Business
Subscriber Only

Corporate law shake-up as international legal eagles swoop on Ireland

Secrecy on fees survives for now but diversity beckons in post-Brexit blitz by top firms

Anthony Collins, the former Law Society of Ireland president, got a call in late 2019 from a partner in a London-headquartered corporate law firm looking to be introduced to a few Irish firms as it scouted around for a partner in a new market.

The UK outfit, Addleshaw Goddard, revealed last week it had found its perfect match: Eugene F Collins, a firm of 125 partners and legal professionals, founded by Anthony's grandfather in 1893 and where he had been a third-generation partner for more than four decades, to 2009.

As part of the courtship, Eugene F Collins's managing partner, Mark Walsh, and other senior figures travelled to Scotland in January 2020 to meet partners in a local firm, once named HBJ Gateley, that had joined forces with Addleshaw three years earlier.

“We wanted to make sure that it be a real merger and that we wouldn’t just be subsumed,” said Walsh. “They told us that they didn’t lose their culture after their merger and how Addleshaw Goddard enhanced their offering to clients and provided support.”

The fact that Addleshaw's managing partner, John Joyce, hails from Co Mayo stock and knew Ireland well, may have greased the wheels of negotiations. The onset of Covid-19 didn't.

“It was really only around St Patrick’s Day last year that discussions started to pick up,” said Walsh. “Even then, it was more difficult to have proper discussions in virtual meetings than in person. But it certainly helped to keep the talks confidential – as there weren’t people flying in all the time to see us, raising suspicions.”

Dublin’s tight-knit community

Dublin's corporate law services sector, which has stood out as an anomaly across western economies in recent decades as a tight-knit community dominated by the storied six names of Matheson, Arthur Cox, A&L Goodbody, Mason Hayes & Curran, McCann Fitzgerald and William Fry, has become a hotbed of activity and intrigue in the past five years.

Firms including London-based Pinsent Masons, DLA Piper, Simmons & Simmons and Ashurst, and US names like Tully Rinckey, Covington & Burling and Dentons, as well as the dual US-UK legal house Hogan Lovells, have set up shop in the Irish capital since the Brexit referendum – largely poaching senior partners from the "Big Six" to establish practices.

London-based Fieldfisher* made waves in 2019 when it merged with top 20 Irish firm, McDowell Purcell, while Detroit-based Clark Hill has moved to combine with the O'Gradys Solicitors and Eames Solicitors boutiques in recent years to build out an office it set up in 2018.

Brexit factor

"Back in 2016, the only developed economies without international law firms were Japan and Ireland. After the Brexit referendum, every managing partner of a UK law firm or international firm in the UK was pressed by their partners to have an Ireland strategy," said Declan Black, managing partner of Mason Hayes & Curran.

“This flowed from anxieties about a loss of dominance of UK law, loss of dominance of the UK as a forum, and a comparative reduction of UK trade and influence. Ireland became an obvious choice to consider having an establishment as it is the only English-speaking common law jurisdiction left in the EU.”

DLA Piper's country managing partner for Ireland, David Carthy, who was lured from William Fry in 2018 to spearhead the global firm's Irish foray, says his firm had already been looking at filing an obvious gap in its international network across 40 countries before Brexit.

“Ireland was an outlier generally, as it always had a strong legal services sector with good quality lawyers [for overseas firms to work with on cross-border deals and cases]. The fact that we’re English-speaking – and because it wasn’t a huge market – meant the big international firms, for a long time, didn’t see an obvious advantage from setting up here.”

However, increased globalisation, with many of the world's largest technology and pharmaceutical companies now well-entrenched in the Republic, has made Dublin increasingly difficult for firms boasting international networks to ignore. The top 10 taxpayers in the Republic in 2020 were all multinationals, led by Apple, Microsoft, Google, Pfizer, MSD, Johnson & Johnson and Facebook.

Senior figures across the legal sector see more overseas firms looking to enter the Irish market in the coming years, with some using the merger route to gain entry.

“I think we’ll see a progression towards the international trend where there will be two or three domestic firms remaining among the big names in the market, but global, or internationally-connected firms, also emerging among the big players,” said Carthy. “You will see eruptions and movement of talent in the years ahead before the market normalises.”

The shifts will not only be good for clients, but the wider economy, according to Black.

“A high-quality and highly-regarded professional services sector – including the accountancy sector – is a lubricant to economic activity. It helps Ireland compete for transactional activity and that, of itself, attracts people to do business in Ireland.”

Legal costs

But companies hoping that increased competition will bring down costs for legal services will be left disappointed, as the demand for talent is pushing staff costs higher, he said.

It doesn’t help that incumbents and new entrants alike face a shared rival for staff that largely didn’t exist a decade ago – the plethora of large companies, led by multinationals, looking for in-house counsel.

Black estimates remuneration inflation was running at 8-10 per cent last year and set to run at a similar rate over the near term.

Eavan Saunders, another William Fry alumnus, may have thought she would soon be wining and dining with half of corporate Ireland when she was hired in early 2020 to set up the Irish office of Dentons, the world's largest legal firm by number of lawyers. The pandemic put paid to that.

It still hasn’t stopped her building up a team of 30 lawyers as of the end of last year – including senior hires from the likes of Matheson, A&L Goodbody and Mason Hayes & Curran as well as her old firm.

