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The ninth day of May last year saw the end of an era; the country’s biggest law firm, Amarchand Mangaldas Suresh A. Shroff, was dissolved. The dissolution marked the end of the family feud between brothers Shardul Shroff and Cyril Shroff, following the demise of their mother, Bharati Shroff.
What was once the country’s largest law firm has now been replaced with two new firms – Shardul Amarchand Mangaldas & Co and Cyril Amarchand Mangaldas.
Naturally, this was followed by a significant churn in the law firm market; not only were there a number of aggressive hires, but also a complete restructuring of firm management as well.
More than a year later, things seem to have settled down.
The end of the year-long period also marks the end of the “non-poach” agreement between the two.
Bar & Bench’s Pallavi Saluja speaks with Shardul Shroff about the firm’s first year, having a non-family managing partner, growth plans, and much more.
Pallavi Saluja: Shardul Amarchand Mangaldas has completed one year. Have things gone as per your expectations?
Shardul Shroff: Things have gone better than what I expected. In terms of the quality of people that we have, and the new office in Mumbai. We are about to have a new office in Bangalore, and will have more than 400 lawyers by the end of this month.
Pallavi Saluja: In a big change to the firm management, a non-family Managing Partner has been given charge of the firm’s western region – was that an easy decision to make?
Shardul Shroff: I think it was a mental decision for me to take. I did not want to depute a family member for it, because then the whole aspect of whether we are a family-run firm or a professional firm would keep coming up. I got Pallavi Shroff to become Managing Partner in Delhi, and the collaboration between her and Akshay Chudasama is going beautifully.
I am always available as a mentor or to take an executive decision.
Pallavi Saluja: Some of your recent hires are undeniable rainmakers. How has their integration been with the Shardul family and the firm as such since each of them has a long and strong history with their former law firms?
Shardul Shroff: I have given Akshay a fairly free hand and he has adjusted very well. Shuva Mandal is the national practice head for M&A and he has a fairly large role in terms of managing other partners and work creation. They are very close to each other.
There is a daily dialogue between Pallavi and Akshay, and the ideologies and methods are very similar. A lot of discussion takes place, which was not the norm at the erstwhile Amarchand Mangaldas.
There is a liberal and trusting atmosphere at the firm and I think they are doing very well.
Pallavi Saluja: How have your own home grown star partners dealt with the idea of “outsider” partners taking up the leadership roles?
Shardul Shroff: The idea of an external Managing Partner was very well received because the Mumbai market is vastly different from the Delhi market. Somebody from Mumbai coming to head the Mumbai office was well received.
Otherwise, we would have had to transplant a partner from Delhi to Mumbai and it would have taken much longer to create that market and strengthen our practice in that market.
In terms of the M&A space, Shuva is heading the overall practice and I am the co-head on M&A. The principles of running Delhi are not different from what we had. There is a great deal of comfort from our Delhi Partners. I don’t think much has changed.
Pallavi Saluja: The law firm market has seen some disruption post the split. How do you see the market now and where do you see it in the next 2-3 years?
Shardul Shroff: I think the market has settled a fair bit, though there are disturbances at some firms which faced exits. The movements are far less than what happened a year ago, because both the firms, in some sense, have settled on the hires. The ones that take place now are accretive hires rather than establishment hires. I don’t think the market will be so disruptive as we saw one year ago.
The 2-3 year projection depends a lot on the economy. It is not boom time as it was in 2008; things are a little unsettled because I don’t think business and industry has that much confidence in the future. If the general terms of doing business in India improve, we will see an upswing. We are working towards the steady growth of the firm at 10-15% in terms of both people and work.
Even in this market, we have hired around 30-40 new people. We now have the optimal number of people that we need. If work jumps up, we will hire more.
Pallavi Saluja: The firm hasn’t seen much attrition. How do you retain talent?
Shardul Shroff: It is an endorsement that we have got it right. We reward talent very well. The new talent has had enough breathing space to come up to the level of the old firm’s arc, in the sense that the Delhi office was much more stable than starting a new office in Mumbai. I think people respect the fact that they are given the opportunity to grow into the firm rather than being pushed into tough times.
The second reason is that we focused on quality and not on quantity, and that, I think has been the one of the reasons for the general success of our firm in the last one year.
Pallavi Saluja: How long do you think the Mumbai office will take to break even?
Shardul Shroff: The Mumbai office has already broken even. The firm has made a profit overall, despite the fact that two new offices need to be set up. We have done well!
Currently we have about 18 partners and about 100 lawyers in Mumbai, and the number of lawyers will go up. We have a new floor coming up for occupation in Mumbai so obviously more people will join.
Pallavi Saluja: The Bangalore office appears to be a work in progress. How do you plan to tap the Southern region?
Shardul Shroff: Karthik Mahalingam has been appointed as the head of the Bangalore office. He is also the practice head for Venture Capital, because that is an area which is well developed in Bangalore.
So we have succeeded in getting a local person with the same temperament as the firm. He has worked with us for the last five years, so there is a cultural and ethical fit. The fact that he knows the local industry will surely help us develop the Bangalore market.
We will also start a Chennai office; we will develop the Chennai market also after making a local hire. The plan is to hire around 30-40 lawyers in each city eventually.
Pallavi Saluja: Has there been a dilution of equity following the senior level hires in Mumbai and Bangalore?
Shardul Shroff: We have diluted it obviously and given people more time to bring in capital. The outsiders’ build-up of capital is spread over three years. To the extent that they keep investing, our stake will be diluting.
The equity of the family is just around 50% and the rest is distributed among the non-family equity partners.
Pallavi Saluja: From what we know earlier all your offices were owned by the firm. Now you are leasing most of them? Will the new Shardul Amarchand also buy office spaces? Isn’t expensive leasing in Mumbai and Bangalore adding to the burden of your balance sheet?
” If land was available for purchase in good areas, we would have bought them. To get space in a prestigious building like Express Towers, you can’t own it.”
Shardul Shroff: Yes, but look at it this way. If land was available for purchase in good areas, we would have bought them. To get space in a prestigious building like Express Towers, you can’t own it.
We recognize the fact that we would like to own the property. The quality of the building and the iconic location in Mumbai does matter.
Even in Bangalore, our offices are in good locations. There is not much up for sale in these areas.
Pallavi Saluja: Entry of foreign law firms? We have discussed this question a few years ago. What is your view now?
Shardul Shroff: I think the Bar Council of India needs to formulate a proposal regarding the terms on which the foreign law firms will enter the market. We have had some time and the good firms have already built up their strengths.
I personally feel that the market is too shallow. If a firm like ours caused disruption in the market, it shows how less depth the market has. Unless that is understood and recognized by the regulators, there will be a disruption again when the foreign firms come.
Pallavi Saluja: If it does happen, how is your firm prepared to deal with it? Is there a clear HR policy to retain talent and grow?
Shardul Shroff: Those firms which have 300-400 plus people will have a greater ability to defend. The cost of hiring foreign lawyers will always be more than the cost of hiring local people.
If the market actually opens, even the domestic firms’ cost and fees recovery will increase, because if they are willing to pay foreign lawyers more, the same will apply to Indian lawyers, as long as they offer the same quality of service. So it might be advantageous for us rather than a disadvantage.
Pallavi Saluja: Final thoughts?
Shardul Shroff: I have always carried the philosophy of quality and paced growth, where you grow into the market, and then ramp up. That strategy has worked well, and we will continue to adopt it.
I want to thank all our clients and our lawyers for standing by us and helping us through the first year. That is the basis on which the firm will grow and get a good name!