As businesses continue to look for global opportunities, the law firms that support them can face their own set of challenges. More and more client work contains an international component for which law firms must be prepared to handle. In this edition of Expert Insights, CT’s Global Sales Support Manager, Devlin Fisher, discusses how the global pandemic has affected business activity and the marketplace, what practice areas are seeing the biggest growth, tackling the global components to client requests, and common issues law firms run into.
CT expert insights: 2021 outlook for law firms with global clients
Greg Corombos: Hi, I'm Greg Corombos. Our guest this week on Expert Insights is Devlin Fisher, global sales support manager at CT Corporation. He joins us today to share the latest trends in mergers and acquisitions for law firms from a global perspective. And Devlin, it's great to have you with us. Thanks for your time today.
Devlin Fisher: Thank you, Greg.
GC: Well, we've certainly seen adaptation and evolution in a number of ways over the past year, but what practice areas are you seeing grow the most when it comes to global work?
DF: Great question to start off this podcast. And the answer is a bit of industry and overall economic insight, but also a bit of common sense. You know, we all know that opportunities exist for law firms during both strong and weak economic conditions. But the challenge then becomes being able to identify where those new opportunities will be. It is easy to follow and react to new client requests coming in. But we as legal professionals need to be able to anticipate where work will grow so that rather than being reactionary to our clients’ requests, we can be proactive, and ready to serve our clients when the work actually does come in.
Clearly, the ongoing COVID-19 global pandemic has been the driving force behind global work since the pandemic began in early 2020. Transactional deals that were scheduled to be closed in 2020 were put on hold or abandoned altogether. A lot of well thought out plans had to be changed or scrapped entirely from law firms and customers alike.
You know, companies had to abandon their plans and go back to the drawing board to revise their outlooks and re-strategize what they would be doing going forward in light of all these challenges that they were now facing due to the global pandemic. And in this process, we've seen several areas of legal work grow. As a result, we are seeing a lot of additional work in M&A. Now, these are both those deals that were put on hold in 2020, which are now being implemented, as well as new deals that are the result of strategic opportunities that the global pandemic created.
But we're also seeing a huge uptick in bankruptcy filings, especially in the transportation, energy, and hospitality industries and it’s related due diligence work that bankruptcy work brings in. We are also seeing a lot of companies reorganize their existing organizational structures. You know, companies are taking a new look at the way their organizations are structured and deciding whether or not it is set up in the most efficient way possible, given the current market conditions.
And, in a bit of optimism here, we are also seeing new organic growth as companies look to expand their operations in new jurisdictions where new opportunity exists. In addition to this work, as the economy stabilizes, and a global pandemic is in our rearview mirrors, we will likely see additional intra-industry consolidations, diversification and vertical integration, as businesses really attempt to solve the problems that the global pandemic created.
Knowing all this is important for law firms, because all these actions and trends will create additional legal work for law firms and firms need to be ready to assist their clients when the work comes in. I hope that answers your question.
GC: It does, it does. And it also whets the appetite for more here because we've talked about what's changing. Let's shift a little bit and talk about where things are changing. What are the most common foreign jurisdictions that law firms are doing work in over this past year?
DF: Well, it really depends on the type of business the law firm’s clients are engaged in and the practice areas the law firm works; and if a law firm’s clients are looking to manufacture their products in a new place. Then the decision process on where to go to do that is a lot different than, let's say if a client was looking for new sales opportunities from new customers and new jurisdictions.
But on the whole, if a law firm’s clients tend to be existing global organizations, we are seeing them seek to reorganize their existing global operations in organizations. And as a result, we are seeing a lot of work in those traditionally, global jurisdictions for U.S. companies, like Canada, like Mexico, like the United Kingdom, where they are taking their existing organizational structures and changing them—changing both the types of entities that utilize in those jurisdictions as well as inter-organizational ownership structures for specific strategic benefits.
Now, on the other hand, for those law firms whose clients tend to be newer organizations that have never done anything global in the past, we are seeing a lot of law firms advising their clients on the best way to enter these new jurisdictions, given what their anticipated business activities will be. These clients tend to have a desire to go in new jurisdictions, but really don't know how best to do that.
You know, every day, I get requests from law firm customers asking me how best to enter new places like China, like India, South America, and other developing economies. And I really provide that support to guide them in doing just that. So, it really depends. And I'm never surprised when a new request or project comes in, that has a global component in some uncommon jurisdiction somewhere.
GC: So pursuing new opportunities is exciting. But there's also the flip side of that and that's the problems that can arise. So what problems do you see firms running into as they start working or start working more in these foreign jurisdictions?
DF: Well, naturally, you know, each law firm that we work with has its own unique set of organizational strengths and weaknesses. And I believe that these strengths and weaknesses are only magnified when a law firm does global work.
