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Manifest Destiny: Are Law Firms Turning Into Franchise Operations?

BEYOND THE LAWby Mark A. Cohen, Columnist & Featured Contributor

[su_dropcap style=”flat”]H[/su_dropcap]ORACE GREELEY, the American author, famously counseled pioneers to “Go West, young man” to advance the nation’s manifest destiny by expanding to the other coast. Law firms, of course, have figuratively heeded Greeley’s expansionist rhetoric for many years. Initially, they forged what would become national firms and, later, established outposts overseas. That is nothing new. But what is new—and tea leaves worth reading—are the recent moves of three very different legal services providers: (1) Cahill Gordon, an elite AmLaw 100 firm; (2) Dentons, now the world’s largest law firm; and (3) Legalzoom, a U.S.-based service provider who has recently secured an ABS license in the UK. These very different legal service providers—and their recent gambits—shed light on the globalization of legal services; the impact of different regulatory schemes (especially the U.S. and UK); the blurred line between law firms and service providers; as well the near-term future for the global delivery of legal services.

franchiseCahill and Its ABS

Cahill Gordon has long been one of the most profitable firms among the AmLaw 100, focusing on corporate finance and big-ticket litigation. It has eschewed the “bigger is better” and “an office in every capital” approach and has, instead, limited its physical presence to three locations: New York, DC, and London. Cahill recently became the first U.S. law firm to secure an alternative business structures (“ABS”) license in the U.K. The license was issued to Cahill UK, LLP; however, it is clear that the principal purpose of securing it was not only to operate as an ABS in the UK and beyond, but also—and here’s where it gets interesting—to create an advantage with (read: greater synergies for) the firm’s clients in the U.S. Notwithstanding the stark regulatory contrast between the U.S. and UK, Cahill boldly and thoughtfully responded to its clients’ desire to operate through one integrated firm operating on both sides of the pond—and beyond. That is not novel, but what is noteworthy is that by securing an ABS in the UK, Cahill has positioned itself to be far more flexible servicing other markets using the UK as a base. It has also positioned itself to become a first-mover if/when (and the latter is a good bet) the U.S. finally sanctions some form of ABS model. And don’t think that the likelihood Canada will go ABS soon does not enter into the equation.

Dentons: A Study in Leveraging the Swiss Verein

Dentons, in stark contrast to Cahill, has extended its UK roots far and wide. In recent years, it has embarked upon a relentless merger strategy from China through Europe and North America. It is now the world’s largest law firm and, in many ways, comes closest to mimicking the expansion pattern of the Big Four (though in numbers, revenue, and global imprint still pales in comparison). Could it be that Dentons is preparing itself for the imminent entry of the Big Four into the legal marketplace? Stay tuned…..

Dentons recently doubled-down on its U.S. presence by merging with McKenna, Long. No doubt, the global heft of Dentons is intended to stimulate its new, expanded U.S. practice. At the same time, having achieved gravitas—at least by headcount and geographic disbursement—in the U.S., the firm believes that it can use that as a hook/differentiator to attract new clients in need of a firm with a global imprint.

Dentons—like DLA, another merger-fueled, Swiss Verein legal behemoth—has utilized the Swiss Verein structure both to overcome regulatory obstacles as well as to fuel its voracious growth. Let’s remember, too, that DLA invested in Riverview Law, a fast-growing UK-based law firm with an ABS. This begs the question—among others—“Are these law firms or franchise operations?”  It is hard to imagine that with all the mergers, firm ethos differences, and conflict issues—not to mention underlying cultural differences—that Dentons (or any like-type firm) can truly be characterized as an integrated law firm. Surely, it will be branded that way as evidenced by its election not to identify a headquarters.

Just as great lawyers were (and, in smaller firms remain) the key drivers of law firms, so too are IT specialists, CEO’s, and branding experts the critical actors in “corporatized” giants like Dentons and DLA. If they are indeed law firms, they bear some remarkable similarities to roll-ups. To succeed, their legal teams will require leaders possessing skill-sets associated with large corporations—not law firms– to drive them (and they are not currently taught by law schools).

