Exclusive: Trilegal, which is claimed to have been growing at 25 per cent per year, has converted into nearly a full equity partnership, created an elected management committee and a democratic model where the founding partners could theoretically be ousted by an equity partnership vote.
Legally India was candidly walked through the changes and examines the back story to the end of its best friendship with Allen & Overy (A&O), the grief lawyers can cause, one-way referrals and the inevitability of associate attrition when a firm has to run fast without godfathers.
Sexy back
Several years ago, Trilegal used to be one of the sexiest firms around, judging anecdotally by buzz from students and jobseekers. Its story of five young lawyer friends who started their firm in 2000 and became a global brand in 2008 after tying-up with top international firm Allen & Overy (A&O), became a template (and a pipedream) for a generation of start-ups.
But over time Trilegal evolved from sexy young upstart to become a part of the establishment, suffering from the same issues that plagued its older rivals such as defections – critically losing three equity partners who broke away to form Phoenix Legal in late 2008, facing an increasing cost base and associate attrition.
As of last week, the best friend relationship with A&O has ended – both firms publicly and mutually blamed the lack of progress and future in liberalising the Indian legal market to foreign lawyers.
But parallel to the break-up lies Trilegal’s radical internal shake-up that has been planned for more than a year and includes the firm’s reinvention as an all-equity, democratic partnership, which it hopes will safeguard its future.
Lock in
According to Delhi-based Trilegal co-founding partner Anand Prasad, revenues at the firm have been increasing by 20 to 25 per cent year-on-year for several years, with a slightly lower annual growth in headcounts and total profits because of a larger cost base. On the flipside, profits per equity partner (PEP), had grown faster than total profits.
Despite this growth, culturally stagnation had begun to creep into the firm’s model.
“It seemed like we are becoming like the old firms, like we are not family members, but five guys who are running the show. That philosophy is not what we started out wanting to be. We wanted to be more inclusive,” said Prasad. “Our partners wanted greater inclusivity but wanted greater inclusivity without the downside that a typical ‘hard model’ would bring.”
“Generally speaking we are now an all-partner equity firm and everybody is on a lockstep,” he said, explaining the change made several months ago with retrospective effect from the start of this financial year.
A total of 20 partners are now equity partners in a single partnership on the firm’s 13-year lockstep, said Prasad, but he noted that one partner, whom he declined to name, elected to stay outside of the equity pool. New partners would not have to invest capital into the firm to enter the lockstep, nor would they retain or cash in any share on exiting the partnership.
Before, Trilegal had only around nine equity partners, with the rest being salaried partners who would usually remain at non-equity level for three years before being elevated into the lockstep. “We’ve effectively reduced our lockstep by 3 years,” said Prasad.
Existing salaried partners were slotted into the lockstep on a case-by-case basis, rather than all entering at the most junior level.
Legally India first reported in August 2011 that the firm was working on rejigging its equity structure (click to read more about Trilegal’s lockstep model).
In a lockstep partnership, partners at each level of seniority are allocated pre-determined points that represent a share of the firm’s profits. Every year as a partner the points increase by a fixed amount until they reach the maximum profit share at the plateau lockstep level – 13 years at Trilegal.
Advancement up Trilegal’s lockstep would not be fully automatic, said Prasad, but determined by a remuneration committee of three partners reporting on partners’ non-financial and peer-reviewed performance. Under the system partners could only advance but never drop down the lockstep.
Democratisation
The remuneration committee members - co-founders Prasad, Karan Singh and Rahul Mattan – also make up the firm’s management committee (MC) that decides overall firm strategy and oversees the other governance committees. After an initial two year term other senior partners could also be elected into the committee by partnership vote, said Prasad, and noted that MC might be reduced to two partners in future.
Anand also noted that the partnership as a whole had the ability to eject any partner from the firm with a “super majority vote” of two thirds of partners, or if contested, by partners holding at least two thirds of the equity.
This would advantage the incumbents, admitted Prasad but added that the balance would move as more partners climbed the lockstep and reached the plateau.
Leaving lawyers
High attrition has “traditionally been our case”, admitted Prasad. “We’ve never had low associate attrition. My response typically would be, if you want to be a high quality firm, you will face attrition.”
