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In-depth interview: Can Cyril Shroff’s half of Amarchand fix & eclipse what was broken? [via Mint, extended edition]

Shroff has ambitious plans for life and work after the bitter family feud that broke up India's largest law firm, reports Kian  Ganz in today’s Mint.

It wouldn't be unreasonable to assume that breaking up India's most well-known law firm, which boasts a 99-year heritage, would usher in a time of mourning for the brothers who have run it together for 21 years since the death of their father Suresh A Shroff.

And while the tribulations of the last six months have certainly taken their toll on Cyril Shroff, the former co-managing partner of Amarchand Mangaldas Suresh A Shroff & Co (AMSS), he seems more determined and philosophical than you'd expect from someone who has just seen their family and life's work torn apart.

“I am at peace and looking forward to the new innings,” he muses. “I am one of the few that gets the opportunity to build two institutions in one lifetime. How many people are that lucky?”

It's telling that Cyril, 55, has had six months to come to prepare for last Wednesday (6 May), when he and his brother Shardul Shroff, 59, announced in the Bombay high court the end of their protracted mediation that extended over more than a dozen sessions that were presided over - free of charge - by former Supreme Court judge Justice BN Shrikrishna, JM Financial group founder Nimesh Kampani, and senior counsel Harish Salve.

In November 2014, AMSS was a corporate law juggernaut of around 600 lawyers plus 84 partners. Then Shardul sued Cyril in the Bombay high court over their late mother's equity stake in the firm, after Shardul claimed she had disinherited Cyril completely in her will.

By Saturday, 9 May 2015, AMSS was officially dissolved.

Cyril's new firm, started yesterday (11 May), is called Cyril Amarchand Mangaldas (CAM) (his brother Shardul's new firm is called Shardul Amarchand Mangaldas).

On 1 June CAM will open for business in Delhi – the city Shardul moved to 35 years ago to expand the firm from the family's traditional stronghold of Mumbai.

“There are 30 cabins (for partners) and all 30 are full,” says Cyril about his new 50,000 square foot office in Delhi's Saket area.

Another 12 to 14 partner-level hires by August or September, in addition to at least 16 partner-level hires made since March, as the mediation was inching towards the inevitable.

He has ramped up in Delhi at a pace that has never been seen before in the Indian market, by acquiring independent practices wholesale, hiring from in-house company departments and foreign firms. But mostly he has poached heavily from competitors such as Kochhar & Co, AZB & Partners, Khaitan & Co, Luthra & Luthra, Dhir & Dhir, Clasis Law and Economic Laws Practice (ELP). (Shardul too has made lateral hires and acquisitions in Mumbai).

Conspicuous by its absence from that list so far is Shardul Amarchand Mangaldas (though poaching from his brother during mediations would have been awkward at best and difficult to structure, considering they were technically a single firm).

Thicker than water?

“From my private client practice, having seen a lot of family break ups, what I've noticed is, at the time when the settlement happens it may not seem fair, but it does not really matter in the long run,” he says. “Those families that have peacefully separated have prospered on both sides, and those that have fought have ruined each other.”

Calling the Shroffs' separation peaceful may be a stretch but at least they appear to have successfully avoided leaving behind only scorched earth.

“It's just like any other firm: I see them no different from AZB, Luthra or Khaitan,” claims Cyril about his brother's new firm, adding that “there are absolutely no contractual restrictions” to competing with each other, “but we will act sensibly”.

He says that he doesn't think the two firms would poach lawyers from each other “for some months at least”. “In that sort of a bloodbath everyone benefits and not us. Both will lose, so we'll just be mature about it. There is enough talent elsewhere in other firms.”

Clients will be trickier: the Delhi and Mumbai region of erstwhile AMSS have shared many clients but in light of existing loyalties and relationships, Cyril speculates “there will be many” who will end up working with both.

That's if the Shroffs don't end up being each others' own worst enemies.

Colourful anecdotes about Cyril and Shardul not getting along, and undermining and competing with each other have been circulating on the Indian and India-focused foreign law firm circuit for at at least a decade; many of such conversations were footnoted by predictions that an AMSS break-up was imminent.

