There has been plenty of action in the legal profession in the past year. First, one of SA's oldest law firms, Moss Morris, closed the doors of its Sandton headquarters after 100 years. Its partners split between various practices including Routledge Modise Moss Morris and TWB Attorneys.
Then Edward Nathan & Friedland, a firm of legal advisers, was sold back to its directors for R50m, one-eighth of the price it was purchased for by financial services group Nedcor five years ago. That put to rest the debate about the value proposition of companies having in-house legal advisers.
"Nedcor's decision to buy Edward Nathan cost the firm dearly," says MD of corporate finance at Ernst & Young Johan Kritzinger. "Many of the firm's financial services clients felt uncomfortable about placing their business with the firm once it was under the Nedcor umbrella."
Still, Edward Nathan topped the list in terms of the number of transactions it advised on last year, at 50 deals worth R41,2bn, according to Ernst & Young. Webber Wentzel Bowens (WWB) was next on the list, with 43 deals worth R40,7bn; then Werksmans (29, R25,3 bn); Fluxmans (12, R21,9bn); Bowman Gilfillan (8, R16m); Cliffe Dekker (27, R12,7bn) and Routledge Modise Moss Morris (11, R12,7bn). These tables include advisers to the buyers and sellers in transactions, but not to financiers. The fact that some firms have dropped down the ranking may show that merger and acquisition activity was concentrated in specific industries (such as financial services) that are traditionally served by certain law firms.
Webber Wentzel senior partner Ed Southey says there will be more hostile takeovers (such as the Harmony/Gold Fields saga) and international acquisitions of local companies (Barclays/Absa) contributing to deal flow in the next year, boosting the need for technical legal advice.
Niche areas such as competition law have come into their own, in an area previously seen as the poor cousin of commercial law. Firms are now setting up large competition divisions that are working on more complex and bigger deals than before. Labour law continues to be an important area for commercial law firms, with arbitration increasingly used as a means of dispute resolution.
Though the structure of commercial transactions is becoming more complicated, Bowman Gilfillan chairman Jonathan Schlosberg says legal firms aren't necessarily buying in specialist corporate finance and tax specialists. "There's increasing specialisation," he says, "with firms focusing on what they do best - giving legal advice." He says specialisation within law firms is limited by the size of the economy. For instance, though overseas firms may have legal teams specialising in banking mergers, the scope of work in SA is probably too small for local firms to become as niched.
But the one thing senior partners in law firms across the country have on their minds is black economic empowerment (BEE).
Not only is BEE driving deals - nearly 40% of all merger and acquisitions completed last year were BEE deals, according to Ernst & Young - but government's focus on the professions has forced firms to take stock of black talent within their own organisations.
There was plenty of bad press about racism and sexism on the bench, and justice minister Brigitte Mabandla convened a colloquium of judges, academics and legal professionals to discuss transformation of the judiciary. It's only a matter of time before government begins to question how the profession is tackling transformation.
The Law Society of SA is putting together a draft charter for the profession, which will guide firms. But so far most firms have implemented or are drafting transformation strategies on their own. They will need to fall into line with the umbrella charter when it is released.
"There's a strong focus on trying to transform talent organically," says Werksmans executive director Charles Butler. "There's also competition between firms to buy in talent."
It takes about seven years to groom a law graduate to partner level. With the pressure to have more black directors and senior partners, some firms are fast-tracking talented black lawyers. "But it's no good training black lawyers if you can't retain them," says Schlosberg.
He says transformation of law firms also involves changing workplace culture, which in law firms can be particularly unwelcoming to young lawyers, both black and white. "We're starting to listen to our young lawyers," says Schlosberg.
In response to empowerment pressures, firms are implementing better training programmes, career planning and performance management systems to manage their staff. "Empowerment has forced law firms to implement better general management techniques," he says.
With deal flow likely to continue to be driven by BEE transactions, those firms with better connections to previously disadvantaged players in commerce stand to gain. But it's not so much the empowerment elite - Patrice Motsepe, Saki Macozoma and Tokyo Sexwale - as in previous years, but smaller up-and-coming black businessmen who are now driving deals. As empowerment deals are becoming more broad-based, Schlosberg says young black corporate financiers who are considering setting up consortiums for big deals are an important link for legal firms.
Last year, WWB advised on the biggest BEE deal to date - the sale of 10% of FirstRand to various empowerment trusts, worth R7,9bn. Edward Nathan and Sonnenberg Hoffmann Galombik advised on the sale by Thintana of 15,1% of Telkom to the Elephant Consortium, worth R6,6bn. Bowmans, Routledge Modise Moss Morris and Derek H Rabin helped to advise on the R4,1bn acquisition of 7,6% of Standard Bank by Tutuwa.