You know, we commonly see a knowledge gap between what a law firm knows about doing work in a particular foreign jurisdiction and what a law firm needs to know about a particular foreign jurisdiction to be able to competently advise our clients as to the most effective way of achieving whatever it is that they're looking to do globally in that jurisdiction. A lot of the work that I do with law firms is simply consulting them on the global work that they are doing and being that kind of gap filler, so to speak, so they can be confident when advising their clients on their global work.
In my role, I am an additional resource to our law firm customers whenever they have a global component to the work that they do. We see a lot of issues when law firms may utilize local vendors to support global work that they do. Law firms may not have an existing local provider relationship in a new jurisdiction they may be doing work in. And the process of vetting potential vendors is costly, takes time, and frankly it's really unnecessary. You don't know how long this vendor has been doing business, you might not have a referral to a local vendor, and you have no way of gauging how competent this vendor is before you actually engage them to do work. You have also got to understand that, a lot of the time, there really is no incentive on the part of a local vendor assisting a law firm when the work is perhaps a one-off project are not expected to last very long.
So, law firms tend to struggle with obtaining local support in foreign jurisdictions when they're only doing a little bit of work in those places. And this is where CT can help. We have a global network of local legal professionals who help support the global work we do. And we can demand from our partners the highest level of service as we work in volume. But you know, a single law firm, for instance, may only have a small component of a project located in perhaps China, whereas we have numerous customers doing work in China every day. So it's really this volume of work that allows us to provide the highest level of service possible to our law firm customers,
GC: Devlin, which foreign jurisdictions are seeing the biggest increases in work?
DF: As law firm clients seek to reorganize their global organizations to solve the problems and issues that arose during the global pandemic or, in the alternative, were always there but just not as visible on the surface. We are seeing law firms assist their clients with formation projects in places like the British Virgin Islands, BVI, the Cayman Islands, the Cook Islands, and other places. When it comes to reorganization projects, we are seeing new work in nearly every jurisdiction across the globe. But just from my recent experience, we are seeing a lot of new work in places like China, India, Brazil, and other emerging economies.
GC: So which type of clients or companies are going global?
DF: Greg, that's a really good question. It really is all types of companies. And I wouldn't limit my answer to a particular archetype company or a template type of organization. The Internet and e-commerce have really flattened the world, which I might admit is an often overused phrase, but it really is true.
Almost any business has the potential to find new opportunities, new customers, new suppliers, etc., in places all over the world. We are seeing all kinds of industries and companies going global. Everything from product manufacturers, to service companies, to technology-based companies, to medical supply companies (think masks), right, all looking for new customer-supplier opportunities around the world. As a result, companies are always looking to expand on what they are doing geographically.
And I think when we look back at the global pandemic, and how it changed and shaped how businesses do work globally, we are really going to say that the pandemic was a significant factor in the growth of global business in the long run.
GC: Devlin, we're still dealing with the pandemic. It's been a year. So how is COVID-19 impacting the effort to build a global practice for law firms?
DF: The global pandemic has completely transformed how business is done and, more importantly, from my perspective at least, how those governmental authorities that are tasked with regulating companies operate. We continue to see both temporary and permanent regulatory changes get implemented in almost every jurisdiction in the world to help combat the global pandemic.
Additionally, ongoing jurisdictional lockdowns continue to impact turnaround times as customers do global work. Requests that used to take 24 to 48 hours to fulfill are now taking weeks as governmental offices are closed or working under limited circumstances. It is extremely difficult to track these ongoing changes as they themselves change in almost every jurisdiction around the world. But it's really understanding the way these laws and regulations will impact your clients. That will be the one thing that will set your law firm apart from others. We had CT track these jurisdictional changes and our law firm customers lean on us to help guide them as they run into these issues globally.
GC: Well the number of things you need to keep track of in your own country, much less all the different jurisdictions you could be dealing in overseas, is immense. So having someone staying on top of that is a huge asset. So, like you just said, there's a lot of things that law firms need to keep in mind when operating in other countries. But if you could put something at the top of that list, what's the most important thing to remember?
DF: You know, there really are a lot of things to remember when doing local work. But I believe the most important thing to remember is that each foreign jurisdiction you may be working in is different. You know, there are no two jurisdictions in the world that are completely alike. And we tend to lose sight of that at times.
You know, we do a lot of work in a lot of different places and we almost feel like that same template of how work was done in let's say, China, would be similar to how work is done in a place like, let's say, Japan, but that's not the case at all. Each jurisdiction is its own sovereign and has the power to implement its own set of business laws and regulations. And they've created legal systems that are unique to them.
As a quick example, there are many jurisdictions around the world that have an available entity type known as an LLC, a limited liability company, as I'm sure most people listening here today are familiar with. But we need to remember that a Delaware LLC is a lot different than let's say, a Chinese LLC, or a Cayman Islands LLC. Each jurisdiction’s LLC has its own distinct characteristics that make it unique to working in that jurisdiction. Even so, we still see a lot of the same things across multiple jurisdictions.
