College of Law Practice Management October 22, 2010 Long term implications of the interdependence and dispersion of the world’s capital markets

2 The global market for legal services  It is the aspiration of all people to improve their lot in life  People do this by investing assets  Time and money to create or use property, real and personal property, intellectual property and natural resources to turn them into financial assets to reinvest to do more of the same  We are living in the era of appropriately regulated free markets – the emerging and developing countries have adopted and are adopting this model - most importantly the BRICs  A lawyers work is at the intersection of the use and protection of assets, whether contested or consensual – we are in the engine room and the pace has been and will be white hot – the engine needs more lubrication  Demand for legal services long term will grow as the world’s financial and intellectual property assets continue to grow and natural resources become more scarce  U>S> will ong be a magnet for litigation  There is a limited supply of lawyers – admission to bar/law school classes  The principal challenge is breaking barriers to entering new markets

3 The top performers  19 of Global 100 at $1 bil +  13 are AmLaw 100 firms  AmLaw 25 have captured 49% of market  Top 6 Global 100 at $11.6 bil  1.9% market share each  Have captured 15% of market  19 of AmLaw 100 now at $2 mil + PPEP; 9 at $2.5 mil +  Grew PPEP at 3%, 10x other 90  No growth in EPs  Benefit of compounding

4 Emerging Markets  BRIC  Brazil  Russia*  China  India  N11s  Indonesia  Phillipines  Bangladesh  Egypt  Korea  Nigeria  Turkey  Vietnam  Iran*  Mexico*  Pakistan*

5 The global economy in 25 years* ETAEventAcceleration since Brazil overtakes Italy15 years early 2011China overtakes Japan (#2)6 years early 2027China overtakes US (#1)14 years early 2027India overtakes Japan5 years early 2029Brazil overtakes Germany7 years early 2031BRICs overtake G68 years early 2032BRICs equal G7No prediction made in Brazil overtakes JapanWasn’t predicted 2037Russia overtakes JapanWasn’t predicted *Goldman Sachs, Global Economics Paper No: 192, December 4, 2009

6 Long term implications of interdependence and dispersion of world’s capital markets Five Drivers I.Clear vision/strategy to match II.Disciplined growth III.Client management IV.Talent management V.Communications management

7 I. Vision  Most successful firms must grow market share dramatically in the world’s largest economic powers and attract U.S. inbound foreign investment and dispute work  China and India will eclipse the G-6 very quickly, and the U.S. during the careers of current associates; Brazil will also be a mega-economic power China may be the world’s largest economy within 20 years India will eclipse China  Protective policies will make it difficult for US firms to penetrate these markets  American firms are mistakenly focused on Europe in their drive to globalization  This is an expensive and wasteful distraction  To the extent there will be a Global 20, five Western firms will be squeezed out by Chinese law firms

8 II. Disciplined growth  Balance reach and profitability  The AmLaw numbers indicate this will be the principle challenge  The need for growth resources is driving a hyper-active merger market  Coming transcontinental mergers will inevitably focus on Asia  Law firm structure and governance will be driven by and required to straddle the balkanized regulation of the profession globally  U.S. firms should be clamoring for a national regulatory structure Critical for India  Grow in markets (broadly defined) accretive to profitability  Vexing choices Litigation’s rise in economic might v. historical strength of transactional work Building in China and India - cut-throat price competitive markets

9 III. Client management  Focus on multi-nationals  Relative to their size, they play a disproportionate role in the economy  2,270 companies (less than 1%) of all companies in the U.S.  In Europe, Germany and France, not London, are home to the multi- nationals  London is a corporate finance practice

10 Role of multinationals  11% of private sector employment growth from 1990 – 2010  19% of private sector workforce  25% of private sector wages  25% of gross profits  31% of GDP growth since 1990  23% of value added to the US” economy  48% of exports  37% of imports  74% of US R&D  60 % of sales in US  2/3 of workforce in US  3/4s wages in US  60% of assets in US

11 IV. Talent Management  Vexing Challenges - two possibilities  A dearth of qualified legal talent in the BRIC and N11 countries will drive the cost of talent unlike anything we saw in the “golden era” Billing rates will soar PPEP will be king  Challenging leverage models Inexpensive leverage and delivery models (e.g., KM, unbundling) will result in a cost cutting battle for market share  Key drivers  Diverse lawyers with Western business know-how and personal skills will be king  Ability to prosper in a multi-cultural, multi-lateral business and professional setting  Best team on the field will be virtual  Management of associates across global platforms

12 V. Communications management  Vexing challenges  Lack of commitment to Asia  Marketing is woefully underfinanced and struggling under a crushing workload  Lack of marketing professionals in BRIC and N11 countries  Lack of marketing experience and know-how in Asia  Lack of competitive intelligence about BRIC and N11 markets  Differences in buying behavior  General disrespect and disregard for the rule of law in emerging economies

Thank you The end