“We have a system that continues to capture the know-how and regardless of attrition keeps profitability and revenue high – not profitable by cutting costs, but by growth of revenue.”
“The hours can be pretty bad,” said Prasad, “but at the end of the day we don’t have a deep relationship, no family relationships or friends to fall back on [to get work from clients]. Where the only USP is high turnaround and good work product, that makes you run faster.”
“The question you ask is are you losing guys that you really wanted to keep?” All firms, including Trilegal, would lose “one or two” associates that it really wanted to retain, he said, but added: “We continue to be friends with people who leave - people have a right to work how they want to. Not to say those people are right or wrong, they choose a different lifestyle [of lower work pressure].”
A&O split
Echoing the mutual press release by A&O and Trilegal announcing their split, Prasad noted that both partnerships felt that foreign law firm entry into India was not on the horizon.
“The call we had, was that the relationships was going well, interpersonally and professionally, people get along very well and the fit was good. But for the next two years they [the government] certainly are not going to take a call on opening the market – they’re not able to take a call on more important things.”
“Safely, liberalisation of the Indian market is at least four to five years away. And that is, if you’re optimistic about what will happen, because it is quite easily possible that it’ll be 10 years away.”
While the client pool was enthusiastic about liberalisation and continued to be, there was not enough strong client pressure to convince the government to move, he said, and there was a small “benefit to grievance ratio” in opening the legal sector, as opposed to multi-brand retail, for example, which could create jobs and economic benefits to larger sections of voters.
“The prime opponents of legal market opening are very close to the establishment,” said Prasad. “You see in terms of when lawyers go on strike, the pain is enormous – it’s easy to motivate them to go on strike. The pain is too high, and the benefit is negligible to corporate India, who doesn’t to vote.
“Junior lawyers - how many votes are there? You can’t even get a municipal council elected with those votes. The early life of the government is where the legal market can be liberalised much faster; in the second part of the government’s life, it is very, very unlikely.”
So, the question arose for both firms, according to Prasad whether “is it going to be advantageous, now that it looks at a distant horizon? Do you get engaged with the perspective of getting married or stay engaged in perpetuity?”
For both firms, independence was now a more attractive option.
Severance
Prasad said that the break with Allen & Overy was ”a real termination of the relationship” and not just an announcement designed to increase referrals from other firms. This would also mean that Trilegal partners would probably not be invited to attend A&O’s annual general meeting of the international partnership anymore, he confirmed.
Trilegal would probably not get access to as much knowledge sharing with A&O as had occurred under the best friendship, although some support would continue because “we used to pay for most of it”, said Prasad.
Only a minority of Trilegal’s work had consisted of referrals, said Prasad, but of foreign law firm referrals 70 to 80 per cent came from A&O. This would probably continue to some extent.
“Some level of the trust [we’ve built with A&O partners] will translate to different partners of A&O continuing to work with us,” he speculated. “And there’ll be clients and partners in other international firms who want to work with us. The totals will balance off.”
Referrals from foreign firms other than A&O had increased in recent years, said Prasad, and larger “multi-million dollar deals” usually had an international law firm involved and going through some “referral mechanism”.
“A host of the smaller deals will be direct [domestic instructions],” he added but admitted that only few of those resulted in referrals to A&O.
“The truth is that we’ve not sent massive [work the] A&O way. We’ve had a limitation being the firm that we were. There’s been work that’s gone the direction of A&O from us, but those are not the big deals you read about often… Not the Reliances or Tatas.”
The question for both firms in the relationship was “are we doing ourselves a service by continuing this or do we try a different approach?”, said Prasad.
For Trilegal, there was an advantage as being seen as an independent outfit, although on the flipside it had also been an advantage to have been associated with a brand name such as A&O.
“We’ve not been very strategic, like most of our competition,” said Prasad about the firm’s historical approach, which was to “make more money than we made last year” and provide a better service to clients.
He said he did not think this approach would change in the near future but then again, if the firm really is growing at 25 per cent year-on-year why change that non-strategy?
However, Prasad is aware that the current crop of partnership changes and their success will be fundamental to keeping up the firm’s growth, with or without A&O.
