Does Going Global Make Sense for Mid-Sized Firms?

Aderant Think Tank

Does Going Global Make Sense for Mid-Sized Firms?

We live in a highly networked, interdependent world where business dealings and disputes often cross national borders. For many firms, this has led to international expansion, with offices and staff located in strategic locations around the globe. While it’s true that firms with a global reach are usually at the top of the legal rankings in terms of size and revenue, even smaller firms are now feeling pressure to provide more cross-border services to clients.

The term “globalization”, as the legal consultant Ed Wesemann recently noted, used to just be a seminar topic for firms. But today, “International capability is viewed by many as inherent to the practice of business law; the natural offshoot of law firms’ need to serve the growth of their global business clients.”

In a Forbes interview this year, Mr. Morley stated that “One definition of a global industry is where you have more of the same firms or companies competing, more-or-less, everywhere. The law is moving toward that, so, we find that, increasingly, we are competing with firms who can operate across those different markets.”

Expanding a practice to include a global footprint doesn’t guarantee success, however. Mr. Wesemann warns that “A lot of firms have opened one lawyer representative offices in far flung global markets with a very naïve understanding of the local legal market and extremely optimistic business plans. Unlike opening an office in the U.S. or England where revenue streams can be enhanced through aggressive marketing and lateral hiring, the revenue the office will have to survive on will largely be that which it gets from existing clients.”

In 2011, the ABA Journal reported on the challenges facing firms operating outside their home jurisdictions. They quoted Laurel S. Terry, a law professor at Penn State, who argued that current attorney regulations simply aren’t keeping pace with the real world. Mr. Terry believes that the legal profession must change, and that “Globalization is here to stay. Technology is going to radically change the way that lawyers work. We are going to have to rethink what lawyers offer and what our services look like. If our regulatory structure can’t adapt, it could get displaced.”

In addition, the rise of so-called Mega Global Firms over the next decade could put a squeeze on the smaller players below them. According to Law Firm Transitions, there’s nothing to stop these global firms from seeking out “downstream” work if demand slows. While “there is no question that globalization makes sense in that it provides firms a competitive advantage with multi-national companies with broad global footprints… the trickle-down effect these firms have on small and mid-sized players could be potentially devastating over the long-term.”

While there are numerous factors that would seem to be driving mid-size firms to embark on a “globalization” strategy, it’s also clear from the aforementioned articles and studies that such a path is rife with challenges to both profitability and operational effectiveness. Most pointedly, with the reach of so many larger firms rapidly expanding on a global level, smaller mid-size firms will be well-served to pause and ask themselves whether their smaller international outposts will be able to compete effectively with their large firm brethren.

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