Wednesday, September 28, 2005

Indian Lawyers Perform US Law Work - A Welcome Trend

Today's Wall Street Journal carried yet another article on the usage of Indian lawyers to perform various US legal tasks. Note that we are talking about US law matters, whether litigation support or contract matters, and not usage of Indian lawyers for advice on Indian law. We are aware of in-house legal teams pushing this trend more than law firms and recall that GE received some publicity a few years back when it kept an India-based team to handle some US law matters.

Why is this a good thing? The US corporate/commercial legal industry heavily emphasizes the buidling of large firms to carry-out the kinds of legal work that can maximize the billable productivity of partners and associates. Without substantial competition from other law firms and types of legal service providers, there is little incentive for such large firms to find ways to reduce their costs and pass-on the benefits to clients. Since many Indian lawyers have fine academic credentials and wonderful English-speaking abilities, we will likely see ever more sophisticated work being transferred to India and elsewhere (the Philippines, for example).

By the way, many refer to the transfer of legal work to India as another form of "outsourcing," though "outsourcing" has become an overused buzzword to describe a fundamental aspect of our free-market system. Having work performed by those with a competitive advantage due to pricing, performance and other factors is the nature of the beast, whether the work is limited to a single economy or includes a transfer of production across borders.

Sunday, September 25, 2005

Korea as Northeast Asian Regional Hub

Korea continues to pursue its goal of becoming a significant regional hub, including as a major destination for multinational company regional headquarters. Recognizing its challenge in the face of a significant investment flow into China and the rising prominence of Shanghai as a regional headquarters, Korea argues that companies can benefit from locating their adminstrative and logistics headquarters in Korea even if manufacturing will be based elsewhere, such as in China.

Particularly for companies that plan to run part of their regional operations out of a hub based in Northeast Asia, and whose plans are not completely dominated by China, such a pitch may make sense. With such an overwhelming degree of focus on China these days amongst US companies, some pay too little attention to opportunities for collaborating with Korean companies and doing business out of and in Korea, let alone Japan (an economy showing some signs of revival).

Friday, September 23, 2005

The Multinational Law Firm - One Size Fits All?

Over dinner with a Korea-based former colleague and friend, the discussion turned to the news of law firm expansion, including the latest on DLA Piper Rudnick, and collapse, Coudert Brothers in particular. What is really driving the belief among some that they must build mammoth multi-country law firms in order to survive and prosper?

The largest companies typically have a team of experienced in-house cross-border lawyers who structure, draft and negotiate deals. Much of the work is handled by the in-house lawyers, though with on-the-ground back-up support from local lawyers in the target country. While the local office of a multinational law firm may be turned to, more often projects are executed by one or two in-house lawyers in one country working with a local lawyer in one of the many excellent local law firms in the target country.

Multinational law firms have their place, such as for the kind of very large multi-country M&A, project finance or securities projects that can benefit from some added element of coordination and control among several offices simultaneously. (An in-house colleague in a major Chicago-area company recently had just this sort of a multi-country firm need for the sale of a business unit with assets in more than a dozen countries.) Yet, what is truly added by a multi-country firm for the day-to-day joint ventures, manufacturing agreements, licenses and agancy/distribution arrangements between one country and another?

The largest law firms tend to feed the beast by seeking-out and emphasizing the largest and most expensive kinds of projects for the largest companies. While the day-to-day cross-border projects will not be turned away, these types of projects may not get the kind of senior attention and care unless they are part of a broader relationship or seen as feeders for larger and more lucrative assignments.

It is true that some companies just want to get a project done and are not particularly cost-sensitive in how a project is executed. There may be some comfort taken in having a very large firm with many offices tend to needs large and small. Some companies take such a route because they are inexperienced and do not have the internal resources for a hands-on role in cross-border legal matters, including for working with local counsel in target countries. Yet, others are simply not aware of their options and may over-value size and the existence of foreign offices. Such a perception is not discouraged by the largest firms who are investing substantial marketing resources in attempts to become the next one-stop shop for worldwide legal needs.

Tuesday, September 20, 2005

Private Equity and VC Firms Push Their Portfolio Companies to Internationalize

In the 1999 - 2001 period, I recall several trips to Silicon Valley to meet with emerging technology companies with an interest in expanding outside of the US. At the time, there was such perceived opportunity in the US, particularly Internet-related, that many in the venture community seemed to have little interest in opportunities in Asia and elsewhere.

Now, there is an ever-increasing interest to push into new markets, and China and India are the focus of attention. China often for perceived manufacturing opportunities to reduce costs, expand revenues and follow customers. India often for software production and back-office functions, such as call centers.

We are seeing the investors, whether private equity firms, VCs or others, taking a strong interest in enhancing the value of their portfolio companies by actively assisting them in their cross-border expansion. (As cross-border lawyers, we do our part by lending our foreign investment and transactions skills to the process.) A good example here in Chicago was the Tuesday lunch at the Sears Tower's Metropolitan Club sponsored by the Association for Corporate Growth. Some 240 bankers, private equity investors, accountants, lawyers etc. gathered to listen to the China experiences of Jordan Industries, an Ernst & Young partner and a private equity investor. The investor had been through a few manufacturing deals for portfolio companies and was a fine example of the trend - a Chicago-based investment group actively encouraging its portfolio companies to get the cross-border religion, and taking a hands-on role in implementing projects outside of the US.

Saturday, September 17, 2005

Scratching the in-house international lawyering itch

Our objective - to share some of the tools, tricks and casual observations that can better enable internationalizing companies to implement their transactions and make use of foreign law and practice. Glad you can join us!

David Laverty