Attraction of big-ticket deals, as well as the global aspirations of Spanish clients, mean opening in Madrid is an attractive prospect for Anglo-Saxon firms
Despite some market insiders questioning what incentive US and
UK law firms have to open offices in Spain – a jurisdiction
where legal fees are much lower than in London or New York, for
example – the Anglo-Saxon firms keep coming. Rumours persist
about US and UK firms eyeing openings in the Spanish market, with
Shearman & Sterling and Norton Rose Fulbright among the names
being mentioned. Meanwhile, in May this year, one did actually take
the plunge with UK firm Pinsent Masons setting up shop after luring
a team from Ramón & Cajal, a move that has led to a
legal dispute between the firms. While acknowledging that Spain may
be a "low fee jurisdiction", legal market insiders argue
that opportunities to advise on some big-ticket M&A
transactions, as well as a trend for Spanish businesses to expand
their operations around the world, mean that for top quality firms,
there is always an opportunity to build a successful
practice.
Spain offers significant opportunities in areas such as private
equity and finance, which are industries where UK law firms have
traditionally been strong, says Andrew Ward, a partner at
Cuatrecasas in Madrid who previously worked as a barrister in the
UK. In addition, Ward says that "Spain has a large and
sophisticated economy, so a law firm that wants to portray itself
as global, really needs to have a presence".
Meanwhile, multinational companies that operate in Spain, or
Spanish companies that go overseas, demand legal advisers with a
global outlook, says Herbert Smith Freehills Madrid managing
partner Miguel Riaño. "This makes the Spanish market
very attractive for firms such as ours that operate in different
jurisdictions," he adds. Growth in the Spanish real estate and
energy sectors, as well as an increase in major transactions in
general, is also appealing, according to Riaño.
Pan-European platform
With regard to the US and UK law firms that already have a presence
in Spain, this is often a result of them following clients that
were investors in Spain and southern Europe, says Javier
Monzón, partner at Freshfields in Madrid. "Besides
profitability and fees, this is also about a global offering to
international clients," he says. "A strong pan-European
platform has been part of the strategy for the UK 'Magic
Circle' firms, except Slaughter & May, and a factor that
differentiates them from their US competitors' offering in the
UK and across Europe." However, some elite US global firms
have taken the step of opening in Spain, such as Latham &
Watkins, White & Case and Davis Polk & Wardwell. In total
there are approximately 30 US/UK firms with offices in Spain.
Diego Lozano, partner at
Pinsent Masons, and head of the firm's Madrid office says
opening an office in Spain was the "natural next step"
for the firm. He adds: "Pinsent Masons already had offices in
France and Germany [before opening in Spain], so it was a case of
the firm looking at where it could strengthen in Europe."
Lozano says the options were Spain or Italy, and the firm chose
Spain because it already advises a significant number of Spanish
companies – including Telefónica, Banco Santander, OHL
and Ferrovial on their operations outside Spain. Lozano adds:
"We are already working with many Spanish companies on
infrastructure projects around the world."
According to Lozano, around 25 per cent of the revenue of Pinsent
Mason's Madrid office is generated by international work.
"We have a simple strategy, we want to be a leader
internationally in our global sectors, we want to offer clients a
significant international presence and be seen in the market,"
he explains. "I would say we are in the middle of the first
phase of our development, we currently have a strong corporate
practices, a finance team and a litigation team, but we are also
growing our technology and construction-related practice and we
need to increase our regulatory capability." Lozano is
targeting significant growth for the firm in Spain – Pinsent
Mason's office in Madrid currently has 18 lawyers, but he
anticipates that, in a year's time, the firm could be twice
that size.
Ignacio Ruiz-Cámara,
co-managing partner at Allen & Overy in Madrid, says Spain has
some very "big, strong and international corporates and
financial institutions, with a presence all over the world"
and that consequently, if firms want to build a relationship with
such clients, they need to be close to their decision-makers.
Ruiz-Cámara adds that there are also major transactions
happening in Spain that can generate big legal fees.
"Obviously, average fees are higher in New York or London, but
that is not the only consideration," he says. "While the
average deal in Spain may be smaller than in other markets, there
are still some big ticket and complex deals happening in Spain year
after year, such as takeovers, mergers, joint ventures and bond
issues, which justifies international firms charging higher
fees." However, Monzón points out that, for the Spanish
offices of smaller US and UK firms, maintaining profitability
levels in line with the expectations of international firms is
possible but "increasingly challenging".
The highly competitive nature of the Spanish market is seen, by
some, as a barrier to the entry of more US and UK firms. "Even
at the top end, firms like my own are more than able to compete
with them head-to-head and in every area," Wards says. He
argues that, given there are already a considerable number of major
US/UK law firms already present in Spain, it is unlikely there will
be many more joining them. However, he adds that, as there are
large firms in the UK and the US that do not yet have a presence,
"if there is work for them then they will come."
Maria José Menéndez, Madrid managing partner at
Ashurst, says the fierce competition in the market is due to the
fact that there is not a significant amount of high-end work in
Spain, and international firms and the top Spanish firms are all
competing for that which is available. "We keep hearing about
more firms looking into setting up an office in Spain, so yes, it
is certainly possible for more firms to come, but they should be
aware that, although there clearly is scope for success, our market
is tough," she says.
Shearman & Sterling and Norton Rose Fulbright did not comment
on rumours that they are considering opening in Spain.
Ruiz-Cámara says the idea of more US and UK firms opening in
Spain cannot be dismissed, and adds there could be some movement if
US/UK firms "find the right partners to open up their
offices."
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