Law firms' increasing role in site selection in the South
By Mike Randle
For decades, law firms that specialize in the practice of economic development were simply a small piece of the overall site selection puzzle. They were lumped in with the other "trade allies," as economic development practitioners like to call the various professionals needed to successfully turn an economic development deal. This diverse group includes environmental engineers, policymakers, human capital experts, venture capital partners and traditional lenders, IT firms, railroads, contractors, utilities, real estate developers, educators and, of course, experts in the practice of law.
All of those pieces of the puzzle are painstakingly put together in an effort to do one thing in the South: create better living standards for the populace being served.
Today, corporate relocation and expansion decisions create a lengthy list of legal, financial and regulatory issues. Cash, tax-related and other incentives often are the critical determining factor on whether a deal is done or a deal is a dog. How employment and environmental regulations are addressed during the site selection process can affect decisions on additional expansions in the future. Corporate finance and construction agreements often determine whether or not a major move or expansion is ever started or completed on time and within budget. In other words, the good old days of doing a deal at the 19th hole are gone forever, for the most part.
Enter the legal profession into the labyrinth of what is economic development today. While law firms are essential in bringing customized professional counsel to each side of the project bargaining table, several firms are venturing into something not seen by a "trade ally" in years. More and more law firms are actually moving in the direction of siting projects themselves.
In the 1990s, today's trade allies were considered economic development points of contact. For example, NationsBank (forerunner to Bank of America) operated a full-fledged economic development department up until about 13 years ago. It was located in Atlanta and Mike Lott and Glenn Cornell operated the unit. It was impressive. If you ever had lunch at NationsBank's corporate dining room in Atlanta right about the time the Olympics were staged there, raise your hand. The only word I can think of regarding that opulent dining room is awesome.
SouthTrust -- which later became Wachovia and then Wells Fargo -- operated an economic development department as well. And BellSouth, which has become AT&T, employed a certified economic developer (CED) in every Southern state up until a few years ago. But those ventures, for all practical purposes, have gone the way of the fax machine.
Yet, about the time the Great Recession began, many law firms in the South intentionally (or not) began to provide more services for companies looking to expand or relocate.
"This is full-out economic development at the legal level," said Linda Swann, Assistant Secretary of the Alabama Department of Commerce. Swann has had an extensive and successful career in economic development in Alabama. She was referring to how law firms have transitioned from simply making sure all contractual agreements between user and city, county or state are on the up-and-up to becoming exclusive points of contact in site selection. "Warren Matthews at Burr Forman, Alex Leath at Balch & Bingham, Chris Grissom at Bradley Arant Boult Cummings and Tom Brinkley at Maynard Cooper & Gale, (all Alabama-based law firms) have brought prospects to us," Swann said referring to the state. "They are fully representing the prospect in almost every aspect of the site search."
So, how have law firms established such solid footing with corporations looking to expand in the South when other trade allies like large banks, telecommunication firms and railroads have downsized their economic development departments? "I think they saw a niche, particularly with large projects, and they are cutting the site consultants out," Swann said. Asked why the banks and other firms who tried their hand at "full-out economic development" in years past failed, Swann said, "I guess because they weren't every good at it."
Apparently, though, law firms have become very good at providing almost complete economic development and site selection services. Erik Doerring, an attorney with Columbia, S.C.-based McNair Law Firm, said that his firm's services are expanding for industry looking to grow. "We are doing our own grassroots development work. We're traveling to Detroit, New York and elsewhere, meeting with clients. So, yes, we are literally operating our own private economic development group," Doerring said.
But Doerring prefers to call his firm a project's "quarterback," or the team leader of the deal. "We really view ourselves as the quarterback of the project. The clients come to us and we refer them to a site consultant, sometimes meeting with three or four. We help them with interviews of engineers, builders, bankers, designers, utilities and other functional partners. We simply help the client navigate the whole process," Doerring said.
This evolution of sorts of law firms running economic development projects, or in Doerring's assessment, "quarterbacking" them, is not necessarily new. Some firms have been doing it for ten years or more. Sanford Holshouser, a Raleigh-based firm, was one of the pioneers, as was Birmingham-based Burr Forman. In the case of Sanford Holshouser, it has several partners that ran economic development organizations at the local, regional and state levels.
