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Shardul Shroff. Photo: Mint
Shardul Shroff. Photo: Mint

How Shardul Amarchand revamped its structure

While the Shroff family still has the most control over equity and profits, they are sharing power more than earlier

He would have found it challenging," says Pallavi Shroff, Delhi managing partner at Shardul Amarchand Mangaldas (SAM), about how Mumbai managing partner Akshay Chudasama, hired from the very different J. Sagar Associates (JSA), would have fit into the legacy firm had he joined before the break-up.

Indeed, it’s fair to say that SAM’s predecessor, Amarchand & Mangaldas & Suresh A. Shroff & Co., was a management morass.

Due to the long-lingering, usually latent, but sometimes overt, animosity between the brothers, the two regions—Delhi under Shardul Shroff and Mumbai under his brother Cyril—were semi-autonomous in their day-to-day affairs, while the larger company decisions and strategy had to be filtered through various national and management committees that were often less than efficient.

From that perspective, the split between them appears to have done SAM good.

But it could have really gone either way when SAM officially launched on 11 May 2015, after a six-month mediation over a family inheritance between Shardul in Delhi and Cyril in Mumbai. The subsequent pace of expansion of both brothers’ operations has been without precedent in the Indian corporate legal market.

Shardul’s new Mumbai office alone hired six partners before even opening its doors (though a Bengaluru office remains missing, and will remain that way for the immediate future, say Pallavi and Chudasama).

Two weeks after the launch, the firm confirmed that its Mumbai office would be headed by Chudasama, the former JSA partner, who would be appointed Mumbai regional managing partner. Pallavi’s husband Shardul would be executive chairman of the firm. Several more high-profile lateral partners followed Chudasama from JSA and AZB & Partners.

How exactly that was going to work out, and whether the family-run leopard would ever change its spots, was anyone’s guess at that point.

A new beast?

“I don’t know the old firm in that sense," says Chudasama over a video conference call from Mumbai. “My comfort has been with Shardul and Pallavi. The reason I’m here today is that I have a lot of comfort with them."

“I can tell you one thing," adds Pallavi. “If you want a senior person with you, you need to have space and need to have them run things. You cannot have a managing partner (micromanaging)."

“Has there been interference on a day-to-day basis? Absolutely none. But do we talk about things? Do we disagree on policy decisions? Yes, but there is no micromanagement," Chudasama insists.

However much you probe, he is unequivocal in his praise and enthusiasm for his new role and these come across as honestly held. “There are challenges, there are roadblocks that keep coming up, but nothing one didn’t expect (or) can’t surmount. It’s been phenomenal, really; we’re ahead of where we thought we’d be," Chudasama claims.

However, Mumbai is not yet cash-positive overall, considering the heavy initial investments, as well as three floors of office space in the iconic Nariman Point Express Towers building that cost nearly 70 lakh per month in rent and required a deposit of over 2 crore.

“Yes, we have fancy offices," quips Pallavi, but depending on how you calculate it, in terms of day-to-day operating costs, Mumbai is “paying for itself" and is “way ahead" of the “original budget".

“The true test is how busy people are. I wouldn’t say we’re at a 100% capacity. but we’re definitely at 80-plus," notes Chudasama. “That for me is the true test: in the less than (10) months since I’ve been around, we’ve managed to keep 80 people pretty much fully occupied."

“It’s not a mean achievement I think," adds Pallavi.

Two partners have left SAM but overall attrition has been minimal, say Pallavi and Chudasama. The firm as a whole is now around 400 lawyers strong, with Chudasama predicting that by 2017 the headcount may reach 500, with growth of around 20% year-on-year.

National cohesion

Becoming a single national firm remains a work in progress, though.

“One of the things we’ve really been pushing a lot over past few months is to build this concept of national practice groups, and really a lot (of effort) has gone into that," says Chudasama.

All partners in larger practice areas now report to national practice heads. The competition practice, for instance, reports to Irish-qualified John Handoll, who joined in 2012; Pallavi is the national disputes and litigation head; Shuva Mandal, who was hired from AZB & Partners by Chudasama four months after he joined SAM, heads the national corporate practice.

While the extended Shroff family still retains the largest control over the firm’s equity and profits, they are sharing power more than they did earlier. “Yes, they’re the largest stakeholders, (but) they’re also the senior-most and most capable partners," says Chudasama.

“The way we’re structured, we’ve got this management committee of two Shroffs, (partner) Jatin (Aneja), (partner) Gunjan (Shah), myself, (former Securities and Exchange Board of India chairman) M. Damodaran (who sits on the board as an external adviser), (competition head) John Handoll. So we’ve got five non-Shroffs," he explains.

In two years, adds Pallavi, she, Shardul and Chudasama will remain on the committee, while the other four positions will probably be opened to other partners on rotation. “And we may bring in one more (really senior) person down the line."

