An article by Robus Legal Marketing was published in the Jan-Feb 2015 edition of PSMG magazine, dealing with foreign law firms flowing into Israel
Robus (Legal Marketing Israel) is the Israeli affiliate of PSMG – one of the largest legal marketing associations – Professional Services Marketing Association. We wish to thank PSMG management and especially Mr. Matt Baldwin – Editor – for his assistance. Enjoy the article, for the full PDF version, please Click here
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A Holy Land for Lawyers
Zohar Fisher of Robus Legal Marketing provides a snapshot of Israel’s legal market
There are two statistics about Israel that give an indication of both the opportunities and the challenges associated with the country’s legal market. The first is 1,844, the number of citizens per start-up, according to Dan Senor and Saul Singer’s 2009 book Start-up Nation: The Story of Israel’s Economic Miracle. The second is 126, the number of Israelis per lawyer
Both per-capita figures are world records, and both make the country’s legal industry unique. With world-class ingenuity in several rapidly growing sectors of its economy, a large well-educated and English-speaking workforce and a stably growing economy, there is little wonder about the interest Israel spurs in many multinational companies and law firms, who consider it attractive and desirable at best, and intriguing at worse
The Legal Market at a Glance
The saturation of the legal market through the sheer number of practitioners means competing is difficult, especially in the crowded mid-market. Salaries outside the very top firms are not great, and many newly-qualified lawyers have themselves opted for the start-up route and launched their own practices. Fees have undergone severe squeezing in recent years, with mid-range firms struggling to stay in the game when their larger rivals undercut them in pitches
Against this backdrop, the market has seen an expected level of mid-market consolidation. 2013-14 saw Shibolet & Co merge with two law firms, J. Zaltzman Gilat Knoller Graus Salomon & Co and Israeli Ben Zvi Law Office, propelling the combined entity into Israel’s top ten by partner and associate headcount. Elsewhere, Pearl Cohen Zedek Latzer merged with smaller peer Baratz & Co
Probably the biggest change to the market came in 2012 when new legislation came into effect permitting foreign law firms to practice in Israel. Overseas firms can still only advise on the law of their country of origin, but it means that big international names can have offices on the ground that serve as more than just representative bases for greeting clients. Yet the market is still conservative, as is often the case in relatively untouched jurisdictions still dominated by the traditional local names
The industry has generally seen revenue increase in recent years, but this is largely because of the growth of the biggest firms. Salaries at smaller practices have fallen. The stable economy, often attributed to Stanley Fischer’s policy of limiting the country’s banks’ exposure to the sub-prime market while Governor of the Bank of Israel from 2005 to 2013, has meant the jurisdiction is financially more secure than many
Economy’s sweet spots – high-tech, energy and real estate
Israel’s legal market can point to some key areas where the economy offers real possibilities. One of them has been around for a long time already, namely the high-tech sector in which Israel is a world leader. A total of $380m was raised by Israeli start-ups founded in 2013, 25% of which was by internet companies, according to human resources company Ethosia
Historically, Israel has played a major role in global technological developments, with Intel’s Israel Development Centre in Haifa developing the 8088 chip used for the first IBM PC and the game-changing Pentium and Centrino chips
The big money lies partially in the Israeli App niche. Among the most notably cases was the roughly $1.1bn takeover of navigation technology maker Waze Mobile by Google in 2013, with Waze Mobile’s 100 employees received a reported $120m between them when it was sold. Another Israeli navigation app, Moovit, has transformed the way people use public transport by providing real-time travel information. It closed a $28m funding round in 2013
Israeli has also become an increasingly important centre for cyber-security. A boom in research in the sector culminated in the announcement of the opening of a development centre, called CyberSpark, in January this year at the growing Ben-GurionUniversity of the Negev in Be’er Sheva, in addition to the desert city’s AdvancedTechnologiesPark established in September 2013
Much of Israel’s prowess in this area comes from the country’s military and security needs. In September the Government announced it would establish a National Cyber Defense Authority, described by Prime Minister Binyamin Netanyahu as an “air force” to protect facilities, security agencies and civilians against cyber attacks. An existing Israel National Cyber Bureau was created in 2011 to defend business and infrastructure, with the two now set to operated alongside each other
The sector has had significant benefits for Israel, with a recent spike in commercial activity. November 2014 saw Aorato, an Israeli hybrid cloud security startup purchased by Microsoft for an estimated $200m. In September 2014 CyberArk, Israel’s largest privately-held cyber company went public on NASDAQ, reflecting a valuation of just shy than $0.5 billion
Elsewhere in the economy, the energy sector is also booming, largely attributed to the discovery of two major natural gas reserves off the Mediterranean coast, Tamar in 2009 and the larger Leviathan in 2010, the latter one being the largest gas field in the Mediterranean Sea. At 622 billion cubic metres, the Leviathan reserves are too big for Israel’s domestic use alone, meaning supplying gas abroad is essential for its commercial success. With the substantial energy needs of Europe and Israel’s neighbouring Arab countries, the gas discoveries are seen not only through a commercial lense, but also a geopolitical one
Real estate is also a busy area, particularly in Tel Aviv, where property prices are rocketing. The city’s prime residential property market grew 75.4 per cent in the five years to the first quarter of 2014, according to a report by Knight Frank, although the International Monetary Fund has warned that it is a bubble ready to burst. However, despite the large volume of work, legal fees on real estate deals are rock-bottom – sometimes less than 0.5 per cent of the transaction value. The Israel Bar Association has even been pushing for a minimum legal fee on property transactions to prevent ridiculously low undercutting, but there has been no progress yet on this
One of the sweetest potential honeypots for law firms is the prospect of increased foreign takeovers involving large Israeli companies, especially in light of a law passed last year forcing conglomerates to sell assets as part of a war on monopolies. Most noteworthy is the Asian interest, with Chinese state-owned Bright Food buying a 56 per cent stake in major Israeli food maker Tnuva this May for $960m from UK private equity group Apax Partners
Foreign Law firms – The Flow to Israel
The 2012 law to liberalise the legal market has had a slow albeit steady impact. The earliest big arrivals were Miami-based firm Greenberg Traurig, which opened in Tel Aviv in early 2012, and London’s Berwin Leighton Paisner, which followed suit shortly afterwards
A number of elite UK and US firms have representative bases that sometimes amount to as little as one lawyer at a desk, including DLA Piper, Freshfields Bruckhaus Deringer, Linklaters, Skadden Arps Slate Meagher & Flom and White & Case. All of these collaborate with domestic firms rather than compete with them, focusing on winning outbound work, mostly because of the small market and the relatively low fees on local work
The eye-catching exception to this trend is Yingke, China’s second-largest law firm, which took over three-partner Israeli high-tech, venture capital and corporate firm Eyal Khayat Zolty Neiger & Co in 2013, forming Yingke Israel. This marks another step in the opening of the Israeli economy towards China and Southeast Asia, a trend frequently advocated by Israeli ministers and public officials
Indeed, a lot has changed in the Israeli commercial sphere in the past few years, both generally and for lawyers. But amidst the shifting business and geopolitical tides, Israel’s unique and promising case remains a constant. And with unique markets, come unique opportunities
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About Robus– Robus is a leading Israeli-based strategic consulting company which provides business development services, and holds unique expertise in the niche market of Legal Marketing for law firms. Robus accompanies both Israeli and foreign law firms in a wide variety of marketing and commercial endeavours. Robus is also behind “Israel Foreign Law Firm Conference”, the only annually held conference devoted to foreign law firms and their practice in Israel