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i feel sad for you
THIS IS WHAT YOU NEED TO NOTE:
My objective was to convey the fact that there is a "club". No point haggling over which lawschool is the best and whether MPL rankings are relevant (but students like you will continue to do so and that is only natural). Even if I say that NLS is a better institution, the debate about NALSAR v. NUJS v. NLUJ is redundant these days. Top firms recruit the best from every lawschool so the debate is often meaningless for the firms. That is what was meant by Big 4 i.e. firms looking at certain colleges come recruitment time and recruiting in "big" numbers from those colleges. It has consequences - like one college dominating one firm/office/practice area.
P.S. Focus on your internships and you will get a good job. In the meantime, learn not to throw mud at every opportunity (you seem to belong to that breed, so amend your ways). If you make it to a Big 4 firm, you will not only have to work with the Big 4 lawschools, but also report to people who are not from Big 4 lawschools. You won't do yourself any favour if you don't grow up beyond lawschool rankings.
Kishen is back
ahahahahah
b) Are you one of the guys who fantasized about participated in "Rakhi ka Swayamvar"?
c) "Jejus!"
Now let's analyze Anand’s comments.
(1) Converting to a full equity model in itself does not achieve much, at least not for associates or clients. Trilegal urgently needs to up the quality of service that clients are offered and create deeper and stronger relationships with them - that is the real determinant of market reputation. Addressing quality means that partners and associates both need to service clients more effectively. I would be surprised if Anand on second thoughts believed that Trilegal can build a quality firm without being strategic about it. AZB and AMSS might not be full equity firms, but they do attract and retain the best talent, and service deals really well. Something to think about Anand. (Disclosure: I am currently at one of these firms)
(2) The full equity model from a market perception standpoint surely has benefits - and hopefully, that model will attract quality lawyers to its fold. The hard task is making them stick. Going by the attrition levels, the real challenge before them is to keep good lawyers. I'm not suggesting that Trilegal does not have good lawyers, just that there aren't as many as other firms.
(3) If the founding/senior partners continue to control the remuneration committee, how do newer partners get an equal say. I should think all equity partners should be able to nominate members to the remuneration committee, irrespective of seniority of the partners being nominated. That would be a truly democratic system. Why shouldn't a junior partner who does just as well as the senior partners not be allowed to be in management.
(4) I cannot understand why a partner would choose to remain out of the equity of the firm – is this option given to all partners?
(5) The no liberalization reason for the break-up seems to be besides the point. A&O and Trilegal always knew liberalization wasn't around the corner for a long time. As a reader mentioned before, A&O might have reconsidered the relationship due to quality and business reasons. Let’s not beat around the bush.
(6) If A&O supported Trilegal with 70%-to-80% of its international deal flow, and assuming that international deals (which usually pay the most) accounted for 20% of Trilegal’s total revenues, it means Trilegal will have to earn 14% of its revenues on merit now. While referrals from other international firms might come through, Trilegal stands in a precarious position with international firms not knowing where its loyalties lie in the international market. Do remember, international referrals only come through if you are good at doing what you do. And if you've seen the movie Beautiful Mind, you would remember the eureka moment for John Nash is when he realizes that in group dynamics, no attractive woman (or law firm in this case) likes to be a someone's second choice.
To sum up, I would say Trilegal has done the right thing from a business model standpoint, and I applaud their efforts and transparency in this regard. But Trilegal still needs to address the quality issue (which is possibly what A&O possibly chased in the relationship, more than business). Unless quality becomes a matter of pride (or strategy), Trilegal might remain a firm doing more or less Tier 2 work with more or less Tier 2 associates.
Truth is you are bothered because you see competition.
Really? I am appalled at your ignorance. Are you from GNLU?
not possible as most of the gnlu ppl work in AMSS and not "Trilegal"
May Trilegal is a very sexy firm and maybe they have procedures and standards that set them apart. But let the clients decide that. Why should legally india be involved in promoting law firms?
"several years ago, Trilegal used to be one of the sexiest firms around, judging anecdotally by buzz from students and jobseekers"
When was this? 10,000 BC?
"one partner, whom he declined to name, elected to stay outside of the equity pool."
Wtf? very scary to entrust work to a firm where such things happen!
