When the Global 200 rankings come out this week each lawyer will get to see where their firm stands on the global scene. They will also learn the wider context of how their regional legal market performed in the last financial year.
Few will be surprised to see that the U.S. remains the largest and most profitable marketplace. But it is not simply the size of the American economy that is helping its largest commercial law firms thrive, it is the way the U.S. transactional market and the dollar is performing in comparison with the rest of the world.
In case there was any doubt about this disparity, consider the following:
- While M&A in Europe, Middle East and Africa as well as in Asia-Pacific has fallen every half year since 2021, the value of M&A in the Americas actually rose in the first half of 2023, according to PwC.
- The dollar is trading at near-historic highs compared with the pound, the euro and the yen.
- IPO proceeds in the Americas are up 86% in the year to date but are down 40% in Asia-Pacific and down 50% in Europe, Middle East and Africa, according to EY.
In other words, all other regions are losing some of their market share of transactions to the U.S.
There was no better illustration of this than last week’s IPO of chip designer ARM Holdings, which at a value of $65 billion is likely to be the world’s biggest listing of the year. A nice mandate for Morrison Foerster, Davis Polk & Wardwell and Sullivan & Cromwell. It is significant because Arm is a U.K. company that has opted to list in the U.S. to get better access to capital. Had it been a listing on the London Stock Exchange it would almost certainly have had other law firms advising.
Attempts to revive Hong Kong’s capital markets look tiny by comparison to the ARM IPO. But they too are significant as the troubled city-state looks to ward off competition from Singapore to become Asia’s financial hub. One leader of a large firm said to me last week that while his firm’s Singapore office had grown, it was mainly due to movement from its Hong Kong office and that Singapore would always struggle to compete.
If anything, the last 12 months have vindicated those who opted against opening in Singapore given it has been so quiet there. Meanwhile, India, which had a boom during the pandemic years, is also noticeably quieter of late. Australia, meanwhile, continues to remain stable rather than spectacular.
So everyone should just focus on the U.S., right?
Wrong. Some law firms—those with the appropriate scale and ambition, such as Allen & Overy and Freshfields Bruckhaus Deringer—are attempting the arduous journey to break into the market by merging or embarking on a series of expensive hires. But for most others the market is just too expensive and competitive to break into, especially at the top end. Competition in the U.S. is intense, but it can only really involve the existing U.S. firms.
Instead, the place with competition from firms all over the world has the perfect storm of being both lucrative and affordable...