When Sanford Holshouser Economic Development Consulting announced in the spring they were hiring economic development veterans and longtime site selection consultants Bob Leak, Sr. and Bob Goforth, that certainly got our attention since we have known both for over 20 years. Leak was a former president of the Research Triangle Park Foundation and Goforth is a former director of economic development for the state of North Carolina.
Ernie Pearson, founding partner of Sanford Holshouser Economic Development Consulting, said this about the hiring of Leak and Goforth: "They have extensive economic development experience, particularly with large industrial projects. Their knowledge and contacts will especially strengthen our firm's site selection consulting practice."
So now law firms are hiring economic developers? When did this happen? When did law firms evolve from merely writing and preparing the contractual agreements -- specifically the incentive contracts -- in a job-generating project to commanding the project? No one seems to know. But we have an idea.
Economic globalization, we believe, has certainly aided the legal community in its efforts to increase its economic development market share. It should be noted that globalization is still a relatively new term. The South saw its first true foreign direct investment (FDI) surge in the 1970s, but FDI didn't really show up in sizable numbers until the 1980s. But even then, FDI for the entire decade of the 1980s totaled about what is invested by foreign companies in one year in the South today. So it is easy to assume that if you are a foreign company trying to increase your footprint in the fourth-largest economy in the world -- the American South -- making first contact with a law firm may be the smartest thing to do.
Same is true for domestic companies looking to increase business overseas, which is being done at a rate this nation has never seen before. Exports of U.S. manufactured goods rose by $645 billion, a 104 percent increase since 2002. For domestic companies wishing to get in on that action, most law firms have the resources to know the ins and outs of global site selection. As for the ins and outs of exporting, that's old hat now. Furthermore, some of those same law firms are also well-versed in the various business cultures found in the developed and developing world.
Mark Simmons, a principal with Columbia, S.C.-based Parker Poe Consulting, is certainly benefitting from economic globalization. "Most of the work we are doing is for international firms wanting a bigger footprint in South Carolina and in neighboring Southern states," Simmons said. Parker Poe Consulting is a division of the Parker Poe law firm.
"I've only been here nine or ten months now," Simmons said. "But 90 percent of my work is corporate site selection followed up by incentive negotiations. And almost all of that is with foreign-owned firms. What we are trying to do is suggest to them that instead of doing things piecemeal all over North America; we can work for them more efficiently. We are handling international companies with their site selection and other issues as they increase their footprint here from start to finish," Simmons said. And what is Simmons' background? He has 30 years experience as a certified economic developer, of late as the main industry recruiter for the Central South Carolina Alliance.
Neal Wade, the former head of the Alabama Development Office, the Economic Development Partnership of Alabama and now the CEO of the Bay County (Fla.) Development Alliance, says that the evolution of law firms into increased site selection services is a smart move. "There are select firms throughout the South that have done it for years. Burr Forman was heavily involved in recruiting Mercedes-Benz to Alabama in 1993. I think it is a smart move to come up with something that is a one-stop shop. These firms can tell the client they are, in essence, bringing everything to the table," Wade said.
Sam Moses, an attorney with the aforementioned Parker Poe, says that the increased involvement in site selection is simply a value-added service. "We have seen a transformation where some firms have taken the extra step and have packaged this up as a value-added service," Moses said. "But it is really about the client and attorney relationship. We are lawyers first, but a lot of the things companies ask for involves non-legal advice. Beyond the scope of that, law firms are looking for ways to create added value as well as being more creative in obtaining clients and retaining clients."
Asked about the hiring of economic development veteran Mark Simmons, Moses said, "Ray Jones, co-chair of our economic development practice, had a long-standing relationship with Mark. Mark approached Ray and the firm and proposed to do something unique and that resulted in a business plan. Mark has over 30 years of experience in economic development and has developed lots of corporate relationships. He understands all aspects of economic development. And, yes, he is working projects first. But he also helps local communities with resources, like databases and leads and implementing community strategic plans," Moses said.
Moses echoed Mark Simmons' statement about working with foreign-owned firms. "One thing we are strong in is working with international clients. Foreign-owned companies have a clear need for this type of service. Some of them are coming into the U.S. with projects for the first time," Moses said.
