Singapore’s legal sector: The fight for market share
http://www.singaporelawwatch.sg/slw/headlinesnews/57580-singapores-legal-sector-the-fight-for-market-share.html?utm_source=email%20subscription&utm_medium=email
13 Feb 2015
Author: Sarah Kogan
EACH year Chambers and Partners carries out thousands of in-depth interviews with clients and lawyers in Singapore and the wider Asian region. Our latest annual rankings for Asia-Pacific were published on Feb 10, 2015.
In the last 12 months, the Singapore legal market has been characterised by continued growth, as well as much volatility in terms of movement of lawyers between firms. Interviewees tell us that while the market for legal services remains buoyant, both established firms and new entrants are under increasing pressure to adapt their offering through flexible fees, more practice area specialisms and better regional coverage.
PRICING PRESSURE
Pricing pressure has become a growing challenge for law firms in Singapore, as clients push for flexible billing at both the high end and mid-market levels.
Although clients still identify good quality representation as their top priority, they also tell us they are looking for the sweet spot between value and quality. While a favourite refrain may still be: “They are expensive, but they are worth it!”, clients are nevertheless becoming more price sensitive. As one general counsel remarked: “What we look for are good, cost-effective lawyers. Good comes first – and these guys are that . . . but it could have been done a lot cheaper!”
Given the competitive nature of Singapore’s legal market, it is unsurprising that clients are more bullish than in the past when it comes to demanding competitive pricing. Even in a long-term relationship, the level of fees can be a deal breaker. As one source cautioned: “They should not rest on their laurels. If they continue to be so exorbitant, then there is a risk for them that we go elsewhere.”
Clients are also increasingly interested in alternatives to the traditional bill-by-hour system, whether this be a cap, fixed fee or retainer arrangement. For more cost-conscious clients, such arrangements can be attractive, but only where the agreement is realistic. As one interviewee told us: “You get what you pay for. I’ve rarely seen a cap not being breached – if a client imposes a cap then you may get poor quality – but if you have no cap then it can also become a problem.”
CROWDED MARKET
This downward pressure on pricing is unsurprising given the increase in the number of law firms in Singapore.
Nevertheless, for those firms that can leverage their existing strength in the region, it is still possible to gain traction quite quickly. For instance, having reopened in Singapore in 2012, Freshfields has already secured rankings in three practice areas, including a band two ranking for Energy & Natural Resources. Relative newcomer Morrison & Foerster has also quickly built its team since it entered the market in 2013, and is ranked in the Corporate M&A table in the latest edition.
On the other hand, for international firms that are newer to Asia, and which have not chosen to pursue a local tie-up, the landscape can be quite challenging. The battle is not only to attract clients, but also to retain key partners, especially within the mid-market ranks. As one source explained: “There is an appetite for teams to be moving around to different firms, there is a lot of personnel movement, and more fragmentation.”
In the last two years, we have seen growth particularly in the number of mid-market entrants to Singapore, including the arrival of UK names such as Simmons & Simmons, Nabarro, and Reed Smith. This influx has resulted in particularly fierce competition to hold onto top legal talent in this segment of the market. During 2014, we saw a number of partners upsizing to more established firms, including Paul Ng’s move from Stephenson Harwood to Milbank, and Nabarro’s former Singapore head Emerson Holmes across to Clifford Chance. Often it appears such moves are driven not only by the lawyer’s desire to be part of a leading brand, with all the benefits that brings, but is also a response to client pressure to offer a stronger regional platform.
DEMAND FOR GREATER SPECIALISM
On the other hand, we see that new entrants who can offer advice to clients in niche areas are still in great demand.
This is illustrated particularly clearly in the TMT (telecommunications, media and technology) sector, where until relatively recently there was a shortage of specialised lawyers available on the ground. As one source puts it: “Like many places in Asia, despite the size of the clients involved, it is an under-represented area of specialism.” UK-headquartered Olswang opened its Singapore office in 2012 and has already achieved a top-tier ranking in our TMT table. It is a similar picture in the insurance sector, where DAC Beachcroft and RPC have both been able to secure band one rankings in our insurance table, having only opened their doors in 2011 and 2012 respectively.
Meanwhile, the leading full-service firms, both domestic and international, have also continued to expand the scope of services they offer to clients, with an increase in lawyers working in niche areas such as financial regulatory, FCPA ( Foreign Corrupt Practices Act) work and competition law. In response to these changes we continue to expand the practice areas we cover in our Singapore chapter, including for the 2015 edition, a new sub-table for individuals who specialise in banking and finance regulatory work.
For now, Singapore’s legal market appears to be on course for further expansion and diversification. While increased competition presents all law firms with challenges in maintaining profitability, Singapore nevertheless remains a highly attractive location for lawyers due to its strategic importance as a regional economic, political and legal hub, and as Asia’s leading destination for dispute resolution. For clients, the high levels of competition among legal providers is also a positive, driving up standards and encouraging firms to hone and expand their offering.
• The writer is deputy editor of Chambers Asia-Pacific guide
Source: Business Times © Singapore Press Holdings Ltd. Permission required for reproduction.
