new chairman of Baker & McKenzie has a tricky hand to play. Eduardo Leite, who began his three-year term at the beginning of last month, may lead over 10,000 staff (including 4,000 lawyers) spread over 40 countries in 68 offices. And the firm may have produced the biggest revenues in the industry this year with annual sales of $2.1bn (£1.3bn), down 0.4 per cent on the year before, but with average partner profits up 13 per cent at $1.1m.
But Leite, a polished energy and commodities partner from the firm’s Sao Paulo office, admits “we want to grow the firm. Not just financially but in stature and reputation.”
A trim Leite, who is Uruguayan by birth but was raised in Brazil, is sitting in a smart sixth-floor meeting room in the firm’s City offices alongside Gary Senior, who in May began his third three-year term as London managing partner.
And perhaps London goes a long way in summing up Baker & McKenzie’s conundrum. With around 400 lawyers and sales of £115m last year, London is the firm’s biggest office, but this only puts it at around 15th in the London league tables of the capital’s biggest law firms, well behind leading Magic Circle outfits like Slaughter and May and Linklaters. This clearly frustrating for Baker & McKenzie.
Its relatively small presence here is readily explainable. While its London office offers a strong broad-based City offering, it does not capture as large a share of corporate and banking work as its bigger City rivals are able to do. This situation is even more pronounced in New York, Frankfurt and Paris. The firm manages its powerhouse status due to its global reach and its industry strength.
Baker & McKenzie was founded in Chicago in 1949, but always thought internationally. The second office it opened was in Caracas in 1955. It has been in London and Brazil for almost 50 years. The firm was even the first international legal outfit to set up an office in China in 1974 and Russia in 1989.
The business has a huge exposure to the fast growing markets of Latin America, Asia Pacific and the Middle East. Leite himself has worked on big deals for Brazilian mining giant Vale and the South American country’s biggest oil business, Petrobras.
Baker & McKenzie also has its core strengths in many of the industries these emerging economies are forging ahead in. The firm has big practices in energy, commodities, IT and pharmaceuticals.
Leite says: “We are strong in emerging markets, and we are seeing a lot of big deals being carried out in this region.”
MCKENZIE’S MID-TIER TAG
Just last week the firm acted for Chinese state oil firm CNOOC, which owns half of Bridas, when it bought 60 per cent of BP’s Pan American Energy unit for $7bn. In London, its employment department is currently acting for British Airways during its 14-month cabin crew dispute with the Unite union. And in March the London M&A team acted for Canada’s Ontario Teachers’ Pension Plan when it bought national lottery operator Camelot for £389m.
However, because the firm’s corporate and banking practices lag behind their closest rivals, and due to its looser network structure, critics say that in some sectors and offices the business can feel more like a mid-tier operation.
“To call us mid-tier is maybe unfair,” says Leite, in his soft-spoken accent that darts between North and South America. “But we are not satisfied with our position in many areas. We want to strengthen our position in the money centres. Germany, London, Paris and New York are all top of our agenda.”
Leite says he will add new hires to those offices where he can, but will also continue the firm’s internal audits, which sees every office visited at least once every three or four years with the aim of improving quality across the firm.
The new chairman says the firm is determined to exploit the international footprint that 55 years of expansion has given it. He says: “We are not new to the global game. That gives us an advantage.”
FOCUS ON EMERGING MARKETS
But Leite adds that rather than focusing on opening more offices under his watch he plans to “strengthen our presence” in the firm’s key markets in Latin America, Asia and the Middle East.
The chairman says he is broadly happy with the spread of its sales across the world; he just wants to get in on bigger deals in each region.
Last year 39 per cent of its revenues came from Europe and the Middle East, 35 per cent from the US and Latin America, with the rest coming from Asia.
Leite says: “Because of our large footprint in the emerging markets we have not suffered as much as other firms did during the recession. Transactions have fallen off around the world. But our strength in fast growing markets has kept us strong.”
The drive by Baker & McKenzie chairmen to push the firm up the food chain began ten years ago under Christine Lagarde, who is now French finance minister.
She chaired the firm for four years from 2000, and was replaced by John Conroy, who was chairman until last month.
Leite says: “John and I served with Christine on our executive committee. And I worked with John on the committee when he was chairman. There is a lot of continuity in this firm. We all want to raise our global offering.”
Both Leite and his London head Senior think there will be more dealmaking next year, though it won’t be an easy road ahead.
Senior says: “There are much better levels of confidence than there were 18 months ago. But there is currently a nervousness about making investments. The slightest thing can hold back a deal. In my entire career I can’t remember a time when deals have been so fragile.”
The London boss adds: “There are two further challenges to dealmaking. The first is valuation. Trying to properly value an asset is a bit like trying to catch a falling knife in this market. The other is psychological. In an upturn directors can lose their jobs for not doing enough deals. Now you can lose your job for doing one bad deal.”
RETURN OF DEALMAKING
But Senior concludes: “However, the fundamentals are in place in the City. Corporates and private equity houses have cash. And I think at some point next year things will stabilise enough for the IPO and buyout markets to take off again.”
Leite agrees, and wants a ringside seat. He is in the process of moving his office from Sao Paulo to Chicago, as is traditional for every Baker & McKenzie chairman. But he will also have an office in London.
However, he does not look set to spend very much time in either of these cities. He estimates he will spend 60 per cent of the next three years on the road talking to clients and staff. He says: “I need to be close to what is going on. You can’t be a virtual chairman.”
Leite is the latest in a line of capable chairmen tasked with overhauling the reputation of this global giant. It will be painstaking work – but the payoff could be huge if it succeeds.
CV | EDUARDO LEITE
Work: Joined the firm in 1975; served on the firm’s executive committee from 1999 to 2003; chaired its policy committee in 2005; he has been Brazil managing partner since 2003 and also heads the firm’s global energy, mining and infrastructure practice; chairman since 1 November 2010
Education: Institute of Osimani y Llerena, University of Uruguay, University of Sao Paulo and New York University
Family: Married, two daughters who live in New York: one is a sculptor, the other is a filmmaker. Leite and his wife live between Sao Paulo and Chicago
Hobbies: Supports Sao Paulo football club