office in one of these emerging markets, you will be treated with respect. The other aspect of that is we’re no longer a law firm with a dominant nationality. We were a U.S. law firm, we’re very proud of our U.S. heritage, but it’s very much a minority of our revenues that’s in the United States now. The biggest office is the London office.
Big Law Business: Dentons has drawn a lot of attention for its mergers, and there does seem to be almost a race to form alliances at times among big firms. Do you see Baker & McKenzie as being part of that?
Senior: Yes, well let me just explain what I think is going on with the legal market. It’s very fragmented. If you look at other industries, there comes a point where the market starts to segment and consolidate. Usually, you end up with a group of dominant global players. The same thing is now going on in the legal industry. In a market like this, if you don’t have the right global strategic positioning, you need to do something. Otherwise, you’re going to have difficulty in a market like this.
The huge expansion that you’ve seen with some firms is really to get the footprint, so that they can get the seat at the table of the dominant global law firms when that group emerges. That’s what’s going on. We think we’re big enough for that purpose and we don’t feel a great urge to expand just to have a seat at that table. But other firms do. Either they have nothing in Asia, or nothing in the United States and therefore you do see these big mergers. Particularly with the vereins.
But we’re not about to join that feeding frenzy. We do look to grow but in a strategic way. We have done something with a Chinese law firm called FenXun. We’ve got the first license to enable us to do that last year. That is certainly part of our plan is to expand in China. That is the sort of investment we look to make — it’s not just to grow with lots and lots of lawyers.
My strong hunch is that Africa will develop the way the other continents have developed and there will be a lot of work there for law firms. So you have to take Africa seriously.
Sourc: BOL BNA – Baker & McKenzie Eyes Africa As Next Great Expansion Opportunity
