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Amarchand Mangaldas Suresh A Shroff, once the country’s biggest law firm, has now been divided between the two Shroff brothers, Cyril and Shardul. Following the official dissolution earlier this month, AMSS has been carved into two, separate firms – Shardul Amarchand Mangaldas & Co and Cyril Amarchand Mangaldas.
As expected, the division has created quite the stir in the legal market, with the two brothers embarking on an expansive, and aggressive hiring spree.
In terms of numbers alone, Cyril Shroff has hired around 20 partners laterally for his Delhi office while Shardul Shroff has hired 6 for Mumbai. And there is more to come, especially at the junior to mid-level.
Cyril Shroff is looking at a 600-lawyer strong pan Indian firm by June 1, 2015. If he does reach this number, Cyril Amarchand Mangaldas will become the biggest Indian law firm in numbers. On his part, Shardul Shroff wants to up his current numbers from 380 to 450 by the end of the year. That is close to a 20% growth rate in just over six months. It is growth that can only be sustained through lateral hires.
Furthermore, with each brother opening offices in the other’s “home ground”, firms across different cities have come under immense pressure to retain existing talent. Or at least that is what the Shroff brothers believe.
In his interview with Bar & Bench, Shardul commented that,
“[Other firms are] all running scared! We’ve stirred the market clearly because it’s a disruptive event in the market. There’s a hunt for talent and firms believe they are losing people, and that’s always a threat.”
Cyril Shroff describes the current situation as “double trouble”.
But that is just may well be the opinion of the two Shroff brothers. What do senior lawyers at different other law firms feel? Is the emergence of SAM and CAM going to affect them in the long run? How will these two new entities change the dynamics of the Indian legal market?
We spoke to Senior Partners across different firms and this is what they had to say.
Impact of the split
S&R Partner Sandip Bhagat seems to be in agreement with Shardul Shroff in as much as the split being a disruptive event.
“From a law firm perspective – there is more competition, increased pressure on pricing and retention of talent; however, [there are also more] opportunities to get new clients.”
J. Sagar Associates Managing Partner Berjis Desai says,
“In the near term, some churning in the legal market, due to two elephants splashing in the pool together, is inevitable. However, it will soon settle down.”
Although he may not have been referring to it, JSA has been a victim of this “churning”. As first reported here, one of JSA’s star performers Akshay Chudasama recently resigned from the firm, and is likely to be appointed the Regional Managing Partner at SAM & Co.
And what does Desai think about Cyril’s ambitious growth plans?
“Cyril is a great lawyer, with amazing legal management skills. This development will only make him stronger, better and freer. I do not see any threat to his undisputed No.1 position, for a long time to come.”
In Delhi, Luthra & Luthra Senior Partner Mohit Saraf has an altogether different point of view. Saraf argues that there is more than enough space for ‘four to five’ good quality firms in India. He prefers to take a macro perspective.
“India is going through a multi-decade growth cycle, which I think will pick up in another 12 months. In comparison high quality legal market for corporates in India is very shallow. In my view, the market will be able to absorb at least 4-5 more good quality law firms in the next 5 years. Therefore, the split will add one more top quality law firm in the top bracket.”
Saraf also says that the split ought to be viewed from the perspective of competing with international law firms, if and when they set up shop in India.
“Going forward corporates need much more sophisticated advice and they will have a challenge to choose between few Indian law firms and more international firms. Therefore, one more mature Indian law firm will only make clients stay with Indian law firms and not go to International firms when the market opens up.”
Saraf is confident that both Shardul and Cyril will set up quality law firms that will actually end up expanding the market for Indian law firms.
The Talent Wars
The fact of the matter is that the ongoing talent wars has seen some firms lose a number of key people.
Saraf says, “From an employer’s perspective, what it will do is that the management of each firm will start looking inwards as to how to attract and retain the best talent since there is a short supply of talented lawyers in India.”
In his view the Indian legal market is moving into an extremely interesting phase, where every top tier law firm in India will be expanding, organically and otherwise. At the same time, lateral shifts are only going to become more common. What this effectively means, says Saraf, is that management will have to look inwards. And do so quickly.