An in-depth Forbes feature about the Shroffs in 2010 touched on this worst-kept secret of the Indian legal profession; at the time this seriously ruffled the Shroffs' feathers. But if nothing else, the events of the last half-year - when the break-down of the family relationship suddenly and painfully entered the public eye - have resulted in the family growing a much thicker skin about such matters.

And while some competitors were initially rubbing their hands with schadenfreude about the brothers' bust-up, a few spoken to as early as December 2014 feared that instead of one AMSS competitor, they would now face two Amarchands that would expand and compete even more aggressively than before. The threat is real if the Shroffs do indeed act “sensibly” and don't decimate each others' ranks or poach each others' clients, which would leave the door ajar for other firms to swoop in.

“I think (Shardul and I) we're both focusing on our future, and if we can jointly take the number one and number two spots, that's a lot more for Zia (Mody) and Haigreve (Khaitan) to worry about than for me,” jokes Cyril with a nod to the senior partners of his largest competitors, AZB & Partners and Khaitan & Co respectively.

The ambition is certainly laid out in Cyril's three-phase roadmap for his new firm.

Phase one provides for a five-year “focus India” strategy where CAM will do “whatever we need to do to completely thoroughly cover the Indian market” and to “ride the Modi era”, he explains.

That period will also include expansion in Ahmedabad, where the firm's pre-existing office went to Shardul under the separation. However, it is also a city where Cyril, other than the Shroff family's Gujarati origins, has a more recent family connection after the February 2013 marriage of his daughter Paridhi – an associate in the firm - to Karan Adani, the son of billionaire industrialist Gautam Adani.

“(Ahmedabad) is currently only Paridhi's office because it's mainly Adani focused. I think we'll expand it but it's not a 2015 agenda for me. After I've done Delhi, I'll do that,” he says. “Delhi's a big elephant, I want to kill that beast first.”

Cyril with his de facto co-managing partner and wife, Vandana, will assist in that hunt by spending 50 per cent of their time in Delhi every week.

In phase two, five to nine years from now, he says that he wants to open offices outside of India; phase three is dubbed “review and refresh”, when in years nine and 10 (by 2026) the firm will take stock of where it's come to and who will take over from Cyril.

“We looked at the future in a 10-year horizon. We picked 10 years because 10 years is a good period to plan for. I also thought of my life - I'm 55 and wanted to design the structure in a manner that I can pass on the baton at 65 to whoever we pass (it) on to in the firm's best interests. It is a 'firm first' approach.”

While he's not explicitly planning his own retirement in 10 years, he's clearly open to that option. “I don't want to be a constraint to the firms' growth,” he says. “And at 65 your body also behaves a little differently. I'll see if I continue to live that long but I'll always be a friend of the firm and in some sort of mentor role. I don't want to do what I'm doing today 24-7. Which means that whatever I finish in terms of my ambitions, I want to finish it off in this period.”

Single minded focus

CAM's new structure and governance – internally codenamed “project new dawn” - began its life shortly after the start of mediation. “It sort of really symbolises how we felt about whole thing,” says Cyril about the moniker given to the new strategy. “And actually that's what gave us the strength to withstand the negativity. We were only focused on sunrise and not on the dark night.”

“I started this work on redesigning sometime in early December (2014) because I knew where this was headed after the high court hearing,” he recounts, noting that he and Vandana had invested “well over 1000 hours” in the new model.

The Shroffs have always been very interested in management and have made more efforts than probably any other partner in India to set up structures within the firm. Notably, this has included two major reviews by Boston Consulting Group (BCG), the most recent of which resulted in a report called Amarchand 3.0, targeted a doubling of the firm's headcount to 1,000 lawyers by 2017 (as reported in Mint by Legally India in 2012).

But to a large extent that review was as much about international best practices as it was about keeping in check the difficult family dynamics.

(“We realize that yes, families can splinter. But we have constitutionally provided how it should happen, and the consequences of doing it,” Shardul told Mint in 2012 about the new system.)

The Shroffs had also coined the so-called “bicycle model”, where the founder family (or more specifically Shardul and Cyril) represented each of the wheels of a metaphorical bicycle that drives the firm forward, with the rest of the partnership being the frame of the bicycle that holds it all together.

“I don't want to use the words 'two wheels of bicycle' (anymore), because that expression has become a bit dented,” says Cyril about it now.

And while CAM's partnership model is not outwardly hugely different from the previous one, Cyril's approach to management now is trying to be more race car than bicycle.

