Squeezed by intensifying competition, and facing an increasingly savvy clientele, law firms in India need to raise their game as soon as possible, particularly as the spectre of legal market liberalisation nears. Raj Gunashekar speaks to a cross-section of Indian firms – Luthra & Luthra, which is among the country’s largest; midsized outfit Phoenix Legal; and recent entrant Vertices Partners – to find out how they see the market evolving in the immediate future.
ALB: What are some of the notable trends that you have witnessed in terms of the quality and quantity of your work? What have you been doing more of, and what have you seen a drop in?
MOHIT SARAF, senior partner, Luthra & Luthra: One has been seeing fewer and fewer multi-billion dollar inbound M&A deals, and $300 million-plus private equity deals. The volume of these deals has come down because Indian equity is trading at very expensive valuations on price earnings multiples. On the other hand, the volume of intra-India multi-billion dollar mergers on non-cash deals in the sectors of insurance and banking, among others, is on the rise. The volume of M&A deals, on account of stress in the banking system is on the rise as well as Indian corporates are selling non-core assets. New listings and the raising of capital have increased significantly.
SAKET SHUKLA, co-founder and partner, Phoenix Legal: The growing competition in the legal industry has undoubtedly driven the Indian law firms to be conscious of maintaining the quality of advice to their clients.
Large and mid-sized firms have been able to witness steady growth by ensuring availability of expertise in both corporate and dispute resolution. A growing trend is that firms have also set up small but niche practice teams. This often balances out the work streams of areas of practice.
We saw a marginal decline in the number of M&A transactions in early 2017, which gradually rose by the end of the first quarter. Meanwhile, we saw an increase on time spent by the firm on corporate and commercial advisory. This is a standard trend observed across the legal industry for years.
VINAYAK BURMAN, managing partner, Vertices Partners:
The most notable trend is the onset of a new breed of mid-sized and boutique law firms. There has always been a gap in the market for this and over the last few years, this gap has been seen to be increasing. Today’s client is rather nimble, cost -conscious and extremely quality-conscious.
This has led to the opportunity of providing them with alternatives in the form of boutique, new age and mid-sized firms, which can offer the same high-pedigree legal work as provided by larger and well-established firms in their areas of expertise.
These boutique law firms are now looking beyond national borders, both from inward and outward-based transactions, as well as servicing the requirement of the client both from a quicker turn-around time, and more concentrated partner attention at a much more cost-efficient manner.
ALB: What have been the biggest challenges facing corporate law firms in India in the past 12 months? How have you as a firm looked to overcome them?
SARAF: In the last 12 months, some new firms have entered the Indian legal market. Hence, the intensity of competition has increased, resulting in pricing pressure. We only hire lawyers when hiring is essential, rather than to increase bench strength. Hence, there was lesser pressure on account of extra bench strength, leading to minimal pressure or the need to drop prices.
SHUKLA: We believe in ensuring we maintain a qualitative resource band. The lawyers within the firm do work under close supervision of the partners and are constantly trained by them. The members of the firm regularly attend workshops and international conferences, which helps them to be updated and hone their knowledge.
An interesting area of challenge has been the growing consciousness among the clients on data privacy and the high-end security procedures and systems used by the clients. The firm has been working through the last few years to upgrade its information technology systems to ensure data privacy meet highest standards of client satisfaction.
BURMAN: With multiple law firms mushrooming, price bids for the quality of work as well as the quantity of work have become highly sensitive. As a result, firms take a hit on both profitability as well as the quality of the work. This is a constant challenge when supply is higher than demand.
Technology has also had its effect on the profession, where at times, for some work, an almost white-label approach is being taken. This too has a large bearing on the cost incurred by the client. The other problem that has been incremental is the general flux in the market with multiple movements, especially at the mid-senior to senior level. Talent retention is thus critical.
We ensure that the service areas of the firm are at par with the best industry standards and provide superior quality legal services with a very quick turnaround time. We also ensure that the happiness quotient of the firm is always at the highest, as my personal belief is happiness in the workplace is the rocket fuel for efficiency.
ALB: India is reportedly moving closer to the liberalisation of its legal market. How are you preparing for this, and how do you expect it to impact firms like yourself, and the work that you are doing?
SARAF: We extensively work with U.S. and UK law firms, and most of these firms have conveyed to me that they will not open an office in India in a hurry. Even if they do open, it will be a very small office to support their International clients, and hence we will continue to work with them closely, and receive on-going referral work.
SHUKLA: What the actual impact would be on the Indian legal industry is somewhat unclear at the moment. Given that we already work at par with international standards and our present clientele includes major MNCs and Fortune 500 companies, we do not see the entry of foreign law firms requiring us to modify or make improvements to our internal structure, our style or quality of work.
That being said, we ensure that all our lawyers are updated and aware of all international developments on both legal and qualitative fronts. Although the entry of foreign law firms may spread out business very thinly, the rate at which the Indian economy is growing should generate sufficient work for the entire legal fraternity.
