With data showing that Deloitte Abogados is now amongst the top five firms in Spain when it comes to deal flow, market perception has yet to catch up with this reality
Only three law firms in Iberia advised on more M&A deals
than Deloitte Abogados in 2015, yet managing partner Luis Fernando
Guerra acknowledges that some legal market rivals claim they are
not competing with Deloitte. "If no one wants to compete with
us, that's not a problem, but in my view we are already
competing," he adds. Data from Mergermarket gives credence to
Guerra's claims – Deloitte advised on 34 deals in 2015, a
deal count bettered only by Cuatrecasas, Gonçalves Pereira
(which advised on 72), Garrigues (57), and Uría
Menéndez (56).
Some competitors in the market say the reason Deloitte figured so
highly in the 2015 deal tables is that there was a boom in
mid-market M&A deals in the last 12 months, and that when it
comes to the biggest transactions, clients still turn to the
traditional heavyweight firms rather than the legal arms of the
'big four' auditors.
However this is another perception that Guerra questions.
"We´re not a mid-market M&A firm, though it may be
how competitors think of us," he says. "We have elevated
our focus towards the top clients and we now represent around 90
per cent of the IBEX 35 companies – we have to convince
clients that we can act for them no matter the size or complexity
of the deal."
Guerra says he envisages a scenario where the firm will be advising
on more of the market's biggest deals in future. "We are
prepared to face any challenge, we will focus on high-value added
services where you need more experienced people so we will probably
reduce our leverage in future [with 50 partners and 550 associates
in Spain, the firm's leverage is currently 1:11]. Guerra also
indicates that the firm intends to be handling larger, more complex
deals in the coming years, which means "in future, we will
probably have less clients and less engagements".
Building the brand
Market perceptions aside, there is no disputing the fact that
Deloitte Abogados is getting bigger. Revenue increased by 11.7 per
cent in 2014 to €85.9 million, and Guerra is anticipating that
the results for 2015 will show a similar level of growth. "We
have grown every year in each of the last seven years," he
says. Guerra says the firm's profitability is also increasing,
but he adds that this is not the firm's primary objective.
"We have a comfortable level of profitability so this means we
do not have to focus on increasing profitability in the short
term," Guerra claims. "We are focusing on where we will
be in three to five years, and working to make the law firm
sustainable in the medium to long term, so we don't focus on
maximising profitability now but on building a better firm for the
future."
Guerra acknowledges that there may still be a perception that
Deloitte is primarily an auditor rather than a law firm, but he
says that the firm's clients are being provided with a legal
service that often surpasses their initial expectations. "Some
law firms may have better brands, but when we evaluate client
satisfaction – which is something not every firm does –
we are exceeding expectations, Guerra says. "There is the link
to the audit business, but we need to create the Deloitte legal
brand."
Avoiding class divides
Guerra attributes the firm's continuing growth to the
"huge transformation" it has undergone in the last six
years. "We created a new culture, we changed the way we render
services as well as the way we use technology," he adds.
"We became closer to our clients and we have built close
personal relationships – our growth is accelerating because
we're doing things better than others, we're more proactive
than our competitors."
Guerra says that Deloitte spends more time than some of its rivals
on building professional relationships and adds that the firm is
more efficient, provides better services and has lower costs than
many other law firms. He continues: "We anticipate the needs
of clients – regulatory compliance is one of clients'
biggest concerns, we invested in this area two years ahead of our
competitors."
Another reason Deloitte is flourishing is because of the culture of
cooperation within the firm, according to Guerra. "There is no
internal competition and we share our efforts, we're a single
team, it's not a silo model," he claims.
While around 25 per cent of the firm's partners are non-equity
partners, Guerra says this does not mean there are two classes of
partner at Deloitte. "Everyone goes through the non-equity
partner stage [before becoming an equity partner], the existence of
different classes of partner is extremely dangerous, but at some
other firms different groups of partners have different email
groups and different meetings."
Attracting talent
The strong belief in the partnership ethos at Deloitte is one of
the reasons the firm has been able to recruit partners from other
leading firms in Spain, according to Guerra. He cites the examples
of recent arrivals Dulce Miranda, an intellectual property partner
who joined from Garrigues, and Ignacio Sanjuro, who was previously
with Cuatrecasas, Gonçalves Pereira. "I think they
joined because we offered them a very ambitious project and also
because of the way we think and believe in our partnership."
He adds that Deloitte is also able to remunerate its lawyers in a
way that makes the firm an attractive proposition. "Apart from
being convinced by our ambition, I like to think they come because
they are being well paid – if people are not joining us,
it's not a question of money."
While Guerra says Deloitte has been more successful than other
firms in terms of reducing costs, he adds that the firm's
revenue is not growing because it charges lower fees than rival
firms. "Our fees are not lower, we have competitors that quote
half our fees, if you provide high quality services, clients are
willing to pay more," he says. "In my experience,
I´ve not seen a situation in which we were chosen for being
the cheapest – we have increased our profitability above the
growth in fees."
Boosting the ranks
There have been suggestions in the market that some lawyers have
exited Deloitte in the past because the work they were doing was
not of the level or quality that they had anticipated. Guerra's
response when this issue is put to him was "I'm sure that
anyone who may have said those things is not now working on bigger
deals."
The outlook for Deloitte in 2016 is positive. "We will
maintain our path of double-digit growth," says Guerra.
"We are also going to maintain one of our main competitive
advantages, that is being close to our clients through our
international network, which has a presence in more than 150
countries. This makes us one of the few legal networks with a
global dimension."
Guerra adds that the firm is now focusing on hiring senior
associates, though the firm will also be hiring a number of
partners in the coming months. He adds: "We're continually
scrutinising the market for talent – meanwhile, in June,
we'll promote four or five non-equity partners to the equity
partnership". Guerra identifies the major growth areas for the
coming year as corporate/M&A, regulatory compliance, labour
law, and tax: "We will focus on these four areas as in these
areas we are clearly winning the battle to be recognised in the
market. We want to break the legal market status quo and we believe
it is possible, Deloitte is on the way up."
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.