Partners on board

Cyril floated a tender and eventually took the help of a London-headquartered international law firm, which is amongst the top 20 globally by revenue, to draft its new partnership deed and structure.

“We actually want to call it a partnership between the founder family and the non-founder partners,” says Cyril. “We got a Ferrari of partnership deeds in an Indian context. It's truly innovative and BCG also did a review of the work that the law firm did, and they all said it was fair, top-notch (and) suited to us, to the international environment and could last a long time.

“The deed was co-created with many of the partners. All present and future partners commented on the deed in a through transparent and rigorous process.”

He says that he wanted “a true meritocracy where the best can come and make a career for themselves”.

The pre-split Shroff family – as emerged from court filings during the litigation between the brothers - held 65% of the equity of the old AMSS firm.

That figure was now lower, says Cyril, because there are fewer family member partners in CAM. The family still held a majority but its equity stake would decrease. “We are going to transition for one year to figure out how post-split the profitability levels are,” he explains, “but the family is committed to go down if necessary even below 51%.”

“I think we will,” he adds.

The new firm will have around 91 partners, including 19 internal promotions and up to 28 lateral hires.

Around a third of those 91 partners will hold the non-family equity on a modified lockstep-style structure, where profit shares are broadly apportioned by seniority but then modified by a number other factors, including a new 360-degree appraisal mechanism.

Getting the partnership structure right is important to attracting and retaining talent, and particularly tricky if more than half of a firm's profits are locked up with the family. But the management side has seen a paradigm shift that could prove to be even more significant.

One of erstwhile AMSS' biggest cracks that required constant papering over to the outside world, was the rift between the Delhi and Mumbai regions, which extended to more than just filial rivalry. Complex management structures were created to ensure that disagreements between the two brothers would not end in a management deadlock or worse.

In hindsight, even those safeguards and months of fevered attempts at internal mediation within the management committee made up of non-family partners and independent outsiders, were insufficient; the conflict over the late Shroff matriarch's largest single equity stake ended up in court only three months after her death in August 2014.

Even more worryingly, while the Delhi and Mumbai regions were outwardly united under the AMSS umbrella, both practically functioned semi-independently from each other, even sometimes competing for the same work.

“It was really two firms running,” admits Cyril. “This is going to be one everything.”

Administratively, all functions such as HR, technology and knowledge management are united on a national level (“I think it not only brings a lot of cost savings but also consistency in management”).

That also goes for the firm's practice areas, which will be managed and headed up nationally by partners and practice heads, while all CAM offices and five linked partnership vehicles will maintain a single profit and loss account. “We'll do billing also from one office so we don't want to create competition between offices,” says Cyril. “We want to function it like a location agnostic firm. It's the opposite of what has been happening.”

Even more than those changes, one feature that crops up over and over again about CAM is that, in Cyril's words, “it's a single leader model” where “leadership of the firm is currently only me”.

Strong and undisputed leadership can be as appealing in law firms as in captaining a hundred thousand-ton oil-tanker: both are notoriously difficult to steer and at risk of piracy and mutiny.

Cyril argues that “quick decision making” and “consistency” of culture (in light of CAM's massive lateral hiring and expansion plans) are the two biggest draws in the single leader model. “I can have the same DNA across the firm... you need to set … the culture properly.”

Nevertheless, around 14 different committees, ranging from recruitment, remuneration, planning to screening committees of non-family partners will assist in day-to-day running of the firm.

The Cyril-centric model also precludes achieving his ambitious growth targets – 1,000 lawyers by 2018 – inorganically. “If I do a merger with any top 10 firm I'll achieve it overnight but it comes with too much (complications): matching profitability levels, which is always a challenge, and the second thing is this has to be a single leader, single vision (firm).”

“I don't want multiple cultures, sub-cultures in the firm. And frankly unless there was another Cyril Shroff, I won't do it,” he says, laughing. “Even if wanted a merger, my partners would thoroughly reject it. (It's) not worth the trouble.”

It's nearly impossible that the next 10 years will be entirely trouble free for Cyril. But compared to the trials the family has now faced, perhaps the word trouble has been redefined.

A shorter version of this article was first published in Mint. Mint's association with LegallyIndia.com will bring you regular insight and analysis of major developments in law and the legal world.

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