"My response typically would be, if you want to be a high quality firm, you will face attrition"
What do low quality firms face? Solid employee retention.
"“The truth is that we’ve not sent massive [work the] A&O way. We’ve had a limitation being the firm that we were. There’s been work that’s gone the direction of A&O from us, but those are not the big deals you read about often… Not the Reliances or Tatas.”"
I told you so.
Overall a lacklustre story. This firm isnt going anywhere no matter how much partnership mumbo-jumbo is published here on LI.
Thanks for your comments.
@5 XYZ: We didn't include that part in the written interview, but Prasad said that they were definitely NOT looking for another best friend, which would make some logical sense.
I don't think it'd be possible to do much better than A&O in friendship stakes, and if that didn't work out, building another one from scratch seems unlikely? What have you heard?
@7 Deeper Throat: An interesting and considered comment, can not disagree with most of your points.
In respect of the partner who stayed out of equity, I understand that this partner had a very different practice, so it wouldn't have worked integrating on a lockstep, though I don't know their name nor did I feel it was necessary to pry too deeply into this.
In general, we had been planning to do the story about Trilegal's new partnership structure for some time now, and I do commend Prasad's openness about the firm's model, as well as relative candour about the firm's weaknesses and criticism.
That would be nice to see from other firms too.
Best regards,
Kian
In this situation, it makes sense for Trilegal to allow higher levels of attrition at the middle levels with a view to reducing its cost base. It is much cheaper to replace experienced associates with fresh graduates - while the yields in terms of hourly rates charged remain quite similar even if the work is being performed by the newer folks with enhanced partner involvement. Of course, in this article, the Trilegal partner in question appears to be making a virtue out of necessity and attributing the high people turnover to work pressure - but the fact remains that it is a fiscally sound approach in the present crunch, even if it has longer term consequences in terms of firm culture and quality.
One of the redeeming factors for such firms, which are largely reliant on overseas clients, has been the Rupee depreciation over the past year - this may have enabled them to show revenue increases in certain practice areas even with lower profitability and stagnant or lower deal numbers. However, this trend seems to be reversing now, and it is important for Trilegal to position itself correctly so that it is able to garner work as things improve in the broader economy.
I've never quite understood the best friend model for an Indian firm of more than 50 lawyers, since one foreign firm alone can't really feed them all.
Something like Ashurst-India Law Partners, or Linklaters TTA, or Clydes-Clasis, makes more sense from that perspective, as a nimble, captive pseudo local office, rather than tying up with something like Trilegal or AZB, with their own ambitions and problems beyond just the tie-up.
The interview happened last Thursday evening by the way, so unlikely to have been a direct response to reader comments (though some of my questions would have been based on reader comments and general market perceptions, of course).
Will be happy to be proven wrong or to be surprised, however, and will keep making enquiries.
Best wishes,
Kian
Something like Ashurst-India Law Partners, or Linklaters TTA, or Clydes-Clasis, makes more sense from that perspective, as a nimble, captive pseudo local office, rather than tying up with something like Trilegal or AZB, with their own ambitions and problems beyond just the tie-up."
Also- [...] sexy is a matter of opinion, sometimes even... hope and faith.
A couple of points, based on the premise that Trilegal is a decent firm, according to market participants and almost every set of ranking tables out there. I don't buy the bad quality story. If you do, look away now, the rest of this post is not for you.
Trilegal had a robust referral practice before the A&O relationship. The biggest beneficiary of its tie up was Khaitan who developed a good set of referral links and grew significantly as a result. WIth additional lawyers who worked overseas having become partners at Trilegal, Trilegal should be able to regain some of their work from other foreign firms.
Since the relationship began, they would have developed relationships with a number of corporates directly, both Indian and overseas. They also do work for a number of Indian banks. In any case, no Indian firm can support over 150 lawyers with referrals from one firm alone - they must have other sources of clients. As for attrition - the thing to do will be to check to see how many lawyers they will have in 6 months time.
A couple of predictions:
- they will not enter into another relationship
- they will continue to grow in the next 2 years
The Trilegal founders are no mugs - they built something significant out of scratch and have always done things differently. No need to take this at face value. Just come back and read this thread in 2 years' time.
