With another member of the 'Big Four' opening in Lisbon to target M&A and real estate work, smaller law firms fear loss of SME clients, while calls for regulation increaseWith another member of the 'Big Four' opening in Lisbon to target M&A and real estate work, smaller law firms fear loss of SME clients, while calls for regulation increase
With PwC Legal becoming the latest member of the 'Big Four' to open in Portugal, calls from some Lisbon lawyers for the Portuguese government to regulate multidisciplinary practices (MDPs) have intensified.
PwC Legal recently announced it had incorporated
newly-established Portuguese law firm CCR Legal into its legal
network. CCR Legal – which was founded in January of this
year – has a team of 12 lawyers led managing partner Cristina
The announcement meant that PwC became the latest member of the 'Big Four' to venture into the Portuguese legal market in recent times. In the last few years, Madrid-headquartered Deloitte Abogados acquired a stake in the share capital of Portuguese firm CTSU, while RRP Abogados – a law firm founded by former Linklaters managing associate Ricardo Reigada Pereira – joined the EY global law network.
The 'Big Four' have already made substantial inroads into the Spanish market – PwC, Deloitte, KPMG and EY are all ranked in the top seven law firms in Spain by revenue, with PwC being the largest with total billings of €150.7 million in 2016.
Cabral Ribeiro says PwC Legal was attracted to the Portuguese
market because of its positive economic outlook, as well as the
growing need for a Lisbon base. "Portugal was a missing link
for the PwC legal network," she says. "For our Spanish
colleagues it was critical because many matters are Iberian, and it
was also important for other Portuguese-speaking clients."
Corporate, M&A and real estate are among the main areas of
focus for CCR Legal. "Currently in Portugal, almost every
M&A deal has a real estate component," says Cabral
Ribeiro. She adds that the firm is also looking to expand its
public law practice. "We are currently conducting talks with a
senior lawyer to join our regulatory and public law
department," says Cabral Ribeiro. "We are also recruiting
in M&A." According to Cabral, there has been
significant interest from lawyers at other Lisbon firms who are
interested in joining a rival that is part of a massive network
– this will undoubtedly be cause for concern among law firms
in Portugal, some of which report that the battle for talent in the
legal market is intensifying, particularly at associate level where
some market sources claim there is a shortage of top lawyers.
"We´ve seen a lot of interest, we're receiving a lot
of CVs and proposals from lawyers who are attracted by a firm which
is created from scratch, but at the same time has the support of
such a huge network," Cabral Ribeiro says.
Unable to compete
The arrival of PwC has caused alarm among smaller law firms in Portugal, which acknowledge that the "integrated services and fee structures" of the 'Big Four' are appealing to small and medium-sized enterprises (SMEs). João Afonso Fialho, president of the Portuguese law firm association ASAP (Associação das Sociedades de Advogados de Portugal) says law firms' opinions on the entry of MDPs into the Portuguese market are divided, making it one of the most contentious legal market issues. "ASAP has been very cautious in its approach, we acknowledge the benefits but also the pitfalls," he says. For example, Afonso Fialho points out that the appeal of the legal arms of the 'Big Four' to SMEs means smaller law firms in Portugal will be significantly impacted by their arrival. "It will be business as usual for large law firms, but medium and small-sized oufits will be heavily affected by the launch of multidisciplinary practices. It will also have a huge impact on single practitioners who can´t afford to compete," he says.
ASAP also has concerns about potential conflicts of interest. "There is a risk of contamination, my personal opinion is that we seem to be forgetting everything we´ve learned for the sake of following market forces. I strongly believe that we should be very cautious," Afonso Fialho says. He believes that the government should take a stance on the issue of multidisciplinary practices in Portugal, and that the legal profession should demand measures to "regulate as much as possible". Meanwhile, lawyers also say that MDPs have tax advantages over law firms in that, being partnerships, law firms pay a higher rate of tax. Cristina Cabral concedes that the issue of MDPs is a sensitive one. "There are different opinions in the market; many believe it will be difficult to handle competition from the 'Big Four', but on the other hand there is the argument that you can´t stop the process," she says.
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