One well known Southern politico, who is now a part of this growing trend by law firms to become a one-stop shop for companies with new and expanded projects, is former Mississippi Gov. Haley Barbour. Barbour started working with Jackson, Miss.-based Butler, Snow, O'Mara, Stevens and Cannada, PLLC, on January 11, 2012. That was the day after he finished two terms as one of Mississippi's best economic development governors. His former Chief of Staff, Paul Hurst, also rejoined the firm that day. Prior to serving in the governor's office, Hurst was a member of Butler Snow.
"Governor Barbour and Paul are tremendous assets for our firm, and we are excited to have them as part of our team," said Butler Snow Chairman Donald Clark, Jr. "Their leadership during some of the most difficult times in our state's history is unprecedented. We are fortunate that this legacy of leadership and innovation will continue at our firm, and both our team and our clients will benefit greatly."
Barbour became just the second Republican governor elected in Mississippi since Reconstruction, and served as governor for eight years. During his tenure, Barbour and his team – including Gray Swoope, who is now head of Enterprise Florida – realigned economic development and created thousands of higher paying jobs, enacted comprehensive tort reform, reorganized job training efforts and led the state through the worst natural disaster in American history.
I asked Gov. Barbour in early July about Southern law firms' increasing role in site selection. "Mike, law firms like Balch & Bingham, Baker Donelson and Butler Snow have become increasingly involved in economic development, but they still do litigation, business work and other typical lawyer work. But years ago, working on bond issues and incentives and other things on the financial side. . .this is just a natural niche progression," Barbour said.
"We have a group here at Butler Snow that is aggressively trying to help Mississippi grow. We have a close relationship and involvement in an angel fund operation. If you are one of the biggest law firms in Mississippi, you have an interest in growing the state's economy," he said.
In regard to law firms actually siting projects, Gov. Barbour was a little less direct. "We have clients looking for ways to invest money. We do match up a site with a business sometimes. But, the site selection business is not just a one-way deal." To me that means that law firms can and will represent either the companies looking to grow or the state, county or municipality courting them. And why not? Law firms are morphing quickly into a one-stop shop for all parties in the practice of economic development.
I asked Gov. Barbour about Linda Swann's comment that law firms, by becoming a one-stop shop, may be cutting out site consultants on projects.
"Mike, be careful what you write about cutting out the consultant. Our mutual friend Dennis Cuneo was employed by Toyota North America as the site consultant on that automotive plant that ended up in Northeast Mississippi. But when he brought all those energy projects to Mississippi after retiring from Toyota, he worked for a D.C. law firm," Gov. Barbour said.
Indeed, Cuneo (who sometimes writes for our own RandleReport.com) did work for a law firm when he directed the site searches of at least four large clean-tech projects that chose Mississippi for significant manufacturing operations in the last two years of Gov. Barbour's final four-year term. Currently, Cuneo is a managing partner of the Washington, D.C. office of Fisher & Phillips LLP, owner of DC Strategic Advisors LLC, and he serves as an advisor to several Silicon Valley high tech firms.
It's not notable that firms like Alabama-based Burr Forman, Balch & Bingham, Bradley Arant Boult Cummings, as well as North Carolina-based Sanford Holshouser and Virginia-based McGuire Woods, among others, have been holding hands with prospects looking to gain a large footprint in the South. After all, they have been doing it for almost two decades now.
Yet, what is notable today is that other firms, like Columbia, S.C.-based Parker Poe, are hiring certified economic developers who are not shy about claiming "we are working projects 100 percent." That in itself is a fundamental shift in the legal profession and in how companies are now site searching in the American South today.
Well known and successful site consultants such as Memphis-based Michael Mullis and Columbia, S.C.-based Mark Sweeney, just to name two, remain independent of larger entities, such as the law firms we just profiled. Will that remain so? Will the site consultant, as it has been known for almost 50 years in the South, stay relevant?
"There will still be folks in site selection consulting," Gov. Barbour said. "Whether they work for the company or have their shingle out as a site consultant, they will still be working projects successfully. But I don't think it is super surprising that site consultants who work for a law firm give themselves more reach and the law firm more reach."