Meanwhile, the role of Shardul has transitioned from the hands-on managing partner that he used to be at Amarchand Mangaldas to what is traditionally more of a senior partner role in a law firm. “Shardul is our mentor in many ways," says Pallavi. “He oversees whether we’re in the right direction and focus; he’s doing a lot of work, and he’s also the ambassadors."

The competition practice is arguably SAM’s single biggest practice area advantage vis-à-vis Cyril Amarchand Mangaldas (CAM). It is also easily the largest such practice among Indian law firms, which also attracts a considerable number of non-SAM clients, purely on its own merits, according to Pallavi. It also continues to have a strong family presence: daughter Shweta and son-in-law Naval Chopra play key roles in the competition department, alongside Pallavi.

Despite the Shroffs’ continuing influence in the firm, Chudasama says it has not been overbearing. “The truth is that every single management board meeting, every decision has ended up being consensual so far. It’s been a very open and healthy debate on various points and nobody (none of the partners) has tried to push agenda points across."

In effect, day-to-day management is now split between Chudasama and Pallavi, respectively the co-managing partners of the Mumbai region (including the smaller Ahmedabad outpost) and the Delhi region (including Gurgaon and Kolkata). They say they communicate two or three times a day, over phone and WhatsApp.

“Akshay can do what he wants," notes Pallavi, “but the reality is that we talk every day, we’re targeting clients every day together, we go to clients jointly... We approach clients jointly and show them that we are one firm."

Equity

That vision of a national practice has to be more than just managerial; encouraging partners to freely share mandates across offices is something that’s been notoriously hard to do in professional services partnerships, particularly in many Indian law firms, where fiefdoms are quick to develop when bonuses and take-home pay depend on the work you or your team or office do.

“If you are all sharing from the same profit pool, in a modified lockstep manner, in the way we’re currently structured, we are one partnership, one profit centre, as far as I’m concerned it doesn’t matter if handled out of Mumbai or Delhi," says Pallavi.

SAM is “one partnership, one balance sheet, one profit centre", agrees Chudasama.

Of course, that’s not the entire story.

The equity model of the firm is still similar to what it was before the split: one majority equity pot that only the Shroff family is eligible for, with a separate equity pot that non-family members can be a part of, with the non-equity partners effectively getting paid salaries.

The 22 partners who are part of the non-family equity pool can climb a modified lockstep of seven levels, with each level taking approximately three years to climb and being subject to performance and appraisals, explain Pallavi and Chudasama.

As a lateral, Chudasama came in at the top of that lockstep ladder.

“There are two sides: ownership and management. The tendency is to mix the two," says Pallavi about how she envisages the new structure, with ownership and management increasingly separating as time goes by—that is, the family may always hold a large chunk of the equity, but the management may be handled by other partners. “That’s a change from the legacy that we had."

All this is easier said than done and the devil remains in the details.

From a management perspective, the biggest challenge that they face is how to service particular deals, says Chudasama. “The big challenge is: how you deal with people, lawyers, their egos, making sure that they communicate with each other, that there’s collegiality amongst them."

The past

On the Amarchand Mangaldas legacy firm, Pallavi reflects that it “was a good period when it was good".

“The last one year (of the break-up) was very difficult... we’ve grown beautifully in the new firm. This is a new beginning, I have so much to look forward to in the new firm," she says.

CAM, the other half of the legacy firm that has expanded aggressively into Delhi, is treated “as any other competitor in the market—there’s no emotion here", according to Pallavi. “Khaitan (and Co.) is a competitor, Zia (Mody of AZB & Partners) is a competitor, CAM is a competitor, so is Luthra (& Luthra)."

That said, both Shroff firms have hired from all those firms except directly from each other so far. Would the gloves come off soon, one year after the split? “There’s nothing targeted in that sense," Pallavi responds, and adds, cryptically, “We’re definitely not going and targeting people here or there; we need to keep our own flock together."

For Chudasama, it has been quite a change, moving from one-partner one-vote JSA, whose founder Jyoti Sagar retired in 2013, surrendering his equity completely. “JSA is a much more flat partnership across the board," says Chudasama. “JSA was a far more democratic model and there are obviously strengths in both models. I think what we’re trying to achieve here (at SAM) is quite unique," he adds.

It’s a balance between tradition and moving towards an international model, he says.

“What’s important is that we have a clean slate," says Pallavi. “We can make the approach very different, the way we want it, it can be inclusive, or (not but) I personally don’t believe in that and Akshay (Chudasama) doesn’t believe in that either. This is a much more inclusive culture than we’ve ever had in the past."

“People are given responsibility of leadership, and if they don’t perform and don’t prove themselves, somebody else will step in," she says.

When or if such a leadership transition will extend to the Shroff family is a question that’s at least several years away, though some of the right building blocks are certainly being stacked right now.

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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