“We expect to be least 50-60 lawyers by end of this year, with a number of partner-level hires set to be announced later this month. We have found a huge amount of traction on the mergers and acquisitions side.

“Because we’ve hired very senior people, we’ve found high demand [for our services] by word of mouth,” said Saunders. Deals have included being a legal adviser to Davy on the agreed sales last year of its main business and various units, after the stockbroker and wealth management firm was embroiled in scandal around a historic bond trade.

The Dublin team also advised Ireland-headquartered clinical-state biopharma company GH Research on its Nasdaq flotation last summer.

“I wouldn’t be surprised if a couple of other firms were to go the way [of Eugene F Collins],” Saunders said. “A merger is certainly an easy way to get scale. But we’re happy to grow more slowly and organically, as it allows us to quality control every hire.”

Back door access

Interest in setting up a base in Dublin has been fuelled by the Law Society moving in late 2020 to limit a back door route thousands of solicitors in England and Wales had planned use to have continued access to the EU legal system. The regulatory body decided at the time, following the registration of 4,000 lawyers from the other side of the Irish Sea in the Republic in the wake of Brexit, to restrict issuing of practising certificates to solicitors whose firms have an office in the State.

One such firm without an office, London headquarters Allen & Overy, had more than 200 Irish practising certificates at the end of 2019. Fellow “Magic Circle” firm Linklaters, many of whose lawyers also rushed to register in the Republic in recent years, quietly set up a small office last year in a Merrion Square.

The managing partner of Irish "Big Six" firm, A&L Goodbody's Julian Yarr, says his firm has fielded its share of tyre kickers.

“They might be interested in the clients we have, rather than to swallow us whole. We’re pretty comfortable with where we are at. I would be hugely surprised if the top two or three firms changed,” he said.

Yarr has drawn lessons talking to peers in independent law firms in the likes of the Netherlands, Spain and Italy, which had seen waves of outside players descend on their markets decades before Dublin became a target.

"Twenty years on, and the same three or four firms are still top of [their markets]. And there's a differentiation factor, too, for our firm: scale. Many of the organisations that are coming are talking about getting to 50 lawyers. We hired 53 newly qualified lawyers in January alone in our offices in Dublin and Belfast. "

Diversity

Ken Murphy, who stepped down last year as director general of Law Society after 26 years, said that overseas firms moving into Ireland had avoided making the mistake of "the old colonial approach of sending in someone from head office to set up and run a legal business overseas" by hiring locally or merging locally. But there's a downside.

“The leading brands are all led by Irish people who typically went to the same schools and the same universities. That’s not appealing to anyone looking to come in,” says Carthy, who has about a dozen non-nationals among his 50 lawyers in DLA Piper in Dublin.

“There’s a real need in the sector for more diversity across gender, nationality, ethnicity and social backgrounds. I think the influx of global brands will ultimately drive a shake-up.”

Most senior Irish corporate lawyers are fully paid-up supporters of a Government post-Brexit initiative, called Ireland for Law, and chaired by former taoiseach John Bruton, which aims to turn the State into a hub for international legal services and dispute resolution.

“London and New York are the biggest legal services markets in the world. If Ireland could even get a small portion of that activity, it would be great,” said Murphy. “Of course, the Irish courts system needs to see a big investment in terms of technology and other resources. But it’s really important that that happens anyway – even if it did not lead to a single additional case coming to Ireland.”

There are other impediments. These include the fact that third-party funding of litigation, where unconnected parties, usually professional outfits, help finance the cost of a lawsuit for a share of a potential payout if it is successful, is not currently allowed by Irish law.

Also, there are no provisions in Irish court rules for groups to take a legal action against a party, or what are known as class actions. Still, the Government is bound by an EU directive to allow corrective redress actions next year.

Secrecy on fees

Back in Eugene F Collins, the 25 partners are preparing to retire the firm’s name next month after 129 years. But the hope is that Addleshaw will add heft as it plans to double the business in size over the next five years, expanding from its traditional stomping grounds in hospitality, retail, financial services, property, life sciences and pharmaceuticals into areas like tax, infrastructure and technology.

“The reaction from clients and staff to the announcement has been great – and it’s piqued curiosity from others in the market,” said Walsh. “I’ve been living with this for two years. It’s very important to bring everyone on the journey.”

Addleshaw will have learned from its homework on the Republic, however, how notoriously secretive the locals are on their revenues and earnings – information that is widely published elsewhere.

Mason Hayes & Curran stands out as a rare pillar of transparency. It reported last month that its fee income rose 23 per cent to €98 million last year as the domestic economy performed strongly in spite of Covid-19 restrictions.

Saunders reckons Dentons’s Irish office will get around, in time, to publishing its revenues, in line with the wider group. Will others follow?

"I think most of the Irish firms will continue to jealously guard such information," said Saunders. "There is such a range of profitability. Some may be afraid that people will realise that their glory days are behind them. Others may fear their clients mightn't be too pleased to see how much money they're making. Some firms are extremely profitable, with their equity partners earning more than the chief executives of most of their clients." *This article was amended on February 18th to correct the name of the acquirer to Fieldfisher, not Freshfields