BURMAN: The entry of foreign lawyers in India is a welcome move by the Indian government as it would allow the Indian legal services market to keep up with the diversified global legal industry and would also allow cross border exchange of knowledge, expertise, skill and talent However, the same, if not done in a seamless manner, may lead to loss of opportunities for local law firms and Indian attorneys.
The entry of foreign firms and foreign lawyers in India will result in the existing competition multiplying manifold. However, many domestic firms will thrive on their competitive prices and quality of service. From our perspective, this has a dual positive construct. Firstly, the market is large enough to address various price points from a service provider’s perspective and the price range for the international firms will find takers only at the top of the pyramid. Secondly, there will be still various avenues of synergies where international firms would seek expertise of boutique firms, both from a time value perspective as well as domain and market expertise perspective.
ALB: What are the keys to succeeding in the market for a firm of your size and scope? What are some of the big strategies you’ve put in place for business growth in 2018?
SARAF: Our focus is to stay independent, and provide high-quality responsive service to our clients and help them with innovative structures.
The disruptive reforms by the government over the past few years should now be behind us, and the markets and economy should be much better in 2018. There will be increased deal flow in 2018, and we aim to get a large portion of it with high-quality partners and systems in place. One can afford to be expensive, but at every stage we need to deliver value to our clients.
SHUKLA: The key to success in any legal market is quality. There are also factors such as the management of the firm, the diversity of its practice areas, and the specialised talent available to it which affects the success of a firm. We have recently brought on board an external management consultant who is helping us improve on the management process within the firm. Additionally, we also ensure that all of our resources undergo constant training programs to keep them on their toes.
BURMAN: It would be through providing strategic and bespoke legal services to our clients’ across all segments. We must ensure the quality of services caters to each client’s specific needs and provides efficient yet integrated solutions with commercial viability.
There are a number of areas that are already changing the landscape of India’s legal market as law firms look to boost, maintain or revive their business in 2018. We are closely monitoring and continuously analysing our clients’ needs in other markets. So, we are focused on strengthening our network with other foreign law firms rather than opening a new foreign office. We are also increasingly working with various chambers of commerce.
ALB: Firms across Asia say that clients today are different – more cost-conscious, and more savvy and judicious when it comes to the use of legal services. What are some of the changes you have seen in India?
SARAF: India has become very price-conscious. Clients want more for less. They want firms like us to deliver value. To save on time and to be efficient, Indian law firms needs to have standardised documents and processes. With improved enforceability of contracts, setting up of commercial courts, improved timelines in relation to arbitration process and improved enforceability of foreign awards, clients in India will start differentiating amongst firms on the basis of good legal advice.
SHUKLA: Similar to almost all other industries, competition has played a major role in creating cost-conscious clients. With the number of lawyers and law firms constantly on the rise, the economic principle of a drop in prices resulting from increased supply comes into the picture.
Unlike in the early 2000s, clients looking for legal services in India have a vast variety of law firms to choose from and like consumers, they are looking for more bank for their buck. An industry-wise trend that we have been witnessing is that clients who look to engage us for various projects now request for a fixed fee estimate prior to commencing work, which sometimes is difficult to ascertain at the beginning of a project.
BURMAN: The Indian legal market has been experiencing many changes, including the rise in number of in-house lawyers and the clients’ approach in selecting law firms on the basis of their pedigree and credentials. Firms are therefore required to respond to clients’ requirements of cost control and efficient services. Clients are far more detail-oriented when it comes to spending, and keep a specific check on the hours utilised, especially in an hourly mandate. Some desire more communication, including more open dialogue around resourcing approaches and blended rates across designations.
Law firms in India are exploring innovative ways to provide more than just vanilla legal services to their clients.
ALB: What are your predictions for 2018?
SARAF: The Indian legal market will be more mature, with improvements in deal flow, and pricing pressures easing. By the end of 2018, we should be ready for the next level of liberalisation with the markets opening up by then.
SHUKLA: The Indian legal market looks set to witness a transformation in 2018. There is a need for more specialised lawyers with specific practice areas. The reforms to the Arbitration and Conciliation Act, 1966, have boosted confidence in the arbitration process in India with foreign clients. We have been seeing a steady rise in the number of arbitrations that we have been handling.
BURMAN: The legal industry is in an innovative and a rapidly evolving state. In 2018, it is expected to be driven by client demands. The steps for the opening of the Indian legal services market will continue in 2018, and this will lead to more options being available to clients for their legal service needs.
The legal marketplace is changing and clients can seek legal assistance from a growing number of non-legal sources including legal documentation providers, legal self-help sites, virtual assistants and offshore legal vendors. As the cost of legal services continues to rise, new legal delivery models will continue to emerge and gain momentum in the coming year. Only the nimble and the adaptable will survive and thrive.