So far S&R has not lost any of their lawyers to either of the two firms. However, Bhagat says that the talent war is unlikely to end any time soon.
“This trend will likely continue over the next few months. I think that at some level, each lawyer in a firm has to take an individual call on whether such lawyer prefers the existing work place or believes that a change is necessary or attractive.”
Khaitan, on the other hand, has not been as lucky, losing a number of lawyers to both SAM and CAM.
Jhunjhunwala says, “There will always be movement and more so at the end of the financial year. We will have to let some go, we will guard others and we will take some away too! Life will go on.”
He adds, “I will also say that we as a firm have been a target over a period of time, because of our position and because we have some of the best talent.”
And if market rumours are to be believed, a number of lawyers at Khaitan have actually refused to join either of the new firms.
To which Jhunjhunwala says,
“Somewhere people value what the firm brings in terms of rewarding meritocracy, being transparent, and most importantly not being a family firm! The attrition is low.”
Unlike some other firms who announced bumper promotions to retain talent, Luthra has been fairly circumspect thus far. They have suffered the loss of one Partner to CAM, but Saraf maintains that the firm will not be unnecessarily reactive.
“We don’t need to take measures because somebody else is opening up a shop. We constantly introspect so that we can offer on a sustainable basis ( year after year) not just one off growth trajectory to each of my fellow colleagues.”
“We are constantly reinventing ourselves, but this split has not triggered anything. We are possibly the only firm which didn’t announce wholesale promotions or salary hike which will only happen in line with our past practice”, added Saraf.
Increasing competition and the RSG rankings
Khaitan’s Rabindra Jhunjhunwala feels that the split means one more law firm “pitching for the same work”. However he is quick to add that the, “market is large and the pie big”.
Some argue that the split has actually translated into a “win-win” situation for other firms such as AZB, Khaitan, JSA, Luthra, S&R, Trilegal.
As a Partner at a pan-Indian law firm said,
“If the client market rumours are to be believed there are clients who don’t want to continue with the Shroff brothers because they feel they will not be able to give time, while some others feel that if they have these two firms in the same room, it could be disaster recipe.”
Luthra’s Saraf says that the two new firms will not have any significant impact on the competitive forces within the Indian legal market.
“Right now, most Indian law firms cannot take too much work, they’re already very busy with what they have on their plate. I would have worried if the split had happened 2 years back when flow of deals was limited and therefore could have led to pricing pressure.”
One way to judge the effects of this split is to compare the RSG rankings over the next few years.
This year, the undivided AMSS topped the RSG ranking while AZB & Partners and Khaitan & Co shared the second rank, JSA took the fourth spot and Luthra on fifth. With the split and the new firms emerging, we will certainly see some changes in the ranking order.
Jhunjhunwala agrees that there will be changes in the pecking order but doesn’t agree that the split firms will retain their top spot immediately after the split. He says,
“Since the split is in the middle, how can that be possible today, it defies the RSG criteria for rankings and any logic! In all fairness it will depend on how things have played during the year and will entirely depend on what each of us do during the year. Let’s not take sides and preempt.”
Exits at SAM and CAM
Interestingly, SAM & Co has also seen a few exits during and after the split with Partner Ravindra Bandhakavi leaving with his team to join Trilegal. The firm has also seen the departure of some Principle Associates.
At CAM, so far only one of the Principal Associates (Manisha Shroff) has resigned to join Khaitan.
What becomes very clear is that lateral shifts will continue for some time, that firms have announced substantial pay hikes to retain talent, and that the two Shroff brothers are certainly stirring the waters.
Bhagat thinks these are interesting times ahead. “I expect the full impact of this split to be felt over the next year or so.”
What will be interesting to see is the long-term effects of the split? Will this mean a change in the partner track at law firms? Will other firms also change their ownership structures? Will we see a new wave of breakaways or will there be further consolidation in the market?
All in all, the next two years are going to be an extremely exciting time for the Indian legal market.