Last week, Atulya Sharma, global chief legal counsel at Apollo Tyres Ltd joined Mumbai-based law firm HSA Advocates as corporate finance and banking securities partner.
Few weeks ago, Rakesh Puri, former global head of legal and compliance at investment bank Elara Capital joined the law firm MDP & Partners to head its banking and capital market practice.
Legal heads of corporate houses joining law firms is a new trend in the industry. In the past, no law firm would touch the legal department of a corporate house and instead, hire lawyers off the ground. And there were reasons for that. One, law firms didn’t want to antagonize their potential clients by preying on talent in their backyard. Two, lawyers were considered more suited to work with law firms as they were more clued in to the law-firm culture.
The departure from the old tradition comes in the wake of new opportunities emerging in the market Unable to find talent that will hit the ground running, law firms are now turning to corporate houses to hire talent that is well versed with the legal culture and requirements of companies, or their potential clients.
Besides, the in-house legal-eagles also act like brand ambassadors for law firms. After all, who is better suited than an industry insider to convince a potential bank, or non-banking finance company, a private equity or a regular corporate client to convince that a particular law firm understands the nuances of their business and is legally competent to serve them?
Law firms see a lot of work coming their way in the near future. Debt restructuring undertaken by big corporate houses such as JayPee group, Essar group, Reliance ADA and even several mid-sized companies looking to shed debt will steer a lot of work at law firms’ door step. Beginning with finding right partners to striking the right legal contracts, these companies are going to need all the legal help they can get and law firms need to be ready to service their needs.
Then, there a lot of initial public offerings (IPOs) lined up for the coming year and that include biggies such as Vodafone and the Nationals Stock Exchange. Like 2016, it is expected that a lot of Private Equity firms, too, would want to exit their portfolio companies through IPOs while looking at buying distresses assets alongside and that translates into a lot of business opportunity for law firms and that, in turn, requires having a competent and large enough staff to take on the burden.
The most lucrative opportunity before law firms, of course, is the non-performing assets of banks. Gross NPAs of public sector banks have surged from 5.43% (Rs 2.67 lakh crore) of advances in 2014-15 to 9.32% (Rs 4.76 lakh crore) in 2015-16. Most banks, currently, are busy working on strategic debt restructuring wherein they are exploring the options of converting their bad loans into equity. Again, this is an attractive proposition for law firms and they need to have a solid team in place to make the best of this opportunity.
Many law firms, in fact, are now eyeing private banks such as ICICI, HDFC, IDFC or fund houses such as IL&FS to poach lawyers with in-house experience, for obvious reasons.
In May, for instance, Cyril Shroff led firm Cyril Amarchand Mangaldas brought in Shagoofa Rashid Khan from IDFC Alternatives as partner in Mumbai to head its national funds and investment practice. The private equity arm of IDFC Bank then poached Vinod Joseph from Bennett Coleman & Co Ltd’s Brand Capital.
Talent pool of lawyers specializing in extremely complicated and sensitive practices such as debt restructuring, or buying stressed assets or even hitting the market for fresh capital raise is quite limited.
It, therefore, makes sense for law firms to hire talent, who is not simply tuned in, but an expert at such deals. And if that means, poaching talent from potential clients, then so be it.
Legal firms only hope that the other party will understand that it is not personal. It is just business, like Don Corleone famously said in The Godfather.
(Maulik Vyas is Special Correspondent at News Corp VCCircle.)
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