Editors' Blog

Reading the runes for 2007

Posted 3/01/2007 by legalweekblogs.com SU

By the looks of the latest legalweek.com web poll (click here) it would seem that there are a fair proportion of lawyers who are breathing a large sigh of relief now memories of those traditional alcohol-fuelled family rows are fading.

As the poll currently stands, more than one in five lawyers (22%) have vowed to "spend more time in the office" in 2007, although admittedly rather more respondents (37%) would like to spend more time with their family this year. The remainder (40%) have decided that now is the perfect time to seek out fresh challenges in the form of a new job.

To obtain a greater insight into the collective mindset of the legal market, reporters Ben Mitchell, Georgina Stanley, Charlotte Edmond, James Illman, Claire Ruckin and Michelle Madsen asked a selection of senior lawyers for their predictions.

The prize for the most reckless prediction goes to David Stewart, head of international at Olswang, who asserts that a magic circle firm – namely Freshfields Bruckhaus Deringer – will merge with a white shoe US firm in the next 12 months.

He clearly knows something Paul Wickes, the head of Linklaters’ New York office, does not.

“I would be surprised if there are any mergers between magic circle and US firms in 2007,” says Wickes, who has been spearheading a sustained investment drive by Linklaters in New York (see blog). “But I expect there will be more domestic [US] and transatlantic mid-market mergers.”

John Young, Lovells’ senior partner, believes the select band of UK firms with a presence in the States - of which Lovells is one - are beginning to make their mark.

“UK firms are continuing to make progress in the US but they are less visible than US firms here because of the differences in scale,” he says. “Transatlantic mergers remain interesting – we have still to see a seriously big one and if it does happen then everyone will have to think about it.”

In the meantime, the Middle East looks set to continue enjoying its status as the international hotspot of choice for UK firms well into 2007, according to Andrew Darwin, European head of M&A at DLA Piper.

“The Middle East is set to be a very strong market in the medium to long-term so firms will continue to place a greater emphasis in the region," he says. “The early inroads made in India and China will also continue.”

As for the UK, nobody is expecting the record levels of deal activity to tail away just yet.

“The M&A market should be pretty strong for the foreseeable future,” says Ashurst’s head of corporate, Adrian Clark, “but you can never predict much beyond a few months. I’m not expecting one sector to be more active than another as it is just a strong deal environment generally and it is not being driven by any particular sector.

"As we stand at the moment it should be a good year for UK firms but, as we know, the cycle will come round and there will be a downturn at some point. The challenge is picking up a good mix of deals.”

Jonathan Coppin, UK head of corporate at Hogan & Hartson, adds: “It is still a very positive market for M&A and, despite the fears, there will still be a lot of highly-leveraged M&A deals. There is also increasing appetite from buyers from emerging markets and that gives US firms in London opportunities, as these companies often do not have established links with UK firms.”

But sustained deal activity brings with it its own particular type of problem for the leading UK firms.

Ashurst senior partner Geoffrey Green observes: “Most firms should be reporting good earnings, so there will be upward pressure on costs and therefore pressure to maintain top-line growth. Long-term careers with firms do not look any more certain than before. Firms have learned that they have to be sparing with the equity and that it has to go to those who can help grow the business.”

As Young adds: “There is no sign of the pressure [on salaries] easing off. It is in part fed by the US firms and part by the pressures of the market. There are not enough lawyers. The issue of work-life balance is something we will all have to continue to live with. You can no longer assume that someone joining the firm sees staying with the firm and becoming a partner as their main goal in life.”

Meanwhile, the in-house community can be confident of one thing, according to Geoff Atkinson, general counsel of Monarch Airways.

“Fees will continue to rise,” he asserts.

See The Daily Diary for a light-hearted take on the year ahead.