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How to Secure Long-term Relationships with External Counsel as a Small Law Department

If you have taken a walk around the exhibit floor at the ACC Annual Meeting, being handed everything from socks to Canadian-themed winter hats, you will notice that law firms spend a considerable amount of time and effort on marketing. All the branding and networking are typically aimed at reeling in the large clients, which make up a multinational firms’ “bread and butter.”

However, small law departments often find themselves in a precarious position when seeking external counsel because they covet first-rate service but have a limited budget. How then does a law department establish valuable relationships with external counsel despite its limited time and resources?

A few years ago, my company created a subsidiary with the goal of acquiring vertical market software companies across the world. From a legal perspective, this meant complex cross-border structures and an acquisitive framework with a need for legal advisors in different parts of the world.

At the same time, we needed to avoid running up large fees before we became cash-flow positive. The same way in which our M&A team had to convince sellers that we were the right buyers despite no track record, I had to convince external counsel to commit to a flat-fee schedule with a potential to become a long-term partner.

Four years later, with 15 subsidiary offices and over 300 employees in the United States, Canada, the United Kingdom, and Australia, the “gamble” by some firms has paid off nicely. We now have established relationships with a handful of firms across the world.

Below are five principles that, from experience, are instrumental in securing long-term quality service with cost-efficient results.

1. Allocate the time

While selecting outside counsel may seem like a formality, it should be given considerable time and effort. View it as a selecting not a service provider but a partner. Ask yourself if this a group you can and want to work with, rather than need to work with. The ability to complete the mandate alone should not be the driver — building a lasting relationship should be the goal.

The firm should feel like an extension of your team. That should be the driver. Don’t be afraid to speak to the managing partner at length, beyond just hourly rates and experience, to understand the firm and whether it is a right fit that understands your business and vision.

2. Paint the entire picture

External counsel are lawyers by profession, but they are also shareholders of a business. A new client viewed as “small,” requesting a set budget for a limited mandate, will not be very attractive.

Instead, highlight your company’s goals, vision, and long-term plan. Be sure to explain that they can be the go-to person for a specific jurisdiction and that a long-term partnership can start with a simple workload.

Early on, I had external counsel respect a pre-set flat-fee agreement despite considerably more hours on the file, only to receive a series of mandates over the next two years. The long-term benefits to the firm greatly outweighed their short-term “fee reduction” at the outset of the relationship. Today, this firm provides us with timely first-rate service for all matters.

3. Seize the opportunity

Our needs were attractive to law firms because we were acquisitive — adding up to 10 companies in a single year. Along with representation on the buy-side, this meant handling our IP portfolio, corporate needs, and becoming our go-to firm in a specific region.

There is no doubt that law firms have seen the value in startups or emerging verticals, investing significant resources in areas such as blockchain or the cannabis industry. If you do find yourself in a vertical with a massive upside, use this to your advantage by working with a firm that sees the opportunity.

4. Understand the referral pipeline

While we have had an excellent relationship with a national firm for over 10 years for complex legal issues, a referral from such a firm will result in an equally top-tier firm that can handle a considerably simpler legal matter.

Understand the ecosystem in which the firm works, including its client base and deal size: Often their referral network may not be a good fit for what your business needs.

5. Use ACC resources

ACC has a number of valuable tools such as eGroups. This allows you to post a message outlining the specific needs and qualities you require, including the general size and jurisdiction (do so anonymously if necessary).

There is considerable value in receiving direct feedback from fellow in-house counsel who have had similar needs. External counsel will appreciate the opportunity to expand their reach with ACC members.

Moreover, they will be very responsive to initial requests.  Some of our best relationships have come from referrals from fellow ACC members.

About the Author

David FelicissimoDavid Felicissimo is general counsel at Valsoft Corporation.

The information in any resource collected in this virtual library should not be construed as legal advice or legal opinion on specific facts and should not be considered representative of the views of its authors, its sponsors, and/or ACC. These resources are not intended as a definitive statement on the subject addressed. Rather, they are intended to serve as a tool providing practical advice and references for the busy in-house practitioner and other readers.