I haven't said that Trilegal founders are mugs (in fact, I hold them in high regard) - or said that Trilegal's service is of bad quality. All I said is that Trilegal is not as good as the Tier 1 firms presently in terms of service quality (but hopefully, will be and could be if it does fix that issue) - and converting to a full equity model does not address that point. Whether you choose to agree or disagree is your call. (If you are at Trilegal, I would say do yourself a favour by ignoring me; ignorance is a bliss).
Although I might be from a different firm, I do wish firms like Trilegal do well and succeed. Like most people who believe in democratic institutions, I wish to see law firms in India become a meritocracy and not be controlled by oligarchs. Trilegal has the right set of values, but unfortunately, either it doesn't have the right talent pool or the talent pool is not working to its full potential. How else can you explain a firm like Trilegal not being a tier 1 firm? (As they say, to be successful, it is not good enough to be a good person, you also need to have some talent that others would wish to have).
And finally, any criticism that I have provided was meant to be constructive, so I would be happy to come back in 2 years' time to have either been proven wrong or amateurish.
Good luck to you for the next 2!
I ignored your first comment because I thought you were a kid but this takes the cake. Are you a paid troll working for Trilegal??? None of your comments make any sense. You splash your negative vibes about Amarchand as if you are a partner there and then utter some nonsense such as "I would be happy to come back in 2 years, yada yada". Please dont preach about the quality of your own firm. If you dont have anything to say get your facts straight.
You sound like someone from Amarchand - by the tone and style of the talk. Your defensive response is also an indicator. I'm glad that that firm (assuming you come from there) has fostered such a nature in you. The right amount of money and the right type of love can do a lot of things. Try not be sell out on your principles though and when others do something better, be willing to appreciate others. Just some unsolicited advice if you don't mind.
And finally, I am not from Trilegal - or a paid troll as you might suggest. And I did mean everything I said in the above post - you can make fun of me but you shouldn't doubt my sincerity.
With Love.
Deeper Throat
I applaud the founding partners decision to move to an all-equity model and what appears to be a pure lockstep model – undoubtedly a step in the right direction.
What I don't agree with is the fact that “attrition” is based entirely for reasons claimed in the article. From what I have heard so far (I agree that this is based on hearsay – but I have reasons to trust what I have heard), I do think that the “culture” of the firm is largely to be blame for. Back in the days (and yes not 10,000 BC, but more when the three firms merged into one), the culture was young, vibrant and supportive – most definitely sexy and attractive. Back then all my friends who worked at these firms (and then at the merged firm) loved to do so. Unfortunately for Trilegal, success has come with its problems – a significant change in the culture. I do think that the partners at Trilegal need to think long and hard about the present culture.
When are you bringing us the law firm salaries survey results?
Couple of other things that might help -
(a) Improving the partner-associate ratio: For a firm like this, which aspires to render high quality service and provide a simulating work environment, the current partner-associate ratio is not positive. With 20 partners for about 150 lawyers, this works out to about 1:6.5. When you consider that this figure includes 10-15 junior partners as well and only 5-7 senior founding and other partners, the picture gets worse. It would be better to aim for a ratio of 1:4 for a relatively young firm; and
(b) Refocus on its strengths: Trilegal is strong in areas like banking, project finance, technology, private equity and general corporate. Why not seek to invest in these practices and aspire to be the market leader in those domains instead of attempting to be a full service firm and frittering resources in areas like M&A and Capital Markets where the competition is strongly entrenched and where Trilegal has no real USP and can at best be an also ran? This will also address the quality perceptions
And have you read the article? Sexy is not what he said, but what LI is saying about what Trilegal used to be when it was smaller and newer.
no what he should say is lets see whats wrong with us since so many people are leaving!!! sexy btw was an observation
Its trilegal not madonna!
(a) no immediate friendship plans gold, silver, magic or otherwise
(b) indigenous sustainability over two years
(c) nurturing internal talent
(d) structural and sectoral focus (whatever that means !!!)
Guess they need to do all of the above in order to build back some of the decline they have suffered after the A&O divorce. Considering the experience of the managing partners and their strategic acumen (or lack thereof) they would probably limp to regain some of their goals..
but, the shadow says, everything is not as it seems... there are games afoot... the shadow sees all ...
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