You know, the Commonwealth countries have similar legal systems, the civil law jurisdictions have similar legal systems, the CIS countries, that is the Commonwealth of Independent States, these are former Eastern Bloc, former Soviet Socialist Republics that are located mainly in Central Asia, they have similar legal systems. And really, to a certain extent, many southeastern Asian jurisdictions have similar legal systems.
So you can take the knowledge you have about doing work in one of these jurisdictions and use it as a baseline to do work in a new jurisdiction—but do not automatically assume things will be exactly the same in that new place because, in many cases, they won't be. So, I think the most important thing to remember about doing global work is that every place is unique. And it's a learning experience every time you do new work in a new jurisdiction.
GC: As long as we're talking about trends, Devlin, let's talk about one that seems to be having an impact right now. And that's the SPAC. First of all, what is it? And what role has it been playing in recent activity when it comes to mergers and acquisitions?
DF: SPAC are one of the hottest trends of 2020 and now 2021 M&A work overall. Basically, without going into a lot of the minutiae in detail, an SPAC, or a special purpose acquisition company, is a shell corporation. So it's one that has no business activities of its own. That is listed on a stock exchange with the purpose of acquiring a private company, thus making the private company public without going through the traditional IPO process, which can be cumbersome and very involved.
Law firms may form an SPAC for their client so their client can use that entity to pull investors’ money as part of a strategic acquisition. Even though the concept of SPAC's have been around for decades, 2020 and thus far in 2021, we have seen a historic spike in the amount of capital that has been raised by utilizing them. We are seeing a lot of law firm customers request assistance from us with the forming of these types of entities.
GC: Devlin, how is CT supporting law firms with global deals as well as the uptick on M&A activity?
DF: I would like to answer this question with a real-world example of a project we recently assisted a law firm customer with. A law firm customer recently reached out to me at CT to assist with developing a due diligence strategy to support a global M&A transaction. And time was the essence, as it sometimes can be in these situations. More often than not, you know, one might think that an M&A deal is planned out and the timing of it is, you know, strategically planned out. But in a lot of cases, customers come to us and there's a ‘time is of the essence’ factor involved.
As a lot of our customers know, developing a global due diligence plan to support a project can be tricky when working internationally as different jurisdictions have unique legal systems that will really drive the types of due diligence searches one is able to perform as the global searches in general, in any transactional deal, including financing deals, or restructuring or rationalization projects involving entities. The first thing you have to do is develop a due diligence strategy that is designed to support this specific project at hand. As you can imagine, the level of due diligence to support a given project will vary considerably from deal to deal and from project to project. If you are working on, let's say, an intra-organizational deal or deal between related parties, the level of due diligence that may be needed to support that deal will be much different than if the project were between two completely unrelated organizations. As a result, the underlying details and circumstances of the deal or project at hand will drive which searches a client will need.
Given this, I asked the law firm customer to provide me with a little background information on what the underlying deal or project was, which then allowed me to help guide them through consultation and creating a custom, tailor-made due diligence solution to support their work on that particular project.
There were a number of global entities involved in several different jurisdictions around the world. In a few of the jurisdictions, turnaround times on some searches were delayed due to the ongoing jurisdictional lockdowns to the extent of the search results would likely not be returned within the customer's timeframe. Using the global knowledge that I have, I was able to advise the customer as to other alternative searches that were available, which would return results quick enough to support the deal. In that way, we were ultimately able to choose searches that were designed to get them the information they needed as efficiently and cost effectively as possible, all within the short timeframe they were working with.
As another quick example, we recently had a law firm customer reach out to us to provide support for a large uptick in global M&A work that came through their door. The law firm was initially hesitant in taking on this additional work, as our M&A group and supporting teams were already working at full capacity. And this uptick in their work was not anticipated to last forever, it really was only anticipated to last maybe the next three months. As a result, they needed a solution that would allow them to take on this additional work, and they reached out to us at CT to help support this work.
We were able to provide the customer with the due diligence support and other ancillary services needed to be able to do the work and thus allowing their attorneys and support staff to free up time focusing on more strategic aspects of the deal. As a result, they were confident that they could take on the additional work and they did just that by leaning on a trusted partner like CT for support and ancillary services.
A law firm can adjust the short-term market fluctuations in the amount of work that they can take on without degrading the level of service they are able to provide to their clients. This just goes to show that the complexities of doing global business are vast and law firms need a team of specialized subject matter experts who can assist them. CT is here to help. We have consultants, including myself, standing by who can help law firms assist their clients with whatever global project they may have.
GC: Devlin, fascinating to see all the developing trends and to discuss them with you and hopefully it's reassuring for our listeners to know that CT is there to help with all the complexities along the way. Thanks so much for being with us today.
DF: Thank you, Greg.
GC: Devlin Fisher is global sales support manager at CT Corporation. I'm Greg Corombos, and for more information on this topic, please call CT at 844-787-7782.