Legalzoom: The Manchurian Candidate

While we are on the subject of branding, can you name a legal services provider with stronger brand recognition than Legalzoom? Certainly, their brand is differentiated from the traditional white shoe elite law firms such as Cahill, Cravath, and a handful of others. But let’s remember that Legalzoom was a service provider, not a law firm, operating in the retail end of the legal vertical. Note the purposeful use of the past tense because (drum roll, please) Legalzoom has recently been granted an ABS in the U.K. and will now offer legal services (read: operate as a law firm) there.

By partnering with QualitySolicitors Law Firm Network to provide affordable legal services, Legalzoom has a vision to become the preeminent provider of retail legal services in the UK. The implications of Legalzoom’s migration to the UK are far- reaching. The company has demonstrated that a service provider can leverage its brand geographically as well as expand its delivery capability to include legal products and services as well as “to engage in the practice of law.” And don’t think that just because Legalzoom operates in the retail end of the legal vertical that same gambit could not be successfully pulled off in the corporate segment of the market.

Some Final Observations

Legalzoom’s migration to the UK—like Cahill’s at the highest-echelon of the corporate market– speaks volumes about the influence of the ABS not only in the UK but also beyond. It is clear that the UK has become the epicenter of change in the legal vertical. The strategic migration of a “legal one percent” U.S. law firm as well as a household-name service provider—and the fact they are the first two U.S. legal services providers to secure ABS licensure—sheds light on the future of both ends of the legal market. The UK has already become the base camp for global expansion, and its favorable regulatory climate will be a magnet for retail and corporate leaders from the U.S. (and elsewhere). It’s clear that U.S. regulatory attempts to forestall the global push of legal services will simply be bypassed—at least until the U.S. accepts the inevitability of embracing regulations that are responsive to contemporary client demands.

The Dentons’ double-down in the U.S, on the other hand, constitutes persuasive evidence that the U.S. cannot immunize itself from the growing threat of foreign competition. It’s only a matter of time before large foreign-based firms—especially from the UK—will set up shop in the States, establish a beachhead here, and garner an enlarged share of the world’s largest legal market. They will, after all, give clients what they want: quality, global presence, transparency, efficiency, and cost effectiveness. “More for less” will trump “based in the U.S.”

To return to manifest destiny: it is a zero-sum phenomenon where some gain territory and others lose it. Until U.S. service providers and law firms can operate on a level playing field with their foreign-based competitors, they may find themselves defending their turf rather than expanding it.


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Mark A. Cohenhttp://legalmosaic.com/
MARK has had a long and distinguished career as a lawyer and innovator in the legal vertical. His unique perspective on the legal industry is derived from roles he has had as an internationally recognized civil trial lawyer, legal entrepreneur, early large-scale adopter of technology for the delivery of legal services, partner at one of the largest law firms, founder and managing partner of a national litigation boutique firm, outside General Counsel, federally appointed Receiver of a large, international aviation parts business with operations on four continents, (Adjunct) Distinguished Lecturer of Law at Georgetown University Law Center, writer, speaker, and acknowledged global thought leader at the intersection of law, business, and technology. Mark currently serves as CEO of Legalmosaic, a company that provides strategic consulting to service providers, consumers, investors, educators, and new entrants into the legal vertical. Prior to founding Legalmosaic, Mark was Co-Founder of Clearspire, a groundbreaking legal service provider whose disruptive, proprietary IT platform and reengineered legal model garnered international acclaim. This followed his founding of Qualitas,an early entrant into the LPO space. Earlier in his career, Mark was an internationally recognized civil trial lawyer. He was an award-winning Assistant U.S. Attorney and the youngest partner of Finley Kumble prior to founding his own multi-city litigation boutique firm. Mark is widely known for his blogging and speaking on a range of legal topics focused on changes, challenges, and opportunities in the current legal landscape. Mark maintains an active speaking scheduled, both domestic and international. He has been a keynote speaker at Harvard Law School’s Speaker Series, Reinvent Law, 3M’s Global Legal Alignment Summit, LegalZoom, University College London, and, in May 2017, The German Bar Association’s Annual Conference. He writes a weekly column for Forbes and has been published in major legal and business media sources around the globe. Mark has been active in sports and the arts throughout his life, and this is reflected in his writing and speaking on legal issues where he frequently makes references to those topics. He enjoys mentoring students and young lawyers and is known for his colorful